PENNSYLVANIA Gov. Tom Wolf (D) issues Executive Order 2019-01, which establishes a Keystone State goal to reduce greenhouse gas emissions by 80 percent from 2005 levels by 2050. The order also creates a state council tasked with helping state agencies reduce energy use and improve the energy efficiency of state buildings and vehicles (JURIST).
A pair of Democratic governors launched wide-ranging efforts last week to prop up the Affordable Care Act and to broaden health care coverage in their states.
The first came from New California Gov. Gavin Newsom (D), who issued an executive order (N-01-19) just hours after he was sworn in last Monday that allows the state Department of Health Care Services to negotiate all prescription drug prices for Medi-Cal, the state’s version of the joint federal-state Medicaid program. The new authority marks a significant broadening of the department’s power to negotiate prices, as those prices are currently negotiated individually by the public and private entities that manage the Medi-Cal program.
Newsom also proposed expanding Medi-Cal coverage to include a broader section of the state’s undocumented population. California currently allows Medi-Cal coverage for unauthorized minors up to age 19; under his proposal that coverage would extend to young adults up to age 26. His plan would also reinstate the so-called “individual mandate,” a tax on people who don’t obtain coverage under the Affordable Care Act. The GOP-controlled Congress revoked the individual mandate in 2017.
His plan would also increase health care subsidies for those already receiving them and for the first time extend that assistance to the middle class. Right now, subsidies are not available for individuals earning more than $48,000 a year or a family of four earning more than $98,000. Newsom said his upcoming budget proposal will provide state-backed financial assistance to individuals earning up to $72,840 and families of 4 earning up to $150,600.
He issued another executive order creating a new state surgeon general position tasked with addressing health-related inequality in California. He followed up with one final thing – a letter to the Trump administration seeking permission for the state to investigate a single-payer universal health care system.
Washington Gov. Jay Inslee also took a step toward a single-payer plan, issuing a proposal on Tuesday to implement a public option health care program in the Evergreen State. Inslee called it a “first step” toward a statewide universal health care plan. Inslee’s “Cascade Care” plan would empower the state Health Care Authority to contract with at least one – and preferably more than one - health-insurer to offer a qualified plan through the Washington Health Benefit Exchange, beginning in 2021. Inslee said reimbursement rates for providers would be consistent with Medicare rates.
Although Democrats control both chambers of the Washington Legislature, the prospects for Inslee’s plan are unclear. California Dems, meanwhile, have supermajorities in both chambers, making it likely that all of Newsom’s proposals requiring legislative approval will move forward. (CALIFORNIA GOVERNOR’S OFFICE, STATE NET CAPITOL JOURNAL, WASHINGTON GOVERNOR’S OFFICE, SEATTLE TIMES, SACRAMENTO BEE)
Four governors – two outgoing, two newly-sworn in – issued executive orders barring discrimination against LGBTQ state employees. Before leaving office in December, then-Michigan Gov. Rick Snyder (R) issued an order barring discrimination based on sexual orientation and gender identity in loan and grant programs, or in the procurement of state contracts. Earlier in the month, outgoing Ohio Gov. John Kasich (R) issued an order barring discrimination against LGBTQ people in state hiring.
In January, Wisconsin Gov. Toney Evers (D) was in office only a few hours before he signed an order also barring discrimination in hiring, and further requiring the state to put standard terms in contracts saying that recipients of taxpayer money can only hire on the basis of merit and can’t discriminate against people based on sexual orientation or gender identity. That same day, Michigan Gov. Gretchen Whitmer (D) issued an almost identical order in the Wolverine State. (MICHIGAN GOVERNOR’S OFFICE, DETROIT FREE PRESS, EQUALITY OHIO, METRO WEEKLY [WASHINGTON D.C.])
OHIO Gov. John Kasich (R) signs HB 101, which authorizes Buckeye State pharmacists to substitute cheaper but equivalent alternatives to the brand-name product EpiPen, which is used to counter severe allergic reactions to bee stings, peanuts, medication, and other allergens (TOLEDO BLADE).
With Democrats now in control of both legislative chambers, NEW YORK Gov. Andrew Cuomo (D) called on Empire State lawmakers last week to pass a constitutional amendment codifying a woman’s right to legal abortion. Dems have vowed to pass bills strengthening abortion rights, but Cuomo said he believes those rights need to be cemented in the state Constitution. To do that, lawmakers would not only need to pass such a measure this year, a separately-elected Legislature would also have to pass the bill again, and then the measure would have to be approved by voters. The earliest all of that could happen would be 2021. (NEW YORK DAILY NEWS, REUTERS)
Following up on a promise that was the backbone of her campaign, new MAINE Gov. Janet Mills (D) signed Executive Order 1 on Jan 4, a directive to expand Medicaid eligibility in the Pine Tree State. Lawmakers had endorsed several expansion measures in recent years, all vetoed by then-Gov. Paul LePage (R). Voters overwhelmingly approved an expansion referendum in 2017, but LePage again stymied expansion by refusing to implement it. Although ordered by the courts to do so, LePage refused right up to his last day in office. An estimated 700,000 Mainers are expected to now be able to obtain health coverage through the joint state-federal plan. (BOSTON GLOBE, PORTLAND PRESS HERALD)
In one of his final acts in office, TENNESSEE Gov. Bill Haslam (R) granted clemency to Cyntoia Brown, a 30—year-old Volunteer State woman serving a life sentence for murder since she was 16. Brown contended she had been forced into prostitution, and that the killing was in self-defense. Her case has drawn national attention, with justice reform advocates citing her case as an example of a broken system that did not take into account her own victimization. The commutation allows her to leave prison in August. She will remain on parole for 10 years. (TENNESSEAN [NASHVILLE], WASHINGTON POST)
FLORIDA Gov. Rick DeSantis (R) issued Executive Order 19-12, a sweeping water reform directive that includes $2.5 billion over the next four years for Everglades restoration projects. The EO also calls for two new state offices – the Office of Environmental Accountability and the Office of Resilience and Coastal Protection – as well as a task force to address large algae blooms choking Sunshine State waterways. It further creates the position of Chief Science Officer, who will be responsible for coordinating and prioritizing the collection and use of environmental data by state agencies. (MIAMI HERALD, TAMPA BAY TIMES)
NEVADA Gov. Steve Sisolak (D) issued his first executive order, a directive establishing the Governor’s Task Force on Sexual Harassment and Discrimination Law and Policy. The group will be tasked with reviewing federal and state sexual harassment laws, regulations, and policies and recommending ways to improve those procedures. (KOLO [RENO])
-- Compiled by RICH EHISEN
OHIO Gov. John Kasich (R) signs HB 425, which codifies that police body camera video is public record unless it is a confidential investigatory record. The law does not, however, require police agencies to use body cameras, and does not specify when body cameras must be activated (WOSU [COLUMBUS]).
OHIO Gov. John Kasich (R) signs HB 511, which boosts the minimum marriage age to 18 for both parties. The law does allow 17-year-olds to marry if they have juvenile court consent, go through a 14-day waiting period and aren’t more than four years older or younger than their betrothed (DAYTON DAILY NEWS).
The DENVER City Council unanimously votes to ban so-called gay conversion therapy, which seeks to change a minor’s sexual orientation. Denver becomes the first city in COLORADO to enact such a ban (GAZETTE [COLORADO SPRONGS]).
The SAN DIEGO City Council votes to finalize a ban on polystyrene food and beverage containers, which have been blamed for poisoning fish and other marine life and damaging the health of people who eat seafood.
The city becomes the 120th CALIFORNIA municipality to ban the plastics (SAN DIEGO UNION TRIBUNE).
