Opening main session
Health of Nations
12 May 2004
Open dialogue to strengthen open markets
Moderator: Lord Alan Watson of Richmond, House of Lords, United Kingdom
Panel: Luis Ernesto Derbez, Minister for Foreign Affairs, Mexico; Donald J. Johnston, Secretary-General, OECD
Adam Smith would surely not have approved of the OECD Forum, mused Lord Watson of Richmond, the opening speaker and moderator of this year's event. Quoting from The Wealth of Nations, Lord Watson reminded the audience at the opening session that according to Adam Smith, "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public". But dialogue, Lord Watson insisted, is diametrically opposed to conspiracy - and this is what the OECD Forum is all about. The opening keynote speech of Forum 2004 thus began with a renewed call for dialogue in confronting the issues that affect societies today. "The Health of Nations" - this year's theme - is a matter that relies greatly on good dialogue between citizens, their governments and companies.
"We are living in a time where we face a new order of risk, from terrorism, to climate change and health issues, and the immediacy of these changes requires society to act", Lord Watson said. "While we may not be able to avoid all the errors and misconceptions of our time, we can find a way through them with good dialogue". The goal of the Forum, he said, was not only to facilitate dialogue between participants, but also to encourage the development of better dialogue in society as a whole: "the quality of a society depends on the quality of its dialogue".
Lord Watson stressed that the media has a key role to play, citing its contribution in drawing attention to obesity as a real heath issue. Quoting Abraham Lincoln, he reminded the audience: "Let the people know the truth and the country is safe". A participant from the floor about how to integrate people more into the public debate in a timelier manner, Lord Watson pointed to the public's own self interest. Capturing the public's attention, he said, involves making things relevant on a personal level. One way to do this is to remind the public of potential costs which might eventually have to be covered by taxes.
Health issues are among the more difficult ones on national agendas world-wide, OECD Secretary-General Donald J. Johnston pointed out. Confronting the health issues of today will surely require dialogue, and this year's Forum theme was timely. Health spending, Mr Johnston said, makes up on average 9% of national expenditure in the OECD area - double its 1970s level. And while technology improves, allowing us to live longer, its costs increase; both directly - since new technology rarely comes cheap - and indirectly, through the costs required to care for an increasing number of elderly.
Mr Johnston said that the varying costs of healthcare in different countries is one reason for dialogue, because sharing experiences could allow countries to achieve the same or better health results at lower social and economic costs. "One example is disease prevention, where perhaps the best known case is the dramatic reduction in rates of smoking since the 1960s leading to a decline in the incidence of lung cancer" he pointed out.
But another main goal of this year's Forum is to address the health of multilateral negotiations, especially after the stall of Cancún. Several meetings at this year's OECD Forum, as well as meetings of health ministers, trade ministers and economy and finance ministers, are expected to help countries make progress on the Doha round.
Mexican Foreign Affairs Minister Luis Ernesto Derbez expressed his hope for just that - reminding the audience that the main impact of the Doha impasse has translated into lower growth possibilities for everyone. He applauded the recent efforts in the US and Europe to get talks moving again: "We must look at the recent US and EU steps as acts of political goodwill, and we must all exercise leadership in promoting the Doha agenda", he said. But the private sector must also do its part, he said, in particular "to encourage the opening of economies".
Mexico's own successes in recent years bore witness to the importance of an open economy, Mr Derbez said. This year is the 10th anniversary of Mexico's entry into the OECD, and in the time since, the country has gone from financial and political crisis and turmoil to stability. One of the priorities of the next round of Doha negotiations, Mr Derbez argued, would be "to convince countries of the economic and political benefits of opening their economies".
A key focus of the Doha round, he said, should be the elimination of subsidies on agriculture. This will be all the more necessary, he said, in order to prepare for future challenges in the months ahead. "There is a consensus that the economy will grow in 2004, but after 2005 we may see some red lights." Mr Derbez warned. "Regional conflicts and terrorism may mean that the world economy will be less stable in the future". This is an area of concern for Mexico, he said, as it is country that depends highly on foreign trade. More integration into the world economy, not less, is the Mexican minister's prescription for a more stable future, and for strengthening the "Health of Nations".
©OECD Observer
Special Breakfast Seminar
Wednesday 12 May 2004
The OECD Corporate Governance Principles
Implications for law firms
Moderator: Olivier Chaduteau, Associate-Director of Day One
Panel: Emmanuel de Boullay, Director and co-founder of the French Institute of Directors; Maitre Yves de Mahenge, Member of the Paris Bar; Rainer Geiger, Deputy Director, OECD Financial and Enterprise Affairs Directorate
Company lawyers have the potential to play an important role in ensuring good corporate governance. Yet before they can do so they need to be clear about whose interests they represent: those of the CEO and the board of directors, those of the company shareholders, or those of wider stakeholders. This was the message from panelists, who looked in at the role lawyers can play in promoting good corporate governance in France.
“We consider lawyers as actors in corporate governance,” said Rainer Geiger, OECD adding that “lawyers are among the gatekeepers.”
If lawyers are to be effective gatekeepers, however, then companies in some OECD countries will need to rethink how they structure their legal advice. Equally lawyers need to be clear about their role within a company if they are to avoid becoming entangled in conflicts of interest
“Lawyers can find themselves facing serious conflicts of interest. Today there is no ethical code that lays out how lawyers should behave,” argued Mr Yves de Mahenge. What is needed, he believed, is a more transparent definition of a lawyer’s responsibilities.
“Who does the lawyer represent? Is it the company director, the board of directors, or the company itself?,” Mr de Mahenge asked.
Certainly there is currently plenty of opportunity for lawyers to find themselves in such ethical quagmires. In the cases of a hostile take-over, or accusations of financial mismanagement, the interests of the company director may not always be those of the shareholders, pointed out Mr de Mahenge.
