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US Surveillance Controversy Underlines Importance of Corporate Foreign Policy

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In a 2011 report, which was declassified last week (August 21), then Chief Judge John Bates of the US Foreign Intelligence Surveillance Court expressed concern at US government surveillance programmes. He asserted that "the volume and nature of the information [that was being collected as of 2011] is fundamentally different from what the court had been led to believe".

The release of the report, which was written well in advance of leaks about the US surveillance programmes by former US Government contractor Edward Snowden, will fuel world-wide debate. And it follows an announcement on August 9 by President Barack Obama about changes to the US surveillance system, including "appropriate reforms" to Section 215 of the Patriot Act which guides collection of data such as phone call and internet usage.

Since the Snowden leaks, there has been concern expressed internationally, including from foreign governments, renewing the debate over the balance between national security and consumer privacy. For instance, pressure is mounting in Brussels for a formal EU investigation into the issue. Meanwhile, it has been reported that China is to investigate several large US technology firms for security reasons.

The impact on US technology firms of the Snowden revelations was a key reason for the decision to hold a US summit on government surveillance and digital privacy on August 8 which was attended by Obama and top industry executives. It has been reported that several US technology firms have expressed concern that Washington prevents them from revealing all the information on surveillance requests they receive.

At least some US technology firms are concerned that international fallout from the surveillance programme revelations could be damaging their reputation and financial bottom line overseas. For instance, one survey by the US-based Information Technology and Innovation Foundation estimates that US cloud computing providers might lose to international rivals between 10% and 20% ($21.5 billion to $35 billion) of foreign markets over the next three years.

The episode underlines how traditional public and private sector concerns of public policy and corporate affairs respectively have become blurred, in sometimes complex and difficult questions relating to domestic and international politics and law. To be sure, this is not a new phenomenon, but nonetheless appears to be increasing in incidence and salience.

Partly, this is driven by globalisation, and the growth of the high technology industry. As Obama noted on August 9, "technology is reshaping every aspect of our lives".

The Snowden revelations are by no means the first time that technology firms have been caught in controversies in recent years. For instance, Members of the European Parliament passed a resolution in February 2010, following the disputed Iranian presidential election of 2009, which called on EU institutions immediately to "ban the export of surveillance technology by European companies to governments and countries such as Iran".

Moreover, during the events which overthrew Egyptian President Hosni Mubarak in 2011, some companies were forced by the regime to temporarily shut down their networks. Meanwhile, Google and Twitter collaborated on a 'tweet to speak' programme which was used as a communications platform by some anti-Mubarak protestors.

To be clear, 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.

Firms are guided by various international codes of conduct, including the UN Guiding Principles on Business and Human Rights which reinforce corporate social responsibility practices. However, in this complex environment of sometimes unchartered territory, some of the most enlightened companies have recognised the need to also take 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 threats. 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.

As globalisation advances, an increasing number of international companies will encounter these pressures. And, at the same time, their actions are increasingly under a microscope of scrutiny.

For those firms which misstep, fallout can be very damaging, both for the financial bottom-line and reputationally. However, for those 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.