We’re all familiar with the analogy of the legislative process being akin to sausage making. But a bipartisan group of Montana lawmakers recently took it from the grammar books to the kitchen by getting together at the home of Chief Deputy Attorney General Jon Bennion to make actual sausage. As the Helena Independent Record reports, Bennion invited a dozen lawmakers to come on by and turn some ground pork, ground elk and various spices into tasty tubes o’ meat as a way to build some bipartisanship before another rigorous legislative session. Pols left saying all the right things about cooperation and reaching across the aisle. Let’s hope it makes the legislative sausage-making a little friendlier.
It’s said there is no such thing as a free lunch. That’s rarely true in politics, where lobbyists are more than happy to ply lawmakers with lavish meals at the drop of a hat. But the free gourmet chow is now off the table in Missouri, where voters recently passed a measure to put a cap of $5 on the value of gifts to pols. That includes food. As the St. Louis Post-Dispatch reports, that has lobbyists, lawmakers and the restaurants that supply them both with gobs of culinary products up in arms. Word is the new law could face a legal challenge, or even a repeal effort by pols. Because free food, darn it.
California marked the end of an era last week, as Gov. Jerry Brown handed off the gavel to new Gov. Gavin Newsom. Brown exited office as the state’s longest-serving governor (16 years) and perhaps its greatest political comeback story. Once the butt of jokes - Gov. Moonbeam, anyone? – the mercurial Brown returned to the governor’s office in 2010, where he helped bring California back from fiscal straits so dire that smart folks openly wondered if the state would go bankrupt. He leaves with it now both flush with cash and a treasure trove of Jerry Brown stories. The news site Cal Matters asked several prominent Californians to share a favorite such tale. The best might be that of state Assemblywoman Lorena Gonzalez-Fletcher, who recounted getting a call from the gov while she was grocery shopping. Brown didn’t even say hello. Instead, he went right into a five-minute monologue urging her to support a bill he favored before hanging up without her getting a single word in. “I thought, ‘How does he even know he was talking to me?’” The bigger question: would it have even mattered?
The aforementioned Jerry Brown brought a lot to the governor’s office during his historic tenure. But one thing he didn’t bring was children. Not so for new Gov. Gavin Newsom and First Lady Jennifer Siebel Newsom, who have four kids under the age of 10. This includes two-year-old Dutch, who introduced himself to the world last Monday during his dad’s inauguration by climbing onto the podium during the elder Newsom’s address. After exploring for a bit, Dutch was scooped up by dad, who held him for several minutes before releasing the little guy back to mom. Or so he thought. The wily Dutch escaped again, returning to the stage for another round of exploration before mom got him for good.
-- By RICH EHISEN
When Risto Siilasmaa realized that Artificial Intelligence (AI) would transform the technology industry, he decided he had to learn what it was all about. Now the chair of Nokia’s board of directors is making sure all 100,000 of the company’s employees understand AI, Machine Learning (ML) and big data. In an interview in Nokia’s seaside villa in Helsinki, Mr Siilasmaa explained why companies who fail to adapt to AI will be left behind.
Why did you become interested in AI and ML technologies?
I’m an engineer by background and I’ve followed new tech since I was a kid of 12 years old, and the fascination of intelligent computers has never left me from the days I read science fiction books. Now that we’ve started seeing real life examples of things that machines can do better than the best human experts, that of course triggered one’s imagination. It’s becoming obvious that any business will draw much of its competitiveness from ML technologies in the future, and of course, I should understand what this means for the companies I work with.
Why should company leaders understand these technologies, rather than leave it to data scientists?
If I talk to an audience of CEOs, I often start by asking which ones feel that, in five years’ time, ML will be a critical piece of their competitiveness and all of them will raise their hands. Then I ask how many of them really understand how ML works and maybe one, two, three per cent of them raise their hands. This is exactly where I was. I believed a few years back that ML would be a key source of our competitive advantage, but I didn’t understand why, and I didn’t understand how it works. So, I could not ask the right questions when people came and talked about what we were working on.If it is so strategically important for the company, I should understand and we all should understand, at least enough to ask the right questions, so that led me to a sort of wake-up moment that I don’t have to wait for others to explain this to me, I can actually move my butt and go back to school myself.What is your advice for company leaders in the position you were in?
The problem with many leaders like myself is that we get used to people explaining things for us, we sort of delegate learning to others. Then we just get the gist of it from a very concise summary, but that doesn’t transfer real learning and understanding to us.We should wake up from that paralysis that others do our thinking and learning for us, and then when there is something truly critical, we should feel that we can go back to school. Of course, we can get really top teachers who can condense the essentials for us, but we should ask them to truly go deep enough so that we can understand how this technology works. This is an attitude that I like to see in the companies I work with, throughout the company. It’s also an attitude of being brave enough to admit that I don’t understand something and there’s nothing wrong with it. There’s something wrong with claiming to understand something that I truly don’t. That can be it’s dangerous. It may lead us to making the wrong conclusions, so let’s just admit that we’re all learners, we’re all eternal students, and there’s nothing wrong with asking stupid questions.
What parts of the business is it changing?
We are in the process of getting transformed. We have a large number of ML projects underway in our internal functions, for improving the quality of our work and augmenting our people so that they become their better selves. For external purposes, we are adding new competitiveness and new functionality to our products and services.We have also launched a program to educate all 100,000 Nokia employees, who will go through simple ML training, just like a code of conduct program, that is mandatory for everyone. We believe that our employees appreciate the fact we want them to learn. It’s important for them to be at the top of their profession and to understand broadly what’s happening, and it’s important for us that they develop themselves as human beings, that they know their expertise is appreciated, and that we’re investing in their development across the board.
Do you have any predictions for AI and ML in 2019?
There is of course research being done on ML widely, but regardless of the new findings and inventions the big bang will come from the already existing technology being applied widely. The technology itself is not very complicated, so companies broadly speaking will be experimenting with the datasets that they have, looking for new ways of using that data and getting productivity and so forth from that data.But they may also at times find something uniquely valuable and surprising from the data, in the same way that we have been playing chess for thousands of years and really smart people have been writing books about chess, and not only have we lost to computers for the last decade but now we have had to acknowledge that our understanding of chess strategy has been flawed, it’s like there is another continent on earth that we didn’t know about and ML found it for us. This same thing can happen to companies as they start doing this work, they may realize something uniquely valuable that they were never even thinking about.
What do companies need to do to adapt successfully?
Adapting ML widely takes time because you need to educate a lot of people and you need to take a different approach to how you think about business problems. If you want to be an AI player, one ofthe knee-jerk reactions that you must have is to acquire data. If you have a problem, the first thought is where do I get the data that I need to solve this problem, and then you buy data, you buy companies for the data that they have access to, you may buy datasets or do R&D work that you give away to people for free so that you get data in return. Then you need to reorganise, to structure your business and your organization in such a way that this tool can be effectively used, and this is a long transition, it’s not easy. I’m not saying that every company should become an AI company—not all can—but the ones who want to be need to think deeply about it.
Is it important that companies buy in external datasets rather than just use their own data?
It is important that companies think strategically about data, both the data that they have or have access to, but especially about data that they can foresee needing in a few years’ time.
Why is data valuable and what sort of datasets have the most value?
Well that depends on the business of the company, but data is the food that most ML needs, that’s the way they are trained. In simplest terms the way ML systems work is that you have a certain set of training data that you use for the training and then you have weights in the system that reflect what data is meaningful in what context. In the training process, those weights are adjusted so that the mistakes the system makes are minimized. You do that training many times, perhaps thousands of times or tens of thousands of times, and each time the mistakes that the system makes are getting smaller and smaller, so the real value is in the trained weights. If you have bad data you will get bad weights, and the system will make mistakes; it can’t answer questions correctly. If you have high quality data that fits the problem that you are trying to solve, you may get excellent results, far beyond human capabilities in these narrow fields of problem solving.