The moderator, Olivier Chaduteau, asked whether there should be a separation of legal advice between different interest groups within a company, and if so how should it be paid for. The panel agreed that shareholders and the board of directors should have the financial resources to hire separate and independent legal advice, which is currently not necessarily the case in France.
“The board of directors does not have its own resources and it has no budget. It’s complicated to mobilize resources in an autonomous way should you need legal advise when a problem arises,” said Emmanuel de Boullay. This contrasts with the Netherlands, he said, where the board of directors can be allocated a legal budget, providing them with greater autonomy to seek independent legal advice. “This is a great innovation,” Mr de Boullay argued.
Mr Geiger agreed that allocating a budget for independent legal advice “would be a good addition,” to the OECD guidelines on corporate governance.
Lawyers also need to work more closely with other disciplines within a company, in particular the accounting department, so that they can better protect the company against illegal practices such as creative accounting, the panelists contended. “There is very little cooperation between lawyers and others. In all the big scandals, such as Enron, etc., it’s often a matter of fraud, but there is a lack of cooperation between different specialists,” said Mr de Mahenge.
“There is a paradox. The fact that lawyers and auditors must not be associated does not mean that they can’t work together.” Indeed, he believes, different professions within a company should not be walled off from each other. “If there are important legal and accounting elements, then they need to talk to each other,” said Mr de Mahenge.
Lawyers also need to lay out their role and responsibilities clearly from the outset. Perhaps surprisingly, lawyers in France tend to come to an oral, rather than a written, agreement on their responsibilities. “We have some very bad habits in our profession,” said Maitre de Mahenge about France. “When a company names a lawyer it really ought to put it in writing” to reduce ambiguity. “We may then find we need a lawyer for directors and for companies.”
To avoid conflicts of interest, lawyers should not sit on the board of directors of a company to which it – or its partners in a legal firm – give legal advice, the panel concluded.
©OECD Observer
Health, Human Rights and Development
Monday morning, 12 May 2004
Towards a rights-based human health
Moderator: Richard Manning, Chair, OECD Development Assistance Committee
Keynote: Mary Robinson, Executive Director, Ethical Globalisation Initiative and Former President of Ireland
"The health of nations is in a sorry state", said Mary Robinson, Executive Director of the Ethical Globalisation Initiative and former president of Ireland during her speech on Health, Human Rights and Development at the 2004 OECD Forum. Discrepancies between rich nations and poor are widening in terms of access to healthcare and these affect social, political and economic development.
The only way forward is to establish a rights-based approach to health initiatives, a new conceptual framework developed by the Ethical Global Initiative in cooperation with Columbia University (economist Geoffrey Sachs), the Aspen Institute, and the International Council on Human Rights Policies. It is a framework that "dares to put the words ethical and globalisation together". Without health and human rights, development cannot exist, and the synergy between human rights, health and development is the focus of new efforts by international organisations. "The key factor of success lies in realising rights", says Ms Robinson. "It has become clear that freedoms foster health, whether it is the freedom from torture, from medical testing, or freedom of sexual choice. It is also clear that human rights engender positive entitlements, such as choices for medical treatment, timely and affordable healthcare, better preventive measures."
The link between human rights and development has broadened since the 1990s, when a larger definition including economic rights was adopted. With 2.8 billion people living in poverty, new thinking was needed.
"Poverty isn't just not having income, but a deprivation of human capabilities," she said. "In effect, you have no human rights. You have no way of claiming entitlements. You are invisible, left out of the calculations."
Those fortunate enough to live in OECD countries can expect to live to 70-80 or more years; in Sub Saharan Africa, that number is 46 and falling. This is largely the result of the AIDS epidemic, with only approximately 1% of the 4 million sufferers there presently receiving retroviral therapy. According to Article 1 of the Declaration of Human Rights, all human beings are free and equal, but millions in Sub Saharan Africa are dying because of no access.
Of particular focus to Ms. Robinson is to improve the current state of human rights for women. That means eliminating gender discrimination and enhancing education: "the education of girls is fundamental to their empowerment; the education of women is fundamental to development." Ms Robinson is a member of the steering committee of Global Coalition on Women and AIDS, which tackles the issue with a "grassroots" approach. "We first identified the areas of involvement: violence against women, women's property rights and inheritance rights, girls' education, and equal access to healthcare. We then held a small conference to help bridge the gap between policy and its implementation. With the help of the International Council of Women Living with AIDS, we developed action plans for individual governments and the particular actors in each situation," said Ms Robinson.
Health goals
In 1978, WHO members confirmed their commitment to health for all by 2000; sadly, this is far from being realised since the mortality rate has increased in several developing countries. "Millions of children are dying from treatable, preventable diseases," she said. Similarly, under the Millennium Development Goals, eight targets were adopted by one of the largest ever gatherings of heads of government on development. Among them are halving the rate of poverty, ensuring environmental sustainability and developing global partnerships in development. Yet, many countries are not on track to reaching these goals.
And it is not just a question of domestic obligations, but obligations under international law. The key; she said, is to be strategic, responding to a question about how to translate her message into practice.
Boosting Official Development Assistance (ODA) is one way. At the Monterey conference on development, US$50 billion in additional aid was agreed, which doubled the current level. While that may seem high, but Ms. Robinson compared with current US military spending of $800 billion, including spending on reconstruction of Iraq for instance.
But money alone is not enough; the question is how aid is disbursed and used. Attention needs to be paid to strengthening health systems for instance, so as not to skew progress towards certain groups and away from poorest communities, who become more marginalised.
Several participants from the floor brought up the WHO's "3 by 5 initiative", which aims to put 3 million people on HIV treatment by the end of 2005, though Ms. Robinson believes the numbers to be quite low.
Along these lines, a representative from Merck noted that there seemed to be an inverse relation in terms of promises by the EU and actual action on the ground, and asked how the OECD might devise better measures. The Moderator, Richard Manning added that a health metrics network is being established, bringing together statisticians and policymakers to improve the quality of data.
