Former Lafarge CEO Bertrand Collomb talks to philosopher Gaspard Koenig

One used to be the head of Lafarge, a historic cement producer whose culture was shaped by the Christian paternalism of the 19^th century; the other is a philosopher who swears by liberalism and individualism. Their views differ on many issues, starting with the role businesses should play in society – a question currently being debated in the French parliament. The government's Action Pan for Business Growth and Transformation (PACTE, in French) aims to make business leaders more economically, socially, and environmentally responsible. But should corporations be the guardians of public good? Not if you ask Gaspard Koenig. True to the liberal creed, he believes a company belongs first and foremost to its shareholders; whereas Bertrand Collomb thinks we should hold on to corporate social responsibility in a deregulated world. 

As the two discuss tricky practical cases, their differences become gradually clearer. Should companies decide what's best for citizens in a democratic state? Is it reasonable to abandon such paternalism in countries where the state isn't doing its job? And what principles should apply in politically unstable areas? Lafarge offers a good example of the kind of ethical dilemmas companies might face: accused of handing out millions of euros to islamic groups to keep their plant running in Syria, this former shining example of French capitalism at its best is now under legal scrutiny. Bertrand Collomb's take is understandably lenient – he defends “his guys” by referring to Saint Benedict's rule that “in difficult cases, monks will do what they can” – and meets with the approval of Gaspard Koenig, who has little time for rules imposed from above. At the end of the day, the liberal and the paternalist agree that nothing can really replace individual morality and responsibility – but consensus on how to favour them proves trickier… 

Following France's new “Pacte” law, companies would be expected to take social and environmental issues into account when making decisions. Is this a turning point in terms of corporate responsibility?  

Bertrand Collomb: This idea is nothing new. In the 19^th century, paternalism was a way of exercising responsibility over employees. Factory workers in the Rhône valley in France were peasants who had been uprooted: for them, just moving a few kilometres down the road was like changing country, so Lafarge would build them company towns with schools and dispensaries... The main innovation actually came when they abandoned this model, when in 1970 the economist Milton Friedman declared that a company's sole responsibility was to increase its profits, and that its leaders should just do their job. Today some people believe that a cent spent on anything but the company's business strategy is a cent stolen from the shareholders. 

Gaspard Koenig: We should add that Friedman didn't say this out of greed. He believed that a company's profits were a reflection of their social utility: if you're making money, then you must be doing something useful – you can only create a market if you have consumers. But when you start following external criteria, you're promoting social interests that have yet to be democratically defined. You risk neglecting your primary social function. 

‘In the 19th century, Lafarge openly aspired to make sure their employees were good Christians’ 

– Bertrand Collomb

Bertrand Collomb, you see paternalism as a “secular christian humanism”. Is that your way of defining this universal collective interest?

B. C.  : Lafarge held to its Catholic foundations until late. In the 19^th century, it openly aspired to not only make sure their employees were happy, but also good Christians. Schoolteachers, doctors, priests were all paid by the company, and exercised a form of social control that would surprise us today. To live in Lafarge's factory town was to be moulded by them. Engineers would gather at the factory after Mass every Sunday, and the first Protestant executive only joined in the 1950s! I was of the first generation of executives who didn't define themselves as Christian entrepreneurs. Unfortunately religion is becoming a divisive factor today, whereas a business leader's job is to bring people together. 

G. K.  : The idea that companies should contribute to the common good implies a vision of society as a structured whole, like the one theorised by Aristotle: above the family you would have the company, and above that, the rest of society. Individuals would therefore live within a set of several concentric circles, with the state as its outer limit. Each one would reflect collective values to which the individual must submit. But a liberal like myself, who believes public policy should aim to promote individual autonomy, can only disagree with this vision. 

B. C.  : I'm not in favour of 19^th century paternalism. Nowadays, social responsibility is exercised differently, in a way that respects individuals’ freedom. In Bangladesh, we recently helped build a village, but we did it indirectly, by supporting local NGOs in charge of doing the building. And we don't force employees or anyone living in these villages to be good Muslims. 

‘The idea of giving companies the responsibility of defining what's in our general interest is a worrying one, because it reveals the state's powerlessness’ 

– Gaspard Koenig

But a responsible company still has to define the interests of the “stakeholders”, which  means deciding what's good for society… 

G. K.  : The idea of giving companies the responsibility of defining what's in our general interest is a worrying one, because it reveals the state's powerlessness. Being a liberal doesn't mean being against the state – I think environmental issues should be resolved by democratically voted laws, like the eco-tax. Let’s take the example of Facebook: American law based on the first amendment ensures a wide understanding of freedom of speech. But now we're asking Facebook to regulate its own platform! Should it be down to their managers, who are devoid of political, social, or historical culture, to define what classifies as a call to terrorism, or pornography, or content that harms the cause of women? I'd rather be governed by a state that I can protest than a company reacting to emotions. 