How can firms ensure the data they use is high quality and relevant?
They need experience to do that; it’s not easy. The problem is that we all have biases and sometimes we don’t understand our biases. Some can be pretty simple—when universities build systems, if the researchers are all white Caucasian males, then they may forget that there are other types of people. They don’t have any intention to skew the system so that it doesn’t deal fairly with people of color, it just happens. They may only find out after they launch the system for public use, and then it’s a big PR crisis. So of course you can measure the quality of data in many ways—mechanically, you test it—but then there may be deeper level thoughts or missing subsets of data that you only realize way afterwards, so you really need to approach it very thoughtfully and it’s another thing that people need to train for, it’s not something we automatically can do well. This is a new frontier; there are lots of things to learn and get adjusted to.
What external datasets are most important to a company like Nokia?
That purely depends on the business and the problem. Let’s say if we want to automate accounting then we need data of accounting sentries and of course all companies have lots of that data because they do accounting themselves. It’s only a question of if they want to use it and to automate accounting themselves or if they use a third party who is specialized in that and builds the systems and helps them to use it. Then there are some things that only one particular company does, and they have access to that type of data and then they will have to do something themselves, they can’t just resort to third parties. Sometimes the problem is when the company doesn’t have access to suitable data and they just have to figure out where to get that.
So how would you summarize the benefit to companies of investing in AI?
I think all companies probably start with attempting to maintain at least their current competitive advantage because everybody is investing in machine learning, especially in the tech space, so you have to run to stay in your current place. But of course, if we are better at this, if we are more innovative, if we actually come up with something new or apply it in an area that others don’t, our products will be cheaper, faster, better quality, they will make fewer mistakes, they will be more intuitive, cheaper to build and cheaper to operate. Those are the opportunities and advantages. In addition, there may be some things that would be completely impossible without machine learning and those are allegorical to situations like AI finding new chess opening strategies or Alpha Go making moves that no human being has ever played, or curing illnesses that were never curable before.
January 11 is National Human Trafficking Awareness Day. Established in 2007 by a Senate resolution, the day shines a spotlight on the issue of trafficking men, women and children for financial gain. Many associate trafficking with sexual exploitation, however among an estimated 16 million human trafficking victims:
That’s right. There is a clear correlation between human trafficking and forced labor.
What defines human trafficking and forced labor?
The U.S. Department of Homeland Security notes that “Human trafficking is modern-day slavery and involves the use of force, fraud, or coercion to obtain some type of labor or commercial sex act.” Human trafficking disproportionately impacts marginalized groups—migrants, women and children, teenage runaways, LGBTQ individuals. It can happen within a single country’s borders or trans-nationally.
Forced labor is even more prevalent, impacting 24.9 million people around the world, including close to 10 million children. Migrant workers are particularly vulnerable because of language barriers, lack of advocates or friends nearby, and financial dependence on their employers.
Countries that have weak rule of law, rampant corruption or economies dependent on cheap labor have higher incidences of human trafficking and forced labor, but it happens everywhere. Countries with more robust economies—and laws against trafficking and forced labor—still face the problem.
And rampant consumerism for low-priced goods incentivizes those who want to take advantage of forced labor to keep costs down.
This isn’t a problem for governments alone to solve. This is a problem that requires collaboration between governments, NGOs, companies and consumers.
Document your entire supply chain. Why is this important? Often, companies don’t take their due diligence beyond Tier 1 or Tier 2 suppliers. However, forced labor is often most prevalent in the collection of raw materials, such as cobalt mining or cotton harvesting. Dig deeper so you know WHO is supplying the vendors you rely on.
Conduct a forced labor risk assessment. Forced labor is currently most common in South Asia, China and Central Africa. It is also more common in certain industries, such as mining or agriculture. With the assessment complete, you can ‘right-size’ your risk mitigation process to align with the risk level.
Establish financial penalties in your supplier contracts. You know the saying, “Money talks”? You can exert pressure on key suppliers to mitigate the risk of human trafficking in their own supply chains (and protect yourself at the same time) by requiring that they meet the standards you’ve set—or pay the price.
Monitor for signs of forced labor risk.Due diligence is just one piece of the puzzle. By implementing PESTLE-based risk monitoring, you can stay alert to potential threats as they arise. Isn’t that better than being blind-sided because a supplier you trust made changes in their own practices that put your reputation on the line?
Train your employees and suppliers on spotting the signs. Airlines, bus companies and other transportation-related businesses increasingly provide this type of training. Recently, CSP reported on the vital role that the convenience and fuel-retailer industry can play in ending trafficking.
Human trafficking and the resultant forced labor represents a considerable reputational and financial risk to companies. When news breaks about forced labor in the supply chain, social media can ignite a PR crisis.
Boycotts gain momentum. Class-action suits ensue. Share prices suffer. And trust is lost.
Fortunately, procurement, supply chain and risk management professionals are ideally positioned to help eradicate these types of human rights abuses.
Next Steps
In our ongoing series of Expert Q&As, we speak with Alison Taylor, Managing Director of Business for Social Responsibility (BSR), a nonprofit organization that works with companies and other partners on sustainable business strategies. She tells LexisNexis that there is a trend of businesses prioritizing ESG issues and the United Nation’s Sustainable Development Goals and contends that the use of data is becoming an “existential issue” for all companies.
What are the main trends in business regarding sustainability over the past few years?
First, increasing interest in environmental, social, and governance (ESG) issues from mainstream investors, not just socially-responsible ones. Our financial services work has grown exponentially as banks and private equity firms focus on establishing systems to measure ESG risks and opportunities in acquisitions, corporate finance, and their own portfolios. The growth in interest is most striking on climate and diversity, but there is a broad, underlying shift in thinking as to how business interacts with society. This focus on sustainability from the financial services industry is directly impacting how seriously corporations take the issue. We are seeing companies increasingly request “ESG” rather than “sustainability” strategies, and this shift in terminology is a direct response to investor scrutiny.
We have also seen the establishment and maturation of internationally-accepted frameworks to measure and frame sustainable business efforts: the Paris Agreement on climate, the Sustainable Development Goals, and the UN Guiding Principles on Business and Human Rights are a few examples. This is shifting the focus to how companies implement sustainability efforts inside the organization, and how they incorporate them into governance, management structures, and incentives.
Finally, we are seeing a convergence between issues of integrity and sustainability. Hyper-transparency means that companies need to behave as if anything they say or do might become public. Societal trust in business is falling, social and political activism is increasing (especially in the U.S.), and legalcompliance is no longer a reliable proxy for reputational risk. All these trends require rethinking on how companies manage a broad range of ethical issues.
What are the advantages for a business in focusing on sustainability, and what are the risks in ignoring it?
There is considerable evidence at this point that a focus on sustainability improves growth over the long term. It can help with employee retention, particularly of younger generations. It improves reputation and access to capital. Environmental efforts can reduce operating costs; efforts focused on societal value can improve license to operate. Conversely, ignoring sustainability increasingly signals that the company has a short-term mindset and an old-fashioned attitude holding that a business’ impact on society and the environment is just a matter of “negative externalities.” Such a mindset is no longer acceptable to many consumers, so businesses that think this way risk undermining public and investor trust.
What advice do you have for a business looking to increase its focus on sustainability?
The focus of sustainability efforts over the last several years has been to identify and act on issues that are in the interest of both the business and society: the “shared value” concept. This is a shift from earlier iterations of sustainability whereby it was regarded as philanthropic and divorced from the business, or as a risk-management and compliance effort. Today, the focus is on opportunity identification, and alignment with core business interests. Sustainability is a broad and evolving concept. Businesses should prioritize and have a clear strategy that is aligned with core business interests—ideally demonstrating leadership on a few key issues.
