The satirical movie, ‘The Interview’, opened in UK theatres last week following its release in the United States over Christmas. The film was transformed late last year into one of the most talked about pictures in recent times after being heavily criticised by the North Korean regime.
The movie was condemned by Pyongyang for undermining the “dignity of [the country’s] supreme leadership” given that it includes a fictional plot to assassinate dictator Kim Jong-un. And Sony Pictures Entertainment, which made the movie, was then subjected to a cyber attack which the US Government attributed to the North Korean regime.
Although Pyongyang has denied responsibility for the online offensive against the firm, Washington has imposed financial sanctions. This is believed to be the first time that the United States has levied such measures against any state for a cyber attack on a private sector firm.
The incident put Sony Pictures Entertainment, the US subsidiary of Japanese-headquartered multinational Sony, in the international diplomatic spotlight. And the firm endured particular strong criticism in December for what had appeared to be its original decision to postpone, or possibly cancel, release of the movie because of threats from cyber hackers.
This episode underlines the potential for business decisions, whatever their motivation, to become intertwined with foreign relations among states and companies. In effect, blurring the traditional public and private sector concerns of public policy and corporate affairs, respectively, in sometimes thorny issues of political, human rights and/or legal issues.
To be sure, this is not a new phenomenon by any means, but nonetheless appears to be increasing in incidence and salience. Partly, this is driven by globalisation, and also the growth of key industries including new technology.
For instance, Google unintentionally sparked a diplomatic row last year following a decision to change the name on its "Palestinian territories" homepage to "Palestine". The move, which Palestinian President Mahmoud Abbas reportedly called a "victory for Palestine and a step toward its liberation", provoked immediate Israeli government complaint to the firm. Israeli Foreign Ministry spokesman Yigal Palmor, for instance, asserted that "Google is not a diplomatic entity which begs the question why they are getting involved in international politics and on the controversial side".
To be clear, new technology firms are not alone in experiencing issues from working with diverse political authorities across the world. Indeed, internationally-focused companies in many other industries, ranging from energy and extractives, to fast moving consumer goods, have long been confronted with challenges too.
Various international codes of conduct, including the UN Guiding Principles on Business and Human Rights already exist and reinforce the corporate social responsibility practices of individual firms. However, some of the most enlightened companies have NOW recognised the need for a more decisive shift toward what has been termed strategic corporate foreign policy.
Corporate foreign policy aligns a firm's external affairs activity, including media relations, risk management, corporate social responsibility, government affairs, and operational planning, in a clear strategic framework. Recognising the need for an unusual mix of core competences (e.g. in advanced diplomacy) in some of these corporate functions, capability (including tools, training and infrastructure) can be enhanced where any gaps exist.
Other example areas of capability where firms occasionally have gaps include foresight and horizon scanning to anticipate and plan for social, economic and political opportunities and risks. Firms may also need clearer internal guidance for determining decision-making, protecting stakeholders (including customers), and/or remaining faithful to corporate values, especially in fast-moving, unpredictable, crisis situations in countries with weak democratic credentials.
The relentless march of globalisation, with the interconnections this brings, means that few international companies will escape these pressures completely. And, at the same time, owing to proliferation of media, and the influence of NGOs and related stakeholders, the actions of firms are increasingly under the microscope.
For those companies which are pro-active and invest in their capability, the prizes (both in terms of mitigating risk and seizing opportunity) are potentially ever more significant. Yet for those which are perceived to misstep, the fallout can be increasingly damaging, both reputationally and also for the financial bottom-line.