‘But this vision of liberalism is too doctrinaire in practice. When you're in parts of Africa where the state is incapable of dealing with public health issues, if you don't tackle AIDS now, there won't be any workers left in twenty years!’ 

–  Bertrand Collomb

B. C.  : But this vision of liberalism is too doctrinaire in practice. When you're in parts of Africa where the state is completely incapable of dealing with public health issues, reality calls for a much simpler response: if you don't tackle AIDS now, there won't be any workers left in twenty years! It's too easy to claim that companies shouldn't define the common good, because sometimes the common good coincides with its own interests. Companies often manage to reconcile ethical and economic interests - at the end of the day, it's the requirements of Total Quality Management that prevail. A bunch of selfish individuals will never be as efficient as people who want to work together well. I can't prove it, but that's the way it is. 

And how should we define such virtuous companies?  

B. C.  : I'd say they're like elephants: I'd struggle to describe them, but I know one when I see one. In practice, I can tell a company where people are devoid of principles from one that does have principles. Of course, an accountant will see the company as a collection of assets. But to function properly, they also need to be a community of humans with principles. At Lafarge, there are things you do and things you don't do, i.e. moral norms that everyone is aware of that have nothing to do with the market. The way we treat people, for example: employees can be made redundant in a responsible way or an irresponsible way. A secretary can be fired in a way that leaves him broken or encouraged to bounce back. 

G. K.  : That’s a question of human behaviour, not CSR. Adam Smith would agree with you, since he was more of a moralist than an economist. But empathy concerns all aspects of human interaction, not just company life. The question is whether firms should be responsible for the rest of society. In an environment where the state does its job, the market is competitive, and consumer choice is ensured, I don't think that would be a good thing. 

Bertrand Collomb

B. C.  : But such an environment doesn't exist! Friedman's position is only tenable in a perfectly functioning market. But individuals can't always choose which yogurt they buy – it's up to private companies to choose to be virtuous.  

‘This is my main argument against the Pacte law: it threatens competition. By trying to instill some kind of moral order, we risk encouraging collusion’ 

– Gaspard Koenig 

G. K.  : That's the problem: France's stock market has ossified. About 40 % of its largest firms were founded between 1850 and 1914. At the time, France was like today's Silicon Valley: full of entrepreneurs, such as Solvay and Lafarge… Today these companies are resting on their laurels, and current talk of business as a “social object” will only reinforce these oligopolies. This is my main argument against the Pacte law: it threatens competition. By trying to instill some kind of moral order, we risk encouraging collusion, at the expense of newcomers. If the founder of Uber had needed to think about having a “social object”, he would never have even started the business, and all kinds of jobs wouldn't have been created… The role of the entrepreneur is to unblock markets saturated by rentier capitalists, which sometimes puts them at odds with society. Ethics can mean anything. In the end we'll be left with a system that favours big firms, those that can release glossy CSR reports…   

Does that mean that entrepreneurs should be immoral? 

G. K. : Schumpeter defined entrepreneurs as individuals slightly withdrawn from society and capable of breaking the mould. If we ask people if they think biotechnology startups are socially responsible, they'll say no: they're terrible, they're going to create augmented babies in artificial wombs, 3D organs, and so on... The visionary individuals who goes on to create entire industries always break conventional norms. 

B. C. : I wonder to which extent innovators might be ethically deviant. Steve Jobs was notoriously cruel to his employees… But it's true that one of our weaknesses today is that we've stopped thinking about the problem of competition.  

G. K.  : The market always has the last word. Sustainability labels are sought after by consumers. In other words, CSR is already happening. By trying to control it, lawmakers are fighting a battle that's already over – as they often do. 

B. C.  : There's something paradoxical about your argument, because you're referring to regulations that reinforce actions initially taken by companies. Let's take the example of cement factories : they've always produced dust, and nobody had an issue with it in the beginning. But when some factories upped their production to a million tons, local residents found it unbearable. So there were two reactions to the problem : in the US they pushed for detailed legislation, without consulting the manufacturers, who fought back for five or six years, and eventually lost – several of them went bankrupt in the process. In France, on the other hand, the companies themselves agreed on a ten year plan. They're the ones who introduced norms, to set themselves apart from the rest, and in turn these norms eventually became law. More often than not, legislation merely forces everyone else to adopt those standards set by the best. 