And how important is leadership?
Extremely important. The sustainability function inside companies remains poorly-defined and inconsistent. Executive and board support is critical to driving visibility and traction for sustainability efforts. Sustainability leaders that have a strong track record in business tend to be more credible and are adept at driving the organizational change needed to make this work succeed. We believe that change management skills are highly underrated in the field of sustainability—subject matter expertise varies enormously, but a sophisticated approach to organizational dynamics is always going to help.
Did any findings in your latest annual survey on sustainable business surprise you?
This is the tenth year of our annual State of Sustainable Business survey, which we refreshed to take account of the new trends we are seeing. I was surprised to see ethics and integrity emerge as the top issue for sustainability practitioners at companies, as this subject has traditionally been the domain of compliance teams. Still, although companies clearly understand the link between sustainability and reputation management, they are clearly not yet ready to tackle some issues that concern the public. Our partners at Polecat conducted social and online media analysis of ESG issues and found considerable attention being paid toward lobbying and business influence on politics—to an even greater degree than toward climate, water, or diversity. At the same time, directly addressing concerns over political influence did not show up as a priority among companies.
It was also interesting to see diversity and inclusion flagged as the second-highest priority, alongside the finding that 41 percent of companies have so far done nothing to address the #MeToo movement. Thereremains a lack of focus on such major societal issues as inequality and inclusion, which is troubling, given their dramatic effect on our lives.
The survey found that AI is the main “mega-trend” in sustainable business. What does this mean?
I think it may reflect the overwhelming media and business focus on this issue. Companies are getting to grips with the fact that the use and misuse of data and technology is an existential issue for most businesses, not just technology firms. Compelling changes are happening in real time, and the future is highly uncertain. There is no clear playbook for how to proceed.
How do you think AI and big data will change businesses in the future?
AI and big data have the potential to transform supply chains, customer interactions, market knowledge, and much more. Abusing this new capability (intentionally or not) can violate a broad range of human rights and constitute deeply unethical behaviour. We are at the start of efforts to understand, regulate, and manage the capabilities of this powerful new technology.
The pharmaceutical sector is one of the most-at risk industries for bribery and corruption. In a new White Paper, we look at some of the recent bribery enforcement actions against pharma firms and strengthened anti-bribery legislation. And we suggest ten steps for enhanced risk mitigation.
Rising risk of bribery enforcement
Pharma is one of the most at-risk industries for bribery and corruption enforcement. In 2016 Teva Pharmaceutical paid $519 million to settle U.S. charges of bribery in Mexico and Ukraine. This is still the eighth highest FCPA-related fine of all time. In September this year, French firm Sanofi agreed to pay more than $25 million to settle charges that its Kazakhstan and Middle East subsidiaries made corrupt payments to win business.
Outside the U.S., regulation is strengthening, most notably in the UK’s Bribery Act of 2011 and France’s Sapin II law. And earlier this year, Israel’s regulatory authorities fined Teva and additional $22 million. It has never been more important that firms have a good due diligence and risk monitoring process in place.A risk mitigation checklist for pharma
Our new white paper explores recent pharma enforcement actions in more detail and outlines best practices for mitigating risk—from implementing training for staff and third parties agents to implementing due diligence and ongoing monitoring aligned to the risks you face. Download the white paper today to find out more.
If serious trivia seems like a contradiction, maybe you need to be more quizzical when it comes to anti-corruption compliance. January 4 is the one day of the year when there’s an excuse to be trivial—even in an area as serious as compliance in anti-bribery and corruption, anti-money laundering and terrorist financing, and the avoidance of forced labor in supply chains. This is because, all over the world, January 4 is Trivia Day.
As trivia goes, it’s ironic that how this day came about is lost in the comparatively recent mists of time. The meaning of ‘trivia’ as we understand it today—facts that are of little value or importance beyond their own peculiarly interesting novelty— dates to the early 20th century and use of the word as it pertains to quizzes emerged in the 1960s.
Then came Trivial Pursuit, which turned useless knowledge into a full-blown craze. It even gave trivia its own trivia: the board game was created in 1979 by two Canadian blokes who mapped out its structure in an hour, over a round of beers. Annual sales peaked in 1984 at around US$800 million. (If you’re old enough, these facts are in the small but irksome category of trivia known as “wish I’d thought of it first”.) Some years later, someone in the United States decreed that January 4 will henceforth be National Trivia Day. It caught on, and the internet did the rest in making the concept global.
Bribery and snakes
In the area of bribery, corruption, money laundering and the like, it’s natural to assume there’s no scope for fun trivia, right? Well, not quite. While it may not constitute the proverbial barrel of laughs, it does lend itself to a bag of snakes. Three of them, actually.
In northern India in 2011, a couple of farmers became so fed up with the bribes demanded to access their own tax records, they upended three sacks containing 40 snakes, including several deadly cobras, on the floor of their local tax office. Apparently, a new world record was set for in-office sprinting, although uncertainty remains as to which staff member set it.
Okay, so one snake protest doesn’t make a quiz. But how about this for a question: Which country recently elected as its president a former TV comedian who campaigned on the slogan “neither corrupt, nor a crook”? He was elected in 2015 and is still incumbent, despite several close relatives and advisers being embroiled in corruption allegations and prosecutions. If you don’t know the answer, see the * below.
If you’re still not convinced there’s a quiz in this, visit the ProProfs Quiz Maker website. It has more than a million quizzes to choose from, ranging from the Ultimate Taylor Swift Quiz, to the Are You the Type of Person Who Cheats in a Relationship? quiz, to… wait for it... the excitement is mounting... the First Quiz For Training On Anti-money Laundering the Anti-money Laundering Policy Quiz and several others in a similar vein. The multichoice questions focus on U.S. legislation and corporate practice, but you could use them as templates for writing your own anti-money laundering/anti-corruption quiz for employees and associates in any other country, to partake in as a training and awareness-raising exercise.
Conventional statistics
Statistics constitute a sizeable continent in the world of trivia, and there’s no shortage of stats in compliance. As a case in point, let’s look at the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (commonly known as the Anti-Bribery Convention) because—trivia alert!—2019 marks the 20th anniversary of its introduction.
Party to the convention are the 36 OECD members and eight other nations. Together they constitute 81 percent of the world’s outbound foreign direct investment and 66 percent of the world’s exports. They are also home to 95 of the 100 largest non-financial multinational enterprises and all of the top 50 financial multinationals. I mean, this thing has impressive reach. And you get one guess as to which superpower is now being wooed on the edge of inclusion (**).
A few months ago, the OECD Working Group on Bribery published a report, Fighting the Crime of Foreign Bribery, in which it explained: “Parties to the Anti-Bribery Convention agree to establish the bribery of foreign public officials as a criminal offence under their laws and to investigate, prosecute and sanction the offence. The convention is the first and only international anti-corruption instrument focused on the ‘supply side’ of the bribery transaction—the person or entity offering, promising or giving a bribe.”
In its graphic summary of the convention’s achievements, the report notes that bribery is now a crime in all of its 44 member countries; and all 44 have strengthened or created corporate liability laws in compliance with commitments made under the convention, allowing them to hold companies, and not just individuals, liable for foreign bribery. Eighteen countries have introduced or strengthened whistleblower protection in response to peer evaluation reports and recommendations.
