Wake-up call for business
THE leaders of large companies are horrified at the hostility aimed at them in the Labour manifesto, but they ought not to be surprised.
The proposals from Jeremy Corbyn and John McDonnell are all pitched to appeal to voters’ disillusion with corporate Britain. Sadly, there is fertile ground to plant these seeds.
The business world has over the past couple of years been scarred by some big scandals, including the grotesque pay handed to former Persimmon bosses, the collapse of Thomas Cook, which went bust under a pile of debt, and the disgraced fund manager Neil Woodford. It’s all too easy to construct a ‘business is bad’ narrative out of episodes such as these.
They play into populist anti-capitalist perceptions that companies are all a racket to enrich fat cat executives and owners while ripping off customers and staff and destroying the planet.
Those ideas, in more sophisticated form, are gaining traction in intellectual circles.
The British Academy published an earnest tract a couple of days ago calling on businesses to put purpose before profit, which is well-meaning but misguided.
Businesses are not charities – their whole purpose is to make a profit. Provided they do so legally and ethically, their activities should benefit society and not cause harm.
Of course environmental and social responsibility should be at the heart of what companies do, not hived off to a separate department as an add-on. The duty not to bring a firm into disrepute is already enshrined in companies law. But the crude anti-capitalist critiques ignore the fact there are correctives within the system, including the financial press and investors who, though slow to be roused, will object to egregious corporate behaviour.
The creed of pure shareholder value – the idea companies should be all about maximising returns to investors at all costs – has been discredited for years.
COrPOrATE culture is not becalmed in the late 20th century, but has evolved, not least because mistreating customers or staff in a social media age has instant consequences.
Most firms in this country, of course, are not large, though this is rarely acknowledged by Labour. Around 99pc – 5.7million of them – are small or medium-sized enterprises, rooted in their local communities.
Most of the entrepreneurs running these companies would struggle to recognise themselves as caricature capitalists.
And for all its faults, business has created millions of jobs in recent years. Employment is at a record high and, even more positively, the number of children living in homes where no one works has fallen to a record low. The idea that this is down to an explosion in low-paid, insecure zero-hours contracts is an urban myth, as employment would be at a record level even if people on zero hours were excluded from the numbers.
Just as much as this election is a poll on Brexit, it is about capitalism and its discontents. The roots of it lie in the financial crisis and the damage done to trust in banks and business more broadly. This has created a climate of cynicism about business and its leaders. As a consequence, the pragmatic, very British brand of capitalism we have lived under since Thatcher is being questioned in this election as never before.
The men and women who run our large companies need to engage in some selfscrutiny over why this is happening. They are not the pariahs painted by Labour, but they have failed to convince enough of the electorate that business is a force for good.
If the Conservatives are re-elected, it should not be an excuse for simply breathing a sigh of relief and carrying on as before. If large companies fail to curb the excesses and abuses, it will return to haunt them.