As for corporations, Ms Robinson said she was "acutely conscious of the need to engage the business community to take every possible approach to the human rights agenda", and this included distributing medicines for HIV. Canada, she said, was in its final stages of passing legislation on this. It might not be a perfect bill, she said, but showed the political leadership needed to facilitate access to generic medicines.
The Kenyan Ambassador to France asked about the flight of health workers from Africa to the western world, since this "brain drain" undermined efforts to improve health standards in poor countries. Mr. Manning said that the OECD's work on migration is looking at this, and that a recent meeting of the UN in Washington, DC on AIDS should be coming out with a series of studies on the issue. Ms. Robinson upheld the right of individuals to migrate, but urged OECD countries to show awareness of the problem.
©OECD Observer
Understanding financial risks
Afternoon, Wednesday, 12 May 2004
Financial education
Moderator: Lorenzo Bini Smaghi, Director for International Financial Relations, Ministry for Economy and Finance, Italy.
Panel: Dae Whan Chang, Chairman and Publisher, Maeil Business Newspaper and TV, Korea; Sir David Clementi, Chairman, Prudential, UK; Bronwyn Curtis, Managing Editor, Bloomberg Television, UK; Kenneth V. Georgetti, President, Canadian Labour Congress, Canada.
Should ordinary citizens be given instruction in finance and investment as they would other basics, like history or mathematics? Financial education, said Lorenzo Bini Smaghi, has always been important for consumers who are looking to manage their income, as well as learning to invest and avoiding becoming victims of fraud. But the importance of financial education has increased in recent years because of the diversity and complexity of financial products. In addition, there are a larger number of consumers involved in the financial markets because of rising incomes and ageing, with more people thinking about their pensions. Moreover, the risks run from blind faith in making financial decisions were underlined by the recent spate of stock market scandals and pension fund mismanagement.
Sir David Clementi explained how the ageing populations across OECD countries must be more involved in managing their retirements. In particular, the move from defined-benefit pension schemes towards defined-contribution schemes has shifted the risks associated with retirement more squarely on the shoulders of employees. His company, Prudential, is actively involved in helping individuals become more financially literate, because a well-educated consumer is more apt to save and invest. He also thought that financial education should be on the government policy agenda because declining consumer confidence from recent financial scandals has affected the markets.
There is a distinct difference between financial information, financial education and financial advice pointed out Bronwyn Curtis. There is no shortage of information available about financial institutions or their investment products. If anything, the time busy people had to read the information available was very limited. Nor do most people understand the importance of financial information or its content. Surveys of financial literacy indicate that many consumers do not have adequate financial background or understanding.
Mrs. Curtis suggests that financial education should be part of the mainstream educational system for our children. Education for adults would have to be delivered through other methods such as television. Currently, there are many consumer finance shows broadcast on television and radio, but there was little in the way of financial education.
Dae Whan Chang agreed that children could benefit from financial education at an early age. In Korea, household loans and credit card use has increased dramatically as financial markets become more accessible to consumers. However, financial delinquency and bankruptcies have shown that with the rise in financial freedom comes exposure to risks. A participant from the floor asked whether new market access should not be restricted to those who were properly educated. Such regulation was not the answer, the panelists replied. The promotion of financial education would be more beneficial, using different channels such as schools, consumer groups, financial institutions and the media to raise awareness of the risks associated with the products being sold.
However, as Kenneth V. Georgetti warned, it would not be reasonable to expect financial institutions themselves to deliver unbiased financial education. In all likelihood, the "education" delivered by financial institutions would be slanted by aggressive marketers. Would this be in the consumers' best financial interests? He questioned the media's ability to deliver reliable financial lessons because of their reliance on advertisers. Non-profit organisations would be more reliable providers because they presumably do not have a hidden agenda.
Mr. Bini Smaghi still felt that financial education was fundamental to the health of OECD economies and society in general. He concluded by echoing other panelists in his support of an OECD initiative to launch a Financial Education project that would distil lessons on best practices from its member countries.
©OECD Observer
Ageing and health
Afternoon, Wednesday 12 May 2004
The value and costs of ageing
Moderator: Philippe Montaigne, Director General, Institut Montaigne, France
Panel: Françoise Forette, Co-chair, Alliance for Health and the Future, France; Julio Frenk, Minister of Health, Former WHO Executive Director responsible for setting up the Commission on Macroeconomics and Health, Mexico; Henry McKinnell, Chairman and CEo, Pfizer; Karn Poutasi, Director General of Health and Chief Executive, Ministry of Health New Zealand.
We are getting older and so our healthcare costs are rising. Typically healthcare for an 80 year old costs double that for a twenty-year old, according to Françoise Forette, co-chair, Alliance for Health and the Future, France. This and current demographic trends make the question of health provision "a very urgent preoccupation for all policymakers in OECD countries," conference moderator, Philippe Manière, General, Institute Montaigne, emphasised.
At the same time, an ageing population was a positive reflection of economic growth, the panel was quick to underline. "The increase in longevity is a privilege of development and not a catastrophe," said Ms Forette. If anything, the correlation between good economic performance and longevity was a reason to promote spending on health.
Even though the elderly absorb more health spending than the young, the ageing of populations accounts for only 0.5-1% of the increase in health costs.
Henry McKinnell, the CEO of Pfizer, a pharmaceutical company, went further in expounding the economic benefits of spending on health. "If we could reduce the death rate from heart disease and cancer by 10% percent for those alive in the US today, then we could add 10 trillion in economic value", said Mr McKinnell.
One participant from the floor asked what effect health spending on the elderly has on revenue per capita and here Ms Forette acknowledged that the economic benefits only held true "when old people contribute (to the system). It doesn't add up when two-thirds of the over-55 year-olds don't work, as in France."
While concurring with Ms Forette that an ageing population is a reflection of successful economic and social policies, Julio Frenk, Minister of Health for Mexico, pointed out that "every time there is a triumph in public health it sows the seeds of the next set of challenges." This was particularly true in countries such as Mexico where half of the population aged over 60 was without medical insurance.