Between signing the convention in 1999 and up until the end of 2017, in a total of 20 of the countries, 560 individuals and 184 entities have been sanctioned under criminal proceedings for foreign bribery. At least 102 individuals and 247 entities in 11 countries have been sanctioned for other offences related to foreign bribery, such as money laundering or accounting. The fact that 21 of the countries were yet to conclude any foreign bribery enforcement action is an indication of the uneven spread of activity. But in a total of 30 countries, another 500 investigations are ongoing.
Laboring the point
It’s drawing a dubious bow to claim that the statistics on forced labor could constitute anything resembling trivia. But how about this: Which country’s population most closely equates to the estimated number of people in forced labor around the world?
It’s Australia, with a population of 25 million.
Similarly (and also according to the International Labor Organisation’s 2016 estimate): Which country’s population is closest to the number of children, aged 5 to 17, who are subject to child labor around the world?
At a staggering 152 million, it’s Russia. Almost one in 10 of the world’s children; 64 million girls and 88 million boys. Almost one third of these children aged 5 to 14 are excluded from any education system, and 38% of those in that age bracket are involved in hazardous work.
It makes you think, doesn’t it? And isn’t that what trivia is all about?
Next Steps:
* Guatemala (President Jimmy Morales)** China
Regulatory technology (RegTech) refers to technology that assists companies to meet growing regulatory requirements. Banks are set to invest more in RegTech in 2019, because they see it as a cost-effective and efficient way to respond to growing regulatory complexity around AML and KYC requirements.
Banks are investing more in RegTech year on year and this is likely to continue in 2019. Bloomberg predicts global investment in regulatory, compliance and governance software will reach nearly $120 billion by 2020. While G2 estimates a 500 percent increase in RegTech investment in the financial services sector between 2017 and 2020. RegTech’s rise is also reflected in the number of start-up companies who have formed to offer these services. A report by Alvarez and Marsal documented a recent “rapid increase” in RegTech start-ups, noting that many focus on specialist products for a single regulatory area, including regulatory reporting, KYC and market monitoring. “We believe that targeting cost reduction will continue to be a key driver of innovation in RegTech,” they wrote.
As more banks adopt RegTech, we can expect global financial authorities to pay more attention to the technology in 2019. The UK’s Financial Conduct Authority (FCA) and the Monetary Authority ofSingapore have already provided guidance to banks around the development of new technologies. We will see more regulators actively working with RegTech companies and banks to ensure the technology is helping them to meet regulatory requirements. The Australian Securities and Investments Commission have launched an innovation hub to engage with companies, and regulators in Singapore and Hong Kong have made similar moves. As Christopher Woolard, Director of Strategy and Competition at the FCA, said: “We will look to encourage innovation and adoption in technology through our RegTech work, working collaboratively to unlock the complexities and costs of regulation in new and creative ways”.
A major driver of the rise of RegTech is that regulatory requirements on financial services firms have grown since the 2008 financial crisis, leading to significant enforcement actions. The world’s 20 largest banks paid more than $235 billion in fines between 2008 and 2015. Banks were met with another layer of complexity in 2018 when the General Data Protection Regulation imposed new rules on managing customer data. In response to this trend, banks have invested more and more in compliance – JP Morgan and HSBC employed 7,000 extra compliance staff between them in 2013. But RegTech offers a more efficient way to respond to sprawling regulation.The UK’s impending departure from the European Union in 2019 could add another layer of regulatory complexity for banks operating in the UK and Europe. If the UK does introduce new rules affecting regulatory compliance in the banking sector, it is likely that more banks will turn to RegTech to streamline their processes. It is therefore unsurprising that UK RegTech companies occupied 30 places in this year’s RegTech 100 ranking of the top 100 most innovative RegTech companies in the world.
Another increasingly important factor driving the adoption of RegTech is the growing evidence that it offers an impressive return on investment. RegTech firms have shared case studies which demonstrate the cost-cutting power of technology. When FinTech firm Fenergo was engaged by a global investment bank, it found that the bank’s KYC client review process was done manually, taking thousands of hours of staff time to complete. When RegTech software was embedded in the KYC process, it led to a 37 percent improvement on case handling time and efficiencies. IBM had a similar result for HypoVereinsbank, delivering efficiency savings of 33 percent after automating its risk and control reporting processes. The Dutch bank Rabobank has used a RegTech risk management solution that reduced 15-minute compliance checks to only three minutes.As these case studies are more widely shared, we should expect more banks to follow. But efficiency savings are not the only benefit of RegTech. Automating processes and supplementing internal data with key compliance-related datasets, such as Sanctions and Watchlists, enables companies to gain new insights into risks, proactively manage threats and respond to regulators’ requests for information more easily. Will your organization be joining the RegTech crowd in 2019?
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January may be hot or cold, rainy or snowy—it just depends on where you live. But whether you sport a windbreaker or a parka when you head back to work after the holiday season, January is the same everywhere when it comes to making resolutions. It marks a new year and a clean slate—which got us thinking. Why shouldn’t companies take part in this fine goal-setting tradition—especially if the goals can have a positive impact on the world AND mitigate reputational, regulatory, financial and strategic risk at the same time? That’s where programs aligned to Corporate Social Responsibility (CSR) or Environmental, Social and Governance (ESG) standards come in.
The rise of CSR
Corporate social responsibility isn’t new. Well-known for its grassroots initiatives, iconic ice cream label Ben & Jerry’s commits nearly $2 million a year to fund initiatives designed to uplift communities, push social change or support environmental sustainability. Google met its 100 percent renewable energy target in 2017 and continues to provide grants for social impact initiatives. Unilever, which counts Dove and Lipton among its many brands, has consistently achieved a high ranking on the Dow Jones Sustainability Index since it was launched in 1999.
What’s different now? Sustainable Brands highlights the CSR opportunity that Unilever seized, and other companies are beginning to recognize, noting “Brands could become, in fact, an aspirational force for social good and address some of the world’s most pressing economic, social and environmental problems.” And evidence suggests that such CSR and ESG commitments can attract prospective employees, consumers and investors. “The bottom line for businesses large and small is that you get a competitive advantage regarding sales and talent recruitment by not only claiming that you support positive social outcomes but also by walking the walk and demonstrating it,” writes Wayne Elsey in Forbes
“More than 90 million Americans own our public companies through their investments in mutual funds, and millions more do so through their participation in corporate, public and union pension plans. These owners include veterans, retirees, teachers, nurses, firemen, and city, state and federal workers. We owe it to all of them – and to all our shareholders and investors who have entrusted us with their savings – to get this right.”
How resolutions can make a difference
When you stick with them, New Year’s Resolutions can have a profound impact. By committing to CSR and/or ESG, companies can realize risk management advantages too. Globalization has made it possible for procurement professionals to build a cost-effective supply chain but has decreased visibility into the many links across that chain. The result is increased risk exposure. By auditing supply chains based on CSR or ESG standards, companies can improve visibility into emerging risks and proactively manage those risks.
Along with the regulatory, financial and strategic risks associated with poor performance when it comes to the environment or social justice, the reputational damage that arises from media scandals can exact a heavy toll on companies. Plus, investors and consumers can weigh in with class-action lawsuits that seek to recoup losses when a company gets caught up in an FCPA investigation or forced labor is uncovered in the supply chain.
What three resolutions should you start with?
2018 has been a record year of penalties issued for breaches of the Foreign Corrupt Practices Act (FCPA). Settlements totaling more than $2.96 billion were agreed by corporations found to be in breach of the Act. The year saw further indications of the FCPA’s global reach, witnessed the first judgments issued under the FCPA Corporate Enforcement Policy and saw that policy extended to cover international mergers and acquisitions activity. All these served to underline the critical importance of robust FCPA compliance programs, effective due diligence and ongoing risk monitoring for multinational corporations.