‘We had typical Lafarge guys out in Syria – respectful people’ 

– Bertrand Collomb

In this sense, your company used to be a model. But a lot has changed recently. Its former leader Eric Olsen said he'd readily help build Trump's wall to keep out migrants. He's also being interrogated over his role in the Syrian scandal, in which Lafarge is accused of financing terrorist groups... How did this happen?  

B. C. : I know the member of the executive committee on Syria. On the ground we had typical Lafarge guys out there – respectful people. At the beginning the plant wasn't in any war zone, since it was located in a Kurdish-controlled area near the Turkish border, in “friendly” territory.  Production was going well. But they had the Syrian army five kilometres to one side, and the Al-Nosra Front five kilometres to the other, so there were obviously a few problems, a few checkpoints you had to pay to get past... Our guys out there felt responsible for their workers' jobs and their clients' cement. Syria needed their cement, and Lafarge supplied over two thirds of it. At the end of the day, they found it more ethical to continue to run the plant, even if it wasn't making any money. But in the process, they forgot that they also had a symbolic responsibility, and more importantly, a legal one. Our legal advisors should probably have warned them that they were risking prison sentences. 

‘Lafarge reacted very well. Its primary purpose is to make cement – not geopolitics’ 

– Gaspard Koenig

G. K.  : I think Lafarge reacted very well. This example further illustrates my point: you need to be responsible towards the customer – in this case, the wider population. Lafarge's primary purpose is to make cement – not geopolitics. In this context, it's an act of courage to stay on and try to protect the men on the ground. I think the way Lafarge is being treated in the media is unfair.  

B. C.  : One NGO even accused us of crimes against humanity… As for the media, they had a field  day. The fact that Lafarge had just become a Swiss company by merging with Holcim certainly made matters worse, as if we had deserted the country.

In the Syrian scandal, there's been talk of 13 millions euros handed out to Islamic groups. Given the context, how long can such actions be overlooked?

B. C.  : The Islamic State in Syria (ISIS) per se didn't receive much. All in all, we gave millions of euros to all the groups, and ISIS probably got about 80,000 euros. Back in 2013, there were dozens of active groups, and it's only in 2015 that Daesh actually became the monstrous ISIS that we know now. If we had given them tons of cement, it wouldn't have had the same impact as giving sums of money, which are unacceptable to both public opinion and our judges. 

There's also been mention of complicity on the part of French secret services, who were informed by Lafarge, but didn't intervene. Then there's the Syrian state, which also had shares in the subsidiary… At the end of the day, who is responsible? 

B. C. : It's difficult to say what actually happened regarding Lafarge's interaction with secret services… I don't think it's fundamentally important, because we weren't involved in any strategic action, nor were we the representatives of France in Syria. What I do know is that our people didn't do the right thing, and now we're in a catastrophic situation. 

The Pacte law aims to put ethics before the interests of shareholders. In the case of Lafarge, did the merger with Holcim and the pressure of international shareholders compromise the managers  sense of responsibility?  

B. C. : That didn't make much difference, because we were already international before the merger. And these events first took place between 2011 and 2013, before the merger. I like to think that if I had been the president at the time, I would have realised that we risked damaging the company…

G. K. : I think this idea that a company has its own interests which should come before those of its shareholders is problematic. It's a denial of their rights as owners, and it introduces a rousseausist argument that the so-called “general interest” should prevail over the particular interests of individuals. Rousseau believed an enlightened ruler should differentiate between the two. In the case of companies, that would be the board of directors. But this mysterious concept of a general interest can easily be used to silence disgruntled shareholders, by answering that there's some other kind of interest that is beyond them… In the French case, this would likely reinforce crony capitalism, or the collusion between the board of directors and the CEO. Sometimes the latter tend to forget they're just employees with obligations towards the company, proxies that can be revoked at the drop of the hat. Today there's a tendency for executives to take control of the company, which is harmful – hence calls for compensation to be capped.  

Gaspard Koenig

B. C. : But this law would allow companies to find a balance between the different interests of those involved. I don't see the company as an object owned by shareholders, nor do I think they have ownership rights over it, in the sense of a right to “use and abuse”. Today we've lost that balance. If an activist shareholder decides we could make 25 % more profit by trimming the slightest excess cost, such as R&D, even if it compromises the company's future, they'll more than likely succeed… Why? Because even if they don't completely agree, the other shareholders will take a 25 % increase any day.