Mr Frenk argued that developing economies face greater problems managing the demographic shift towards older populations than do developed countries.
"It must be seen as a very positive outcome of good policies. The key issue is how to respond institutionally," said Mr Frenk.
The Mexican minister explained that whereas developed countries have an opportunity to adjust to ageing, developing countries will undergo change in a single generation. "What took place over 200 years in the UK has happened in 50" in countries such as Mexico, he said. One reason is rapidly falling birth rates. Improved health services and lower birth rates initially create what Mr Frenk calls a "demographic bonus", as there are fewer dependent children. It is during such times that developed countries have typically invested in building health and social security programs. However, in developing economies, the speed of demographic change together with economic and financial constraints have made it much harder to take advantage of this demographic bonus.
The shift in developing countries risks being "from having lots of poor children to lots of poor elderly" Mr Frenk argued. "We need to share experiences so that developing countries can leap-frog … the challenges that industrial countries went through or are going through."
All speakers highlighted the importance of preventive healthcare as a way to reduce costs and keep people active longer. Governments often fail to take simple cost-effective measures such as making influenza vaccine widely available, said Mr Frenk. Karen Poutasi, Director-General of Health and Chief Executive, ministry of Health, New Zealand, explained her government's approach of integrating the planning and delivering of health and disability support systems in an effort to keep people healthier and so the elderly active and out of nursing homes.
Pfizer's Mr McKinnell called on governments to look to scientific innovation to prevent illness in old age and therefore keep overall healthcare costs down. "The good news is that most of you in the audience will live into your eighties. The bad news is that 50% of 80 year olds suffer from Alzheimers," he remarked. Either governments pay to take care of Alzheimer sufferers, "or you look for ways such as medical innovation to prevent the onset of the disease", he argued. And that meant providing better financial incentives, McKinnell explained, in answer to a question from an attendee about the development of a SARs vaccines. Pfizer had been one of the largest producers of human vaccinations, but now makes none thanks to a combination of legal liability and government price controls, said Mr McKinnell. "We need incentives." As for one concern raised from the floor that elderly people tend to receive too much medication rather than too little, the answer from Mr McKinnell and Ms Forette was clear: the elderly still receive too little medication and healthcare, not too much.
©OECD Observer
Cancer and the environment
Special session
Evening, Wednesday 12 May 2004
A disease of our time?
Moderator: Chris Brooks, OECD Communications Head
Special guest: Dominique Belpomme, Professor, University of Paris V and head of ARTAC (the Association for Therapeutic Research against Cancer).
In France, 150,000 people die of cancer each year (out of 280,000 diagnosed). This is a twofold increase in 50 years. Furthermore, the rate of death, at 45% is not expected to increase much going forward. Cancer is a very complicated illness. Even despite new findings, it is very unlikely we'll be able to eliminate cancers 20 years from now.
With tobacco accounting for roughly 25% of cancer cases and lifestyle apparently coming in at 25-30% (including diet and hormonal treatments for women, for example), pollution is believed to count for more cases than many have believed till now.
The reason is simple: chemicals found in pollution are carcinogenic. The National Cancer Institute (in the US) conducted a study of air pollution in big US cities, which concluded that there was a higher incidence of lung cancer there. A recent study in France concluded the same, whereby 10% of lung cancers can be attributed to air pollution, as well as chemicals invading our food, from pesticides and the like.
Dominique Belpomme stressed the growing incidence of cancer in children, which has risen in the US and Europe. Today's diseases are increasingly chemical-induced, and not just microbiological or viral, as witness the increased incidence of asthma in children, he said.
New chemicals need to better monitored. Programmes like REACH (Registration, Evaluation and Authorisation of Chemicals), which aims at applying some sort of regulation to chemicals, will help.
A common theme running through Mr Belpomme's intervention was the discrepancy between what the scientific community claims and what politicians say. This has all been summed up in a new document Mr Belpomme has worked on, called the Paris Appeal (Appel de Paris), an international charter to draw public attention to diseases from chemical pollution. The charter, which has been signed by leading academics and Nobel prize winning researchers, focuses on three points: that many illnesses are linked to the environment; that the children's health is at risk; and that in fact the human species as a whole is in danger.
Several questions came from the floor. Oddly, according to one speaker, while there was high investment on research on the effects of tobacco, the same effort was not going into chemicals and fertilizers that may be important sources of carcinogens. A good many substances were carcinogenic in large doses, even vitamins and aspirin, Mr. Belpomme said.
How were ordinary citizens supposed to react, asked another, especially as there were so many common home products with warnings of possible dangers from cancerous substances? Mr. Belpomme replied that since it was difficult to test all products, the precautionary principle should apply.
Another participant pointed to that gap between the scientists and governments on the issue. The way to close it, according to Mr. Belpomme, is through public and NGO pressure. Such were the impending dangers that Mr Belpomme called for a new "Marshall Plan" to take action. But while he stressed the need for political will to act, he emphasised the need to work with industry to forge change.
©OECD Observer
Obesity and Health
Morning session Wednesday, 12 May 2004
An impending epidemic
Moderator: Sabine Syfuss-Arnaud, Special Correspondent, L’Expansion, France
Obesity & Health
Panel: Pierre Lefèbvre, President, International Diabetes Federation, Belgium; John Martin, Director of Employment, Labour and Social Affairs, OECD; Michael O'Grady, Assistant Secretary for Planning and Evaluation, Department of Health and Human Services, United States; Danny L. Strickland, Chief Innovation Officer, Coca-Cola; Janet Voûte, CEO, World Heart Federation, Switzerland
“Obesity wasn’t even on the international agenda 10 years ago,’’ noted Lord Alan Watson of Richmond, in the opening keynote speeches to the Fifth OECD Forum, but has since bubbled to “boiling point” as a global issue. Speakers at this session tended to agree, though a more thorough understanding of the causes of obesity was needed.