The global reach of the FCPA
This year provided increasing evidence of the global reach of the FCPA to hold organizations to account, coupled with signs of a trend towards closer cooperation between national authorities in identifying and prosecuting corporate financial crime.
Of the 16 FCPA corporate enforcement actions in 2018, fewer than half involved U.S.-based companies. The remainder affected organizations or individuals based in France, Chile, Brazil, Canada, Israel and Japan. The diversity of sectors involved, from manufacturing to mining and financial services to pharmaceuticals, demonstrates no industry is immune to the risks of regulatory non-compliance.
The Petroleo Brasiliero S.A (Petrobras) settlement of $1.78 billion in September made history as the highest-ever fine issued under the FCPA, as the company resolved violations relating to systematic bribery of politicians and political parties in Brazil.
In June France’s Société Générale (SocGen) agreed to pay a total of $585 million to settle charges related to bribery in Libya during the Qaddaffi regime. This is the fifth highest FCPA settlement and the first coordinated enforcement action by the DOJ and French Authorities in an overseas corruption case. The DOJ received “significant cooperation” from international counterparts the Parquet National Financier, the UK Serious Fraud Office, the Federal Office of Justice in Switzerland, and the Office of the Attorney General in Switzerland.
This strong appetite for cross-border cooperation was underlined in a speech by the US Attorney General Rod J. Rosenstein in November, where he praised successful collaboration with foreign authorities and warned would-be transgressors that “the arm of American law enforcement is long”.
Japan’s Panasonic Corporation, together with its U.S. subsidiary Panasonic Avionics, was the third company in the mega breach category after reaching a settlement of $280 million to resolve FCPA offences relating to payments to consultants in the Middle East.
The FCPA Corporate Enforcement Policy incentivizes disclosure
The Petrobras settlement would have set an even higher record if the company had not qualified for reductions under the terms of the recently implemented FCPA Corporate Enforcement Policy. The policy, introduced in November 2017, incentivises companies to self-disclose potential FCPA violations and cooperate fully with subsequent investigations.
Companies that: 1) voluntarily self-disclose potential violations 2) proactively co-operate in investigations and 3) carry out timely and comprehensive remediation activities qualify for a 50 percent reduction in fine based on the low end of the U.S. sentencing guidelines. Also, if the company has implemented an effective FCPA compliance program it will not generally require the appointment of an ongoing monitor.
Companies that initially fail to self-disclose, but subsequently offer full cooperation and implement an effective compliance program, qualify for a 25 percent fine reduction. This was applied in the Petrobras case, as the company proactively participated in the investigation, providing real-time information and taking robust remedial action.
Companies that fully apply the principles of the FCPA Corporate Enforcement Policy and agree to pay disgorgement, forfeiture or restitution can receive a declination. This means no DOJ prosecution will take place and the investigation will be closed. The two cases to date include UK company Guralp, which received a declination in August following its voluntary disclosure of bribery and money laundering, remedial activity and cooperation with the investigation.
In further evidence of cross-border cooperation, the DOJ’s decision to grant Guralp a declination rests on the fact that the company remains under investigation by the UK’s Serious Fraud Office for the same offences under the UK Bribery Act and has committed to accepting responsibility under the SFO’s jurisdiction.
In all the FCPA cases, the importance of a visible commitment to preventing future violations has been emphasized. By adopting a robust risk monitoring program companies can stay informed of evolving risks in their sector, improve visibility of country-related risks and demonstrate their commitment to achieving compliance with the FCPA.
To qualify for declination or fine reductions, companies must self-disclose well before information about the suspected breach becomes public knowledge. This again highlights the need for a comprehensive compliance and monitoring program that alerts the company to potential violations before they become public.
Extension to Mergers and Acquisitions activity highlights role of due diligence
The importance of robust due diligence and risk monitoring during mergers and acquisitions was underlined in August as the DOJ announced that the FCPA Corporate Enforcement Policy also applies to U.S. companies merging with or acquiring foreign companies. The announcement emphasized companies’ obligations to identify and remedy instances of FCPA violations uncovered within target organizations. This makes a full risk assessment of target companies and applying the appropriate level of due diligence critical to companies’ FCPA compliance efforts.
Companies that identify potential FCPA violations prior to closing a deal are advised to seek DOJ opinion on whether the suspected activity could result in enforcement before proceeding. Companies that discover violations subsequent to M&A are strongly encouraged to disclose them at the earliest opportunity in order to benefit from the possibility of declination or fine reduction that may result.
The FCPA Corporate Enforcement Policy, though still in its infancy, provides a greater degree of certainty for companies who uncover violations. It helps them to assess the impacts of disclosure and puts a solid financial incentive on the table. Its extension to cover M&A activity is recognition that companies may inherit problems, but that they should take a proactive and timely approach to resolving these and implementing the appropriate due diligence and ongoing risk monitoring programs to address weaknesses and reduce regulatory risk.
The policy is an important step towards setting a culture of greater corporate transparency by rewarding companies that do the right thing when they uncover corrupt practices. It is the carrot that should be weighed against the stick of the full force of prosecution under the FCPA.
Are you nervous about the imminent Fourth Industrial Revolution? After all, each industrial revolution has resulted in the displacement of workers through automated or industrialized processes. But history shows that short-term displacements were balanced by economic advances, proving that industries—and their workers—can adapt and evolve to succeed. How will AI in all its variations—from customer-facing chatbots to ROI-driving predictive analytics[—influence and transform the Communications Industry? Download “The Rise of AI and How it Will Impact Communications Professionals: A LexisNexis Media Intelligence eBook” to find out.
Gaining Strategic Insights from AI
Earlier this year, Anthony Petrucci, Senior Director of Corporate Communications & Public Affairs at technology company HID Global, laid out a challenge to others in Communications professions in an article published on Forbes. He wrote, “I challenge my colleagues in this field to embrace the opportunities AI presents to augment our communications function in the long term, rather than being defensive, reactionary or ignorant that change will happen.”
Petrucci contends that Artificial Intelligence—in its many forms—has the potential for “enhancing, supporting and amplifying human truth, human experience and, ultimately, human freedom.” Sounds like a tall order, but we agree that AI represents untapped potential within corporate communications.
We’ve all experienced the challenge of having to “do more with less.” Rather than seeing AI as a threat to your job, it should be recognized as a time-saver, freeing you up to focus on the message instead of the metrics.
Are you curious about AI applications for Corporate Communications?
Check out our eBook, “The Rise of AI and How it Will Impact Communications Professionals: A LexisNexis Media Intelligence eBook,” to learn more about different types of AI already driving insight and what the future may hold.
Lloyds Bank has set an ambitious three-year strategy to “digitize” the group. In its strategic review for 2018-20, Lloyds intends to use technology like data analytics and Artificial Intelligence (AI) to gain new insights which can transform key parts of its business. This is just the latest indication that financial services firms believe their future success rests on big data and AI.
In its strategic review for 2018-2020, Lloyds has pledged to make a strategic investment of more than £3 billion, of which more than half has been allocated to “digitizing the group”. It now defines its business model as “digitized, simple, low risk [and] customer-focused.” A key priority is “simplification and progressive modernization through targeted investment in technology, data, and innovation.” To support this change, it will to increase training and development by 50 percent by 2020. This training will include improving capabilities around data and applied sciences. It also aims to double its number of digital experience designers and engineers who specialize in robotics and AI. The bank predicts this strategy will have clear outcomes, including a positive effect on its bottom line. It anticipates that it will make efficiency improvements of up to 30 percent by 2020. The aim of the strategy is ambitious: it wants to be recognized as the best bank for customers, colleagues and shareholders, and to “help Britain prosper.”In a 68-page presentation on the strategy which was given to analysts and investors, Lloyds spelled out the myriad ways it aims to exploit new opportunities enabled by technology. The bank hopes to use data insights to improve customers’ experience of digital banking. Voice biometrics will reduce the time it takes for customers to verify who they are over the telephone. With intelligent automation, Lloyds expects to reduce manual compliance efforts by 20 percent by using automated speech to text and analytics. Automated voice and chat-bots will improve the capacity of telephone banking staff by a third. By using cognitive and machine learning and building an enterprise data hub, Lloyds plans to enhance business intelligence across the organisation. Automating processes, connecting cross-group and external data and using API architecture and applied sciences for sophisticated analytics will also improve the capacity of its relationship managers. When these individual innovations are added up, they demonstrate a clear commitment to digitizing the entire banking group and embedding technology in all aspects of the business.