G. K. : That's a caricature. Some shareholders acquire minority ownership and still behave responsibly…

B. C.  : In that case they're not activist shareholders. At DuPont, I saw one guy buy a billion dollars worth of shares, sell half of them six months later, and cause havoc in the company, without a thought for what will become of it in twenty years time…   

G. K.  : It's true that ownership brings a sense of responsibility. We need to encourage ownership to make people more responsible: when you own a house, you take better care of your environment. The responsible shareholder is often the one who founded the company, who built up the capital and made it flourish from nothing. Lafarge was founded by Mr Lafarge. That’s the magic of capitalism: ex nihilo wealth creation. To preserve it, we need more property, more capitalism, not boards of directors inventing new interests for the company, when their members are actually just there to collect their attendance fees. In these circumstances, the idea of reinforcing the power of shareholders is far from absurd. It would put more responsibility on the shoulders of managers, who as of today can run away with their stock options at any moment. We should accept that a company is first and foremost a contract between people who want to put their capital and investments in common. 

Lafarge's case also reminds us of the difficulty of behaving properly in faraway, unstable places, whatever the shareholder's interests might be…  

B. C. : Today we're moving towards  a more centralised form of control, since globalisation brought about a new type of responsibility at a distance – responsibility through suB. C. ontractors, as it's known. In the case of the Bangladesh building that collapsed, no-one asked who, of the architect, the construction company, or the owner, was responsible – we just focused on the textile companies that were manufacturing there. With this network of responsibility, small local actions can put companies at huge risk. 

‘I think it's the idea of responsibility for other people that we should be questioning’ 

– Gaspard Koenig

G. K.  : I think it's the idea of responsibility for other people that we should be questioning. In The Welfare State, François Ewald traces the concept back to the 1898 law on accidents at work. For the first time, workers were no longer responsible for their injury – their employers were. Ewald built a whole theory of insurance based on this idea, whereby individuals are neither responsible for their health nor their old age. We find this same responsibility for others in the case of subcontractors, and it's taking worrying proportions, since companies are now left with a global responsibility. That's how we built a completely centralised Welfare State, based on a diffuse chain of responsibility, from the individual at the bottom to the state at the top. That goes against the kind of society I want.  

B. C.  : My legal director finds it shocking that Nike or Adidas should take the blame for things their subcontractors do. But in so far as they benefit from the absence of regulation, I find it logical that companies be partially held to account. In an ideal world, globalisation would be regulated. Because it's not, private companies and NGOs have created a substitute system. 

But in practice, how can ethical standards replace law? Should we dictate codes of conduct, and monitor local subsidiaries and subcontractors…?   

B. C.  : Instuitively, I'd be in favour of local decision-making, and in borderline cases I'd like us to refer to the Rule of saint Benedict, from the 6th century: the book contains all kinds of precepts, but states that “in the most difficult cases,  monks will do what they can”. But we often observe that different ethical principles contradict one another. For a long time, Lafarge didn't have a formally written out anti-corruption policy. When we decided to ban backhanders, we just added “being honest” to our list of guiding principles, as a way of preventing people from bending the rules. 

G. K.  : Allow me to take a little dig... I was told that at Lafarge's Parisian headquarters, employees are obliged to hold on to the handrail when using the stairs. Is it true? 

B. C.  : To get results in terms of safety, we need strict rules. It's a bit of a stereotype, but at the age of 75, it's not without reason. 

G. K.  : Which brings us back to accidents at work. When we try to be responsible “for” people, we always end up imposing rules in an authoritarian manner. 

‘The industrial reality was that thousands of workers used to die each  year. Which would you prefer, 19^th century companies or today’s?’ 

– Bertrand Collomb

B. C.  : The industrial reality was that thousands of workers used to die each year. Now that figure has dropped to about 15 deaths per year in our company, most of which are  due to road accidents in India. Which would you prefer, 19^th century companies or today's? 

G. K.  : I'd rather climb the stairs however I want and sign an insurance form stating that it's my responsibility if I fall flat on my face! I think it's best to give as much power as possible at the local level. When the first textile companies set up in Switzerland, conflicts between employers and employees were resolved through people's assemblies, which proved cathartic. That's how private health insurance and retirement funds were born in Switzerland. In the contract-based model I'm defending, accidents are managed at smallest level.   

Who will take care of workers’ social security in a world where everyone is self-employed?

G. K.  : We need to bring responsibility back to the individual. It's easy to see how much these autonomous forms of work undermine the Welfare State.

B. C.  : Intuitively, I'm in favour of  Uber. But when you watch how it works objectively, you can see that the relationship between the company and its drivers is far from a balanced one. The so-called “sharing” economy is codswallop. We're actually recreating a Dickensian situation! So of course they'll be a reaction. 

G. K.  : That's why I'm in favour of a universal income. Paradoxically, the safety net needs to be managed by the state, not private companies. We shouldn't destroy social security, but adapt it.

Pictures : © Serge Picard