Worldwide, the number of obese and overweight people total about 1 billion, noted Janet Voûte, CEO of the World Heart Foundation, quoting WHO data. The US is unfortunately “leading the way” globally. Michael O’Grady, Assistant Secretary for Planning and Evaluation at the US Department of Health and Human Services, said the percentage of obese and overweight people in his country is at an all-time high – about 34% of the adult population. And childhood obesity was on the rise too. About 10% of young people five-17 are overweight, Ms. Voûte noted.
No country is immune. “Even the French paradox is finished,” said Sabine Syfuss-Arnaud, who moderated the session. Her comment referred to a rise in childhood obesity rates in her own country, France. The problem has spread to developing countries too, such as China, said Pierre Lefèbvre, as developed country lifestyles, including sedentary behaviour, took hold.
The trouble is, the panel agreed, the numbers may actually understate the problem. In Europe and many other OECD countries, said John Martin, Director for Employment, Labour and Social Affairs at the OECD, the data are based on self-reported measurements – not actual medical observations. People may naturally underreport their personal weight, Mr Martin suggested.
The consequences of obesity loom large in human suffering and death, but also as a burgeoning economic burden. The toll in human lives is staggering. In the U.S., diseases linked to obesity kill 400,000 people a year and represents 17% of all deaths of preventable causes. Obesity is well-known as being a risk factor for heart disease. “Of even greater concern” said Ms. Voûte, “is the prevalence among adolescents of metabolic syndrome,” a cluster of cardiovascular risk factors including hypertension and mildly elevated glucose levels – a kind of pre-diabetes. Indeed, the medical community no longer talks about adult-onset diabetes but instead Type II diabetes, said Mr. Lefèbvre, as anyone who eats too much is prone to the disease.
The economic cost is high too and is trending higher. In the US, these costs were estimated at $75 billion a year or 5% of total health spending, according to data cited by Mr Martin. In countries like Canada, Australia and New Zealand these costs are estimated to be 2%-3% of GDP: “One worrying feature is the time lag between the onset of obesity and related health problems, suggesting higher health-care costs in the future,” he said
While obesity and its main consequences are clearly a problem, panelists were not satisfied with current knowledge about the effects and causes – let alone potential solutions. One audience member wondered about refined sugar consumption and its possible negative effects on stamina and productivity. “We need good science…that will link consumption to a range of health problems,” agreed Mr. Martin.
Mr O’Grady noted the trend in “supersizing” foods and beverages, but doubted this was the only cause of the US problem, since obesity appeared to vary with gender, age, socio-economic status and race.
A new study shows that the main driver of weight gains among US adults is an increase in calories from eating more snacks per day, said Mr. Martin, rather than just a decline in physical activity.
What to do? The real crux for Ms. Voûte was one of improving consumer consciousness. One audience member asked if any of the diet regimes were of any use. Ms. Voûte said a scientific consensus about dieting does not yet exist, yet effective programmes were badly needed.
Ms. Voûte admitted that “no one here knows the answer, but the good news is that we all are here to try to figure it out,” making reference to panelists from government, NGOs and business and their desire for stepped-up public-private partnerships. Mr O’Grady stressed the idea of personal responsibility, and on the use of “carrots rather than sticks.”
Coca-Cola’s Danny L. Strickland, Chief Innovation Officer of Coca-Cola, summed up part of the problem faced by policymakers. His company wants to be “part of the solution, through new products, policies and programmes.” The company is investing hope in C2, a drink it is launching that tastes like its classic cola but has half the calories, carbohydrates and sugar. “There is a limit in what you can make people do,” he argued, “healthy products have to taste good.”
©OECD Observer
Corporate Responsibility
Morning, 12 May 2004
The OECD Guidelines for Multinational Enterprises
Bridging the trust gap
Moderator: Mark Landler, Frankfort Correspondent, New York Times
Panel: Jean-Philippe Courtois, CEO, Microsoft Europe, Middle East & Africa; John Monks, General Secretary, European Trade Union Confederation; Jane Nelson, Director of Corporate Social Responsibility Initiative, Harvard University, US; Nevenka Pergar, Board Member, Aktiva Invest, Slovenia
Are businesses acting responsibly in their affairs and how can the OECD Guidelines for Multinational Enterprises help them to achieve broad goals? Jane Nelson, Director of the Corporate Social Responsibility Initiative at Harvard University reminded the audience that the health of nations was a notion that embraced economic and environmental well-being. She noted that the OECD MNE Guidelines had three main principles: do no harm; be proactive; and promote corporate responsibility and transparency in the market. There is an acceptance of the need to involve stakeholders in corporate governance: “The way to go involved corporations/government/trade union partnerships.”
Moderator, Mark Landler, pointed to the voluntary nature of the OECD guidelines as the one of the key issues, and subsequent speakers took up this point, wondering if stricter application was not needed.
John Monks, the general secretary of the European Trade Union Confederation, said he would adopt the role of cynic, taking as an example Shell’s efforts to improve its public image in the environment and energy conservation field, though this firm still fell foul to some questioned business practices. Mr Monks noted a recent European poll that showed that 61% of those polled did not trust large companies. “The goal of companies must be to improve trust, especially in financial institutions and pension funds”, he said. In particular, “the paternalism of corporations must end”.
Nevenka Pergar, board member of Activa Invest in Slovenia, pointed out that though Slovenia was not yet an OECD member, it had nonetheless signed the OECD MNE guidelines. As representative of a financial holding company, Ms Pergar was nonetheless in favour of more of making regulations more binding. She saw several major areas for improvement: transparency in boardroom governance; quality management; education and strengthening links with civil society.
Jean-Philippe Courtois, CEO, Microsoft Europe, Middle East and Asia, said Microsoft was embarked on two journeys: that of becoming a global MNE, and that of “thinking it through” as Microsoft expanded its representation to 60 countries. The watchword at Microsoft was “people, planet, profits.” Business was part of society, not divorced from it. Standards of business conduct were key at Microsoft. In the short term, Microsoft was focusing on openness via business transparency to shareholders. Technology had a role to play in promoting that openness and furthering people participation and corporate citizenship. This included demanding high standards in corporate responsibility, as well as empowering communities through technology and education, including in developing countries.