Recent announcements from rival banks suggest that data and AI technology are becoming the key weapons in financial services firms’ armory. Earlier this year, HSBC announced that it would recruit 1,000 data scientists to grow its digital strategy. This month, Deutsche Bank launched a new enterprise analytics capability which collates and analyses millions of lines of data on securities transactions to identify opportunities for the bank and its clients. In a presentation to investors on 16 November, the Netherlands-based bank ABN AMRO said that innovation and technology would be “a critical enabler for efficiency.” A study by SNS Telecom & IT predicts financial services firms will invest $9 billion in big data this year, rising to $14 billion in 2021.But big data’s potential is not limited to the financial services sector. Academics are using big data to analyse millions of research papers to inform their own research. The manufacturing sector is using Robotic Process Automation (RPA) to automate functions which previously took up a large amount of staff time. Media outlets such as Xinhua and the Washington Post are using AI to generate news stories. Leaders in sectors like sales and marketing are also using AI-powered big data analytics to find new insights.
Companies have access to data about their own customers and operations. Lloyds, for example, has data on the transactions carried out by its tens of millions of customers. But this data by itself is not enough to provide insights which can be applied in its operations. Companies often benefit from external data sources—ranging from news and social commentary to company market and legal data—which can provide added context to their own data.
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Migration is a recurrent theme in human history. Whether seeking to escape violence, natural disasters or poverty, migrants express their determination for better lives through migration. On International Migrants Day, we look at a particular risk that migrants face—forced labor. The issue is more widespread than you might think. One of the most significant findings of the 2018 Global Slavery Index is that the risk of forced labor is even more prevalent in high-GDP countries than previously assumed. This once again highlights the necessity to take immediate action against forced labor and raises an important question. How can corporations, governments and civil society address the forced labor risk and prevent the exploitation of vulnerable migrants?
Forced labor risk entering global supply chains
To address the question of forced labor and how to prevent it, we must first acknowledge the social depth and economic impact of modern slavery. According to recent numbers published by the International Labor Organization (ILO) more than 40 million people are victims of modern slavery worldwide. Out of these, 25 million are in forced labor and approximately 15 million are in forced marriages.
Millions of men, women and children whose daily lives are brutally affected, are forced to work or offer a service under the threat of violence and without consent. Forced labor is the most severe form of human exploitation and primarily affects more vulnerable groups of society. Migrants are particularly at risk because they may rely on unscrupulous recruiters that promise job opportunities, then extract high recruitment fees and use deceptive hiring practices that leave workers trapped in forced labor situations due to debt. There are numerous contexts which assist the creation of economic dependencies leading to forced labor, including lack of education, thriving corruption, poverty, weak rule of law and high unemployment numbers.
Why International Migrants Day matters
The United Nations recognizes the exploitation of migrants and forced labor on December 18th with International Migrants Day, commemorating the International Convention on the Protection of the Rights of All Migrant Workers and Members of their Families. Its aim is to recognize the contributions migrants make to the global economy and to put emphasize on their basic human rights.
Through the implementation of the Sustainable Development Goals in 2015, the global community has created a universal platform for the fight against forced labor in the 21st century. Sustainable Development Goal 8.7 reflects these ambitious objectives and urges the global community to
“take immediate and effective measures to eradicate forced labor, end modern slavery and human trafficking and secure the prohibition and elimination of the worst forms of child labor, including recruitment and use of child soldiers, and by 2025 end child labor in all its forms.”
The ILO recently criticized Thailand for their lack of action concerning forced labor and other cases of severe human rights abuse on domestic fishing vessels, once again raising public awareness to forced labor risk, but other cases often fail to attract the same public attention. Yet, the Thai sample case is only one of countless recent cases of human rights abuse in connection with forcing migrants into labor. The influx in migration in Europe has swiftly put the continent in the center of attention when it comes to the risk of forced labor in supply chains.
Since 2015, vital European border-countries such as Italy, Cyprus, Bulgaria and Romania have experienced a drastic increase in refugees from the Middle East and the Sub-Saharan region, making them notably more vulnerable to forced labor and economic exploitation.
The European agricultural sector is often named as one of the key sectors of concern regarding forced labor of migrants and refugees. In 2017 The Guardian reported, “that thousands of Romanian agricultural workers were being used as forced labor and sexually exploited by their Italian employers.” This systematic marginalization and exploitation of especially female Romanian migrants in the Italian agricultural sector stands out as a serious sample case on how migrants are forced into modern slavery, both economic and sexual.
Taking action, creating chances
Recent activities underline the global efforts of putting forced labor at the center of attention and combating its root causes, such as poverty, gender inequality and lack of education. Corporations can play an important role in helping address forced labor risk by conducting thorough due diligence and implementing continuous supply chain risk monitoring. Regulations like the UK Modern Slavery Act, implemented in 2015, and the 2010 California Transparency in Supply Chains Act represents governmental initiatives to address human trafficking, forced labor and modern slavery in the 21st century.
Although businesses are bound to comply with such governmental regulations, it can also be seen as an incentive within a profound CSR strategy, simultaneously enabling a better reputation within nongovernmental organizations and civil society and facilitating corporate risk management and mitigation.
Enhanced risk mitigation is a must
Here are 5 recommendations on how companies can strengthen their risk mitigation strategies concerning forced labor and modern slavery.
In the third and final of our annual three-part series looking ahead to the coming legislative year, SNCJ Senior Advisor Lou Cannon takes a look at some of the challenges and opportunities that await lawmakers in 2019.
This is also our final issue of 2018, so from all of us to all of you, have a happy and safe holiday season and a wonderful New Year. See you in January! – SNCJ Managing Editor Rich Ehisen
States function as laboratories for democracy, as Justice Louis Brandeis famously observed, and they’ll have numerous opportunities for experimenting in the year ahead.
For the first time since 1914 a single political party will control both chambers of every legislature except one: Minnesota, where Democrats captured the House in the November midterm elections while Republicans retained control of the Senate.
Meanwhile, divided government and probable gridlock will prevail in Washington. Democrats won control of the U.S. House in the midterms while Republicans increased their majority in the U.S. Senate.
Opportunities for partisan action will be most available in states in which one party controls both the legislature and the governorship. Going into 2019, there are 23 such states with unified government in Republican hands and 14 states controlled by Democrats. Thirteen states have governors of one party and legislatures of the other.
States newly unified by the Democrats in the election are most likely to “push the progressive envelope,” said Tim Storey, an analyst with the National Conference of State Legislatures (NCSL). These states are Colorado, Connecticut, Illinois, Maine, Nevada, New Mexico and New York.
As an example, New York Senate Democratic leader Andrea Stewart-Cousins, poised to become Senate majority leader, said she will continue a tax on the wealthy due to expire in 2019 and also support gun control measures. Stewart-Cousins will be the Empire State’s first female and first African-American Senate majority leader.
