Why we all benefit when businesses do the right thing
GREED is good,” growled Michael Douglas in the classic 1987 movie Wall Street, while boasting that his last seven deals had made shareholders a thumping $12billion profit.
Rather less well known is the line at the start of that epic scene where Douglas’s character, Gordon Gekko, says: “in my book you either do it right or you get eliminated”.
I’m sure very few would support Gekko’s “greed is good” mantra these days but he may, inadvertently, have been on to something with his warning.
There is growing pressure on business from politicians, activists, the media and, critically, consumers to act in the best interests of all their stakeholders and the planet. In short, to “do it right” and only those who do will have long-term sustainable business models.
So how can we change behaviours and create a cultural shift so that firms are focused on fixing society’s pressing problems?
Well one positive step in the right direction would be to redefine the role of the UK’s five million businesses, making them more accountable for their employees, local communities, and our planet.
MANY, probably most, businesses do already take many of these responsibilities seriously. But to ensure that others do more than simply pay lip service to the notion, we need new legislation to enshrine such obligations in law.
That is why Virgin StartUp and Virgin Management have joined more than 1,000 companies, including John Lewis, Iceland and Innocent, in backing calls for the Better Business Act to be included in the Queen’s Speech on May 10.
This move, which also has backing from the Institute of Directors, would amend section 172 of the UK Companies Act. When it was passed, in 2006, the Companies Act was not only the longest piece of legislation ever to be passed but the first time the country had spelled out the responsibilities of directors and enshrined them in law.
In summary, the Act says that the primary task of directors is to make as much money as possible for shareholders. The amendment seeks to change that, so that businesses are forced to give equal consideration to the wider interests of their people, local communities and the environment.
It would be a small change in the law that would make a big difference to society and aspirations of reducing inequality and climate change, by compelling businesses to take decisions in the long-term interests of us all, not merely investors.
The idea, first floated 12 months ago, has cross-party support in Westminster. At Virgin StartUp, we have been committed to such goals from the get-go. Since Sir Richard Branson launched his first business more than 50 years ago, Virgin has always been driven by the ambition of “changing business for good”. Indeed, Richard launched Virgin StartUp as a not-for-profit in 2013, to help thousands of aspiring founders to do just that with their own businesses.
The pandemic, climate emergency and social inequality are profound and pressing problems that can only be solved if we harness the potential of entrepreneurs, innovation and enterprise. The world needs every business at its best by creating good jobs, fixing pressing problems and adding value to society. We have been focused on supporting business leaders who are determined to make a difference – not just a quick buck. We believe that purpose and profit go hand-in-hand and that those companies which are committed to a greener, fairer society not only grow faster but are better at attracting and retaining talent and have a more sustainable future.
THAT is why, last year, Virgin StartUp launched the Collective Impact programme, in partnership with Crowdcube, to support the next generation of purpose-driven business founders as they scaleup and seek new investment.
The success of the programme means that Virgin StartUp is poised to invite a second cohort of companies to apply to join the Collective Impact.
The purpose of the programme is to bring together like-minded founders, mentors and investors to help those businesses leverage support from the crowd to make the world a better place.
And, as self-regulation clearly doesn’t work, that change needs to have the full force of the law behind it.
The Better Business Act is driven by leaders who recognise that the law has fallen behind business culture and who have proven that a purpose-driven approach to business works best for everyone.
‘A small change in the law would make a big difference to society’