Participants from the floor expressed some scepticism about the degree to which companies were willing to collaborate with governments in adhering to the OECD MNE guidelines. Jane Nelson acknowledged that more had to be done, and emphasised several ways to improve the guidelines’ effectiveness, including the need to provide clearer and better information, and to ensure that the guidelines were applied to government procurement.
Several speakers argued that it was all very well to want stakeholder participation, but these had to want to become involved, pointing to the difficulty of getting stakeholders into the boardrooms. There was also some concern about how stakeholder consultations might absorb company time and resources.
©OECD Observer
Sustainable development
Moving from words to action
Wednesday afternoon, 12 May 2004
Moving forward?
Moderator: Geir Haarde, Finance Minister, Iceland
Panel: Yves Coupin, Senior Vice President, Sustainable Development and Continuous Improvement, AREVA, France; Johanne Gélinas, Commissioner of the Environment and Sustainable Development, Canada; Michael Meacher, Member, House of Commons and former Minister for the Environment, United Kingdom; Gil Rémillard, Chairman and Founder, La Conférence de Montréal, Canada; Trine Lise Sundes, Confederal Secretary, Norwegian Confederation of Trade Unions
"If you were in the OECD, what specific action would you take tomorrow to help advance the cause of sustainable development?" The question came from the floor of this discussion, where talks were upbeat, despite a general recognition that progress on sustainable development agenda had been meager. Yet, there was also a wide recognition of how pressing sustainable development had become. As Geir Haarde noted, "the very fact that a finance minister such as myself has been invited to moderate a discussion on sustainable development show just how far-reaching an issue it has become." A change in global perceptions is occurring.
The question is how to advance sustainable development, 12 years after the Earth Summit in Rio de Janeiro. Michael Meacher wanted action to be stepped up: "On the international level, we must continue to send more signals to the market of both the necessity - and benefits - of sustainable development. In domestic markets, we must focus on the consumer and his perceptions; for example by explaining the environmental impact of gas-guzzling automobiles."
Mr Meacher saw the Johannesburg summit on sustainable development as a positive step, but wanted more direction on implementation. "What we see in the Johannesburg text is a multiplicity of goals, but little regarding a plan of action." He went on to say that too many conditions are being placed on rich countries' financial contributions to sustainable development, and that for the agenda to become successful it has to go "mainstream". That means involving developing countries and providing a channel for immediate redress in relation to sustainable development concerns.
Johanne Gélinas was not as upbeat: "If we take Rio as a guideline, the sustainable development agenda has been a bit of a failure". Along with her job as a Canadian environmental commissioner, Ms. Gélinas also works in the office of the country's Auditor General, which collects and manages evidence to hold governments responsible for their policies and accountable to their promises. Her office interacts with more than 75 countries to gauge the impact of business and policy, by sending reports to parliament and giving recommendations on issues such as water quality. "If we want to have better news 12 years from now, we have to get on the job," she said. She said there were major obstacles though, not least the fact that "governments sign enormous amounts of international legally binding agreements. What they should be doing is rationalising and prioritising the most important areas." Ms. Gélinas finished with a word to governments: "we're keeping our eyes on you, and we won't let you fall asleep."
Regulation alone is not enough to encourage sustainable development. Yves Coupin said that when a business must make discourse and action coherent. They must consider two things: how their own experience can contribute towards finding solutions, and how to adopt best practices. According to Mr Coupin, the French nuclear energy company AREVA, satisfied energy needs without contributing to greenhouse gases. Its successful strategy has also meant involving stakeholders in the decision-making process.
After Enron and similar scandals, public trust has declined, while calls for social responsibility have increased. In France, a corporation's annual report must include forecasts on the sustainable development impacts their business may have. Companies are thinking more and more about environmental impacts of their strategies, and many countries have included "precautionary principles" regarding scientific uncertainty in their constitutions. According to Gil Rémillard, the expectations are clear: "Companies must contribute to public good or face the stock devaluation that follows analyst or media reports." He says that the growing norm of corporate responsibility affects corporate behaviour, and that we are seeing but the beginning of such a trend. "Reebok has been recognised for promoting labour organisation in China, while in Canada, Adbusters is about to launch a new line of footwear with a $250,000 advertising campaign on how Nike exploits its workers. In general, I think we are moving in the right direction."
Trine Lise Sundes presented some sobering figures to close the session. She told the audience how each year there are 2 million work related deaths worldwide, 270 million work-related accidents, and 160 million work-related diseases. These problems could only be dealt with properly at an international level. Ms Sundes also suggested the use of a new tool in advancing sustainable development: "Social indicators should be given the same status as environmental and economic indicators, and be considered in the policy-making process."
©OECD Observer
Corporate governance
The OECD Principles
Evening session, Wednesday 12 May 2004
Better standards for healthier economies
Moderator: John Plender, Senior Editorial Writer, Financial Times Corporate Governance – Improving Standards
Panel: Daniel Bouton, CEO, Société Générale, France; Véronique Ingram, General Manager, Financial System Division, Australian Treasury; Donald J. Johnston, Secretary-General, OECD; Gunnar Lund, Minister for International Economic Affairs and Financial Markets, Sweden; John J. Sweeney, President, American Federation of Labor and Congress of Industrial Organisations (AFL-CIO); Lutgart Van den Berghe, Professor of Corporate Governance, Vlerick Leuven Gent Management School & Director, Belgian Directors' Institute; Takaaki Wakasugi, Professor of Economics, Tokyo University
The revision of the OECD Principles of Corporate Governance, approved by members at the Ministerial Council, was “the most extensive consultation process that I think the OECD has undergone”, said Véronique Ingram, General Manager of the Financial System Division in the Australian Treasury, so launching this session on corporate governance at the OEC Forum.