Power in the New York Senate had been wielded by a coalition of Republicans and maverick Democrats. The midterms dispersed the coalition and handed power to regular Democrats.
There are fault lines between the two parties in the states on issues of energy, gun control, taxes and voting rights.
In state after state Republicans have pushed for photo ID laws at polling places and opposed early voting and same-day registration. Republican-authored legislation in North Carolina this year resulted in many fewer polling places. Democrats say such efforts are intended to dampen voting by minorities.
Another partisan issue is global warming, which most Democrats decry and many Republicans deny. California and Hawaii, both Democratic bastions, aim to obtain all of their electrical energy from sources that have no carbon emissions by 2045.
“It will not be easy,” said California Gov. Jerry Brown (D) last September in signing legislation aimed at reaching this goal. “It will not be immediate. But it must be done.”
Without having such ambitious targets, some Republican-controlled states are making notable progress in using renewable and alternative energy. Four states – Oklahoma, Iowa, Kansas and South Dakota – obtain about a third of their energy from wind power. Texas, a GOP redoubt, has in the past year added more wind capacity than any other state.
Criminal justice reform is explicitly bipartisan. The United States has the highest incarceration rate in the world, but a decline in crime and sentencing reform has brought the total number of those incarcerated — about 2.2 million people — to a 20-year low, according to the Pew Research Center.
Republican and Democratic states alike have reduced sentences for minor crimes, provided treatment for drug users and reformed bail practices. Since 2007, 35 states have reformed sentencing and corrections policies through the Justice Reinvestment Initiative, a public-private partnership that includes the U.S. Justice Department, the Pew Charitable Trusts, the Council of State Governments and other organizations.
Voters in California approved a significant bail reform in the November election although its implementation has been delayed. In Florida voters passed a measure that will allow felons who have served their time to vote. The Florida initiative received 64 percent of the vote in a state otherwise split down the middle between Democratic and Republican candidates. It was endorsed by both the American Civil Liberties Union and Freedom Partners, an organization affiliated with the conservative Koch brothers.
Florida’s restoration of voting rights to former felons suggests that voters may be less divided than the parties representing them. This is true on other issues as well. Arkansas and Missouri voters in the November election approved increases in the minimum wage that Republicans had opposed in the legislature, boosting pay for a million workers.
Health care is another issue where voters may be ahead of the politicians. Voters in three Republican states — Idaho, Nebraska and Utah — this year overwhelmingly approved ballot measures to broaden Medicaid eligibility to people earning up to 138 percent of the poverty level.
States will face fiscal challenges in the year ahead. Unlike the federal government, most states are required to balance their budgets, which 30 states do annually, while 20 states operate on a two-year budget cycle.
Many states enter 2019 in their strongest fiscal position since the Great Recession of 2007-08. A fiscal survey of the states just issued by the National Association of State Budget Officials (NASBO) found that after relatively weak revenue growth the past two years, “tax collections accelerated in fiscal 2018 with total general fund revenues growing a robust 6.4 percent, led by a large uptick in personal income tax collections.” Forty states saw revenues come in ahead of budget collections. Only seven states made mid-year budget reductions.
A less rosy picture was painted in a 15-year survey of state revenue and spending by the Pew Charitable Trusts. Barb Rosewicz, who heads the state fiscal health project for Pew, found that “total revenue in 10 states fell short, jeopardizing their long-term fiscal flexibility and pushing off to future taxpayers some past costs for operating government and providing services.” New Jersey had the largest deficit, with revenue covering only 91.3 percent of expenses. Illinois, second worst, had revenue covering 93.8 percent of expenses.
The eight other states with the “symptom of structural deficits” were Massachusetts, Hawaii, Connecticut, Kentucky, California, Maryland, New York and Delaware. Revenues ranged from covering 96.1 percent of expenses in Connecticut to 99.5 percent in Delaware.
Some of these states, most notably California, have shown marked improvement in recent years.
California was a budgetary basket case when Gov. Brown took office in 2011, facing a deficit of more than $25 billion. It now enjoys a $2 billion surplus and has put away $14 billion in a rainy day fund for use in the next economic downturn. S&P Global Ratings says California experienced “one of the strongest credit recoveries that we have seen among all the 50 states.”
Nonetheless, the Golden State will be vulnerable during any recession because of its dependency on high-end income taxes. The state has the highest top-tier income tax (13.3 percent) of any state in the nation.
When will that downturn come? That’s what fiscal officials in every state and city would like to know, for states and local government revenues usually lag during recoveries from economic recessions.
The United States is now in the 10th year of a boom, with an economic growth rate of 3.5 percent in the third quarter of 2018.
State revenues and spending have increased moderately for nine consecutive years, according to NASBO. But a September poll of 51 economists by the National Association for Business Economics found that two-thirds of them expect a recession to begin by the end of 2020.
It could come sooner. Such recent events as a global stock market retreat, prospects of a protracted U.S. trade war with China, a home building slowdown and Britain’s difficulties in exiting the European Union (“Brexit”) have prompted some analysts to forecast a slowing of the economy next year.
An economic forecast for 2019 by Jon Hilsenrath of the Wall Street Journal found less growth and more uncertainty over such issues as trade policy, border security, military spending and inflation.
States have made progress in providing fiscal cushions for the next recession. According to Pew, the 50-state total of rainy day funds in the states increased for a seventh straight year in fiscal 2017 to $54.7 billion with indications it will be even higher in fiscal 2018.
The NASBO survey found that the median balance of state rainy day funds is expected to reach 7.3 percent as a share of general fund spending in 2019 compared to a measly 1.6 percent in 2010.
This speaks well of the states, for fiscal rainy days are certainly coming. We just don’t know when they will arrive.
As a result of the November elections, in 2019 Republicans will control both the legislature and the governor’s office in 23 states, three less than the number of states under unified GOP control this year. Democrats will control the legislative and executive branch in 14 states, twice as many as currently under unified Democratic control. In the other 13 states -- four fewer than this year -- control of the governor’s office and the legislature will be split between the two parties.
Sustainable, or ESG, investing – choosing investments based on environmental, social and governance considerations – has been around for decades. But such investing has really taken off in recent years. According to global investment research and management firm Morningstar, assets in sustainable investments grew more than 500 percent between 2006 and 2016, from 3.78 trillion to 22.89 trillion.
Public pension funds have helped fuel that growth, as state and local governments have sought to attract ESG-inclined millennial investors, as well as respond to calls for ESG investments or divestments from some investors. For instance, after the American Federation of Teachers urged teacher pension funds earlier this year to divest from companies that supported private prisons used to house migrants separated from their children at the U.S.-Mexico border, Chicago’s teachers fund did so. Some funds have also faced growing pressure to sell off investments in gun retailers and fossil fuel companies.
Critics argue that sustainable investing places political and emotional considerations ahead of the fiduciary duty to provide the best return for investors. That very argument was used to oust the president of the California Public Employee Retirement System’s board of directors, Priya Mathur, an internationally recognized leader in the sustainable investment community, in October.
Recent research by the Boston College Center for Retirement Research found that ESG funds haven’t performed as well as unrestricted funds, although the center noted that the underperformance was due at least in part to the much higher management fees charged by ESG funds rather than to the performance of the investments themselves.
But Ohio State University law professor Paul Rose makes the case that fiduciary responsibility for public funds extends beyond return on investment. He says such funds also have to consider the fiscal impact of investments on taxpayers, such as whether they will raise government costs for health care or water quality.
“You could create a colorful argument that [certain types of] ESG investing does help taxpayers over the long term,” he said.
Ohio University’s Rose notes that regardless of the type of investments you’re advocating for or against, “You need to be able to demonstrate that you’ve run the numbers.” (GOVERNING, MORNINGSTAR)