When the Principles were promulgated in 1999, she pointed out, the business environment was relatively benign and the Principles, as a catalogue of best practice in corporate governance in OECD countries, became an international benchmark, not least for non OECD governments trying to improve their regulatory frameworks. After the ensuing corporate scandals and collapses, ministers reviewed the Principles to see if they were still relevant and if they needed to be bolstered in some areas. The Principles were discovered to be sound on the whole, though in need of tightening up and clarification, not reinvention.
Principal drivers of the revisions included the failure of institutional investors to exert pressure on boards because, said Ms Ingram, they had been “asleep at the wheel”. Key changes incorporated in the revised Principles involved bolstering the role of investors, enhancing the operation of checks and balances in the system and dealing with conflicts of interest and lack of independence on the part of auditors and other gatekeepers.
“You don’t govern a company with 36 directors,” remarked Daniel Bouton, CEO of the Société Générale, who noted that boards are finally now shrinking in size in French companies. Self regulation was working well in France, and he attributed this success to full adherence to the OECD Principles. Some 40 first level listed French companies have set up committees on compensation which are totally independent, the majority of boards have precisely defined powers of board and management, and more companies have more independent, smaller, boards, he noted. Governments should not, insisted Mr Bouton, be too ambitious about regulation, since “a zero risk world would be boring”.
Sweden’s minister for economic affairs and financial markets, Gunnar Lund, said that he had spent most of his time in office dealing with corporate scandals. The current preoccupation with corporate governance results from such scandals and from the challenge of making globalisation work. Mr Lund believes that globalisation can produce enormous benefits, but that “proper discipline” is needed to harness such forces. Sweden needs a combination of self regulation and legislation. If, he said, the corporate sector does not live up to this challenge, he is prepared to legislate to make sure they do.
John Sweeney, chair of the Trade Union Advisory Committee to the OECD (TUAC) and president of the US labour organisation, AFL CIO, stressed the role of capital owned by workers in promoting better corporate governance. He pointed out that “worker capital” amounting to US$7 trillion was now the largest source of investment funds in the United States and that workers now owned 26% of all traded companies there. Union sponsored funds are active in initiatives to improve corporate governance, proposing new listing standards for the New York Stock Exchange and NASDAQ and organising voting campaigns to replace bad directors. Unions had participated in revising the OECD Principles because they were the only international standard for good corporate governance, Mr Sweeney said. Unions want, he concluded to make globalisation work for workers as well as for capital.
“Why do we need corporate governance standards?” asked Lutgart Van den Berghe, Professor of Corporate Governance in the Vlerick Leuven Gent Management School and Executive Director of the Belgian Directors’ Institute, ”Because it has positive effects on the economy and health of nations.” Good corporate governance is a means, not an end in itself. What matters is substance, not form. And transparency was not everything: research on listed companies in Belgium shows that companies with the best disclosure and transparency records had the worst behaviour in the board room. One way of improving matters was to have more outside directors, as well as appointing better managers. However, remuneration costs might rise, which would be a problem for some firms.
A Japanese perspective was provided by Takaaki Wakasugi, Professor of Economics at Tokyo University, who said that Japan was still at a preliminary stage. In March 2004, the Tokyo Stock Exchange announced corporate governance principles similar to those of the OECD, but the main business federation in Japan objected to them. In the 1990s, he recollected, there were many scandals and criminal acts in major corporations. As a result, return on assets had fallen from 6 to 2% and whereas share yields averaged 19% from 1952 to 1989, they were minus 8 per cent a year from 1990 to 2002. Companies were responsible for destruction, not creation, of shareholder value. Interest in corporate governance had therefore sprouted in recent years. The government promulgated a revised Commercial Code in April 2003 embodying a new committee system and the separation of board and management, but fewer than 100 of the 1,500 companies listed in section one of the Tokyo Stock Exchange have adopted it. The attitude of ordinary people is an obstacle: although the Japanese are capitalists, with average net worth of US$100,000 each, their thinking is “socialistic”. They think that shareholders’ profit should be sacrificed in the interests of employees, Professor Wakasugi argued. His research shows that good corporate governance is positively linked to high rates of return and job creation.
The OECD Secretary General, Donald J. Johnston, finished by saying that the role of the OECD was not to draft a “convention” on corporate governance but to help its member governments develop best practices. He said that drafting the OECD Principles had been “a tour de force”, and the OECD will, he said, monitor the implementation of these principles in member countries. Non members would also find them invaluable, including for attracting foreign investment.
©OECD Observer
Equity and access health session
Evening, Wednesday 12 May 2004
Balancing rights
Moderator: Julio Frenk, Minister of Health, Former WHO Executive Director responsible for setting up the Commission on Macroeconomics and Health, Mexico
Panelists: Jean-Pierre Garnier, CEO, GlaxoSmithKline, UK; Baroness Sally Greengross, Co-chair, Alliance for Health and the Future, UK; John Hutton, Minister of State for Health, UK; Christoph Thalheim, Secretary-General, European Multiple Sclerosis Platform, Belgium
This debate characterised the OECD Forum by offering a wide ranging debate with health ministers, a pharmaceutical company chief, a medical advocate and a health association representative in discussion with an audience of stakeholders, experts and health employees.
For UK minister John Hutton, the issues confronting national health authorities were complex. There was no doubt about the need for equity, but the issue was also about how this should be financed, and governments adopted varying approaches. The free market was unable to deliver on its own, which meant that governments had to intervene, which in turn imposed resource strains on the fiscal system and provision of health cover.
Pharmaceutical executive Jean-Pierre Garnier warned that the single-payer system based on public provision was broke, and this had cost containment implications for pharmaceutical companies. In turn, this would have knock-on negative effects on new drug development. He also cited the stock market’s reading of the situation, with pharmaceutical company market capitalisations having fallen sharply in the last few years.
The health sector had seen many positive developments which sometimes introduced new problems. For instance, ageing and greater longevity raised public expectations and lead to higher healthcare costs. Medical research was in a way a victim of its own success. Innovation was caught in the middle, since many OECD countries were spending more on generics and less on innovations, said Mr Garnier.
A very positive side to progress in healthcare was the spin-offs it has produced for child and family healthcare, with better monitoring and medical histories being built up, for instance, according to Baroness Sally Greengross. But in the UK a new social problem had emerged in that very often healthy older people had worse access to facilities and activities, she said, and were cut off from normal everyday services, like insurance or hiring cars. It was great to be able to live longer, but people should be able to enjoy a healthy old age with full rights.
Christoph Thalheim, Secretary-General of the European Multiple Sclerosis Platform, which has representatives in a total of 30 countries, was concerned that while access for all was clearly important, particular conditions should receive particular kinds of attention from policy action. Sufferers from multiple sclerosis were a perfect example of such a group. Some countries, like the UK, had done much to take this illness seriously, enhance the mobility of sufferers and helping them to deal with symptoms. Mr Thalheim said there were 450,000 MS sufferers in the 25 EU countries, the number rising to 600,000 in Europe as a whole.
If problems faced by OECD governments in the health area were broadly similar, policy approaches varied for historical, social, and demographic reasons. There was particular interest from the floor in the policy approaches adopted by the UK government, with its internal markets and other reforms to improve efficiency, cut waiting lists and so on. One participant raised a question about the emergence of two-tier health systems in OECD countries. Mr Hutton in particular agreed that this posed a risk in the UK, but explained that government policy was to encourage competition between providers of all types to improve quality, as well as bolstering access.
Mexico is a country that has worked hard on improving equity in health access, and Health Minister Julio Frenk, who chaired this meeting, summed up the session by identifying three main strands to the problem facing public policy makers:
- the technical dimension, which is essentially innovation and evidence-based medicine;
- the ethical dimension (values of equity, universality of access, integrity and fairness)
- the political dimension (implementation and accountability)
Action would have to bear in mind these strands, which are pillars to building equitable access to health systems.
©OECD Observer
Peace and resurgence but a nuclear shadow
East Asia in the 21st Century
Noon, Wednesday 12 May
Moderator: Nicolas Beytout, Editorial Director, Les Échos, France
Keynote speech: Dae-jung Kim, Former President of Korea, Nobel Peace Prize Winner
Full speech [PDF, 102 KB] is also available to download
Former Korean President Dr Kim Dae-Jung told an OECD Forum of business leaders, government officials and representatives of civil society that East Asia was living in peace, despite differences, but the North Korean nuclear issue "is a huge obstacle standing in the way of peace".
Delivering the keynote address on the opening day of the OECD Forum and introduced by OECD Secretary-General Donald Johnston as an outstanding leader, he told a packed auditorium in the Paris Kléber International Centre that the solution was for North Korea "to completely dismantle its nuclear weapons and the Unites States to provide security guarantees to North Korea and help North Korea advance into the international community".
President Kim Dae-Jung recalled his talks with North Korea's Chairman Kim Jong-il in June 2000 and his subsequent brokering of renewed contact between the United States and North Korea. The former Korean leader said he was "hopeful" that North Korea was "ready to give up its nuclear weapons program" and relations would improve through dialogue. Any attempt to use force and provoke a new war on the Korean Peninsula could result in over a million casualties.
He said his "sunshine" policy emphasised the three stage approach of peaceful coexistence, peaceful exchange and peaceful reunification. "Korea and North Korea should eliminate the icy breeze of the Cold War and let in the warm sun rays of reconciliation", he said. "North Korea is gradually opening up its doors and pursuing economic reform", and once "US-North Korean relations improve, the relations between the two Koreas will take a dramatic step forward."
Former president Kim Dae-Jung said the most significant phenomenon in the economic development of Asia was the resurgence of China and India. Citing recent research, he said that back in 1820, China accounted for 27% of the world's GDP and India accounted for 14%, at a time when the UK's share was only 5%.
Noting that Korea is now the world's 12th largest economy, he said his country served as a model for developing countries. "Korea, China and Japan have all been influenced by Confucianism," he said. "The economies of the three countries are swiftly adapting to and developing in the age of the knowledge-based economy of the 21st century" and some experts predict they could become the epicenter of the world economy in the 21st century.
©OECD Observer
People-based strategies
Special session: An economy with a human face
Afternoon, Wednesday, 12 May 2004
Strategic thinking in enterprises is being sidetracked by a series of "phantom factors" and the tyranny of the virtual world, according to the initiators of a new strategic consulting venture seeking "to put humans back at the centre of the economy".
A session chaired by Francis Mathieu heard a presentation from former publicist Aubry Pierens who urged the need to rethink the way enterprises approached how they worked out their company strategies. He said there was excessive dependence on what he called the tyranny of "filling in computer tables", and following polls.
Criticising corporate analytical practices that showed the lessons of history were often forgotten, Mr Pierens said that the "virtualisataion" of people and dialogue had led to a widely accepted mentality that "people only believe what they see on the computer screen."
Calling for a return to simpler virtues, he said "we have been born to live happy, and we need to live in a spirit of enterprise, even fear which is an emotion that can prove an inspiration for working out more adventurous action."
Founder of the Paris-based business strategy firm, We Consulting, Mr Pierens launched a proposal for "men and women of goodwill" to work together. "Let each one of us give 1% of our time to debate and chart a route to a new kind of growth". He proposed holding a three-day meeting at a suitable venue for group thinking "in order to break the consensus if one wants to change our way of life and rethink our approaches".
Asked by a questioner from the floor whether the idea related to the anti-Davos Social Forum he said he was not pushing confrontation: "we are looking to serious thinking about major problems, such as holding a session as we did after a recent OECD meeting in Shanghai, China. That way we can provide input at the level of the OECD's international analytical work."
For more on We Consulting, its mission and objectives, see www.we-consulting.com
©OECD Observer
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