IoD chief’s Election warning to business
BRITISH business is facing a dangerous few months, warns Simon Walker, the director general of the Institute of Directors. With an Election looming and politicians of all parties eager to score populist points, business cannot afford to keep scoring own goals.
‘We are four months away from a General Election which is clearly going to be one of the most fractious and uncertain in British political history. Business is less trusted than it’s been for decades,’ he says.
‘I’m very conscious of the fact that there are politicians – across the spectrum actually, and not exclusively in the Labour Party – who are highly critical of business, and I’m just very anxious that companies should behave well and not provoke needlessly in the campaign.’
This concern helps explain what, to many, will have seemed like a series of unexpected interventions in public debates by Walker in recent months.
The Institute of Directors, with its
If a firm breaks the rules, it should be condemned – and the IoD will lend its voice
offices and clubrooms in Pall Mall, is a resolutely free-market, pro-business organisation. Walker is a former communications director at British Airways, Reuters, and Buckingham Palace and a former head of the British Venture Capital Association. In his career and his views he personifies those free-market values.
So it was perhaps unexpected that in the last three months of 2014 he chose to lambast oil and gas giant BG Group for offering to pay its new chief executive too much money. That intervention followed many other public comments about excessive pay in Britain’s boardrooms. Walker also laid into Premier Foods for bullying its suppliers with demands for extra payments to keep their contracts – the so-called ‘payto-stay’ scandal.
But to Walker it all makes perfect sense. Business must be sensitive to public concerns and it must not give ammunition to the politicians who might be tempted to intervene.
He says: ‘I would say this at any time, but in this period it is particularly sensitive. We have had threats to intervene in banking and energy and across a whole range of businesses. I don’t want to give any more justification or legitimacy to that.
‘I think there is a special responsibility on people like me who believe passionately in free enterprise and competition to speak out if they see things that are damaging the free market or are anti-competitive. I think it’s particularly true in very politically sensitive times.’
This sensitive – one could say modern – side is reflected in some of the superficial changes at the Institute of Directors under Walker. Its main entrance is still a typical Pall Mall building – pillars, sweeping staircases and wood-panelling.
Walker himself, however, is not quite classic British establishment. Born in South Africa and educated at Oxford, the 61-year-old spent his early career as a journalist in New Zealand. His office is far from a wood-panelled affair, instead being a clean white-walled modern one on the top floor. He has also done away with the rule that requires members and visitors to wear ties while in the hallowed halls of the IoD.
The subject of business responsibility is high on the agenda again this weekend with the recent collapse of City Link. Its owners, private equity group Better Capital, have been accused of cynicism in allowing the bill for redundancies to fall back on the taxpayer, as well as heartless insensitivity for putting the company into administration on Christmas Eve.
Walker cautiously avoids rushing to judgment. He says: ‘The timing of City Link’s collapse must have been a terrible blow for its employees. But the distressing truth is that business failure cannot always be avoided. If the owners and management acted in good faith and did all they could to turn the business around, then there is nothing to be done but see that the process of unwinding happens in an orderly manner with a focus on the welfare of the staff.
‘If a business breaks the rules and mistreats employees or customers they should rightly be condemned, and the IoD will lend its voice. But it’s very important to distinguish this from unfortunate cases where firms just go under.’
But while reserving judgment on City Link, Walker does believe there is more to business standards than a rule book. He says: ‘It’s not enough to say “we didn’t break the law” or “it wasn’t illegal”. There are other questions like “was it ethical?”, “was it treating your customers and suppliers with respect?”
‘That I think is at the heart of business. Because business is about vol- untary exchanges between willing participants – suppliers on one side and the people they are supplying on the other, and it’s important that
Politicians in an election cycle are scouring for populist issues they can seize on
both sides feel they are getting something out of it.
‘You can’t rip off customers and treat employees badly and say “oh, but we weren’t breaking the law”. You may not go to prison but you’re going to make an awful lot of enemies. That was my real feeling about Premier Foods, for example. Yes, it’s perfectly true it wasn’t against the law. But it was not treating your suppliers with respect. It was holding them over a barrel because you could. And if you do that you’re going to be regarded with suspicion and distaste, and it’s never in business’s interests to be regarded with suspicion and distaste.’
As Walker says with a General Election four months away, politicians can make hay with public suspicion. At the same time he does recognise the pressure that politicians face from the public.
He says: ‘It’s quite difficult for politicians to turn round and say they don’t have the power to do something. But actually they shouldn’t have the power to do a lot of things, and we don’t want them to have the power. But they will take that power to themselves if push comes to shove. And that is just as true of Conservative politicians as it is of Labour ones.’
So having lambasted Premier Foods for its bullying behaviour, Walker is clear that laws such as the ban on firms demanding charges on suppliers that has been proposed by Labour would be wrong.
He says: ‘I don’t believe that’s right. I think business should fix itself. I think it’s a wholly inappropriate thing for politicians to be legislating over, because they will get it wrong. The point about the free market is it is self correcting.’
He cites the controversy over zero-hours contracts as a similar case. These contracts allow an employer to pay a worker for each hour worked without guaranteeing how much work they will be given.
‘Zero-hours contracts have a valuable place in business. And they mean a lot of people have jobs who wouldn’t otherwise have jobs,’ Walker insists. But he adds a crucial caveat: ‘It is abusive behaviour to tie in your people with whom you have a zero-hours contract with an exclusivity clause which says they can’t work for anyone else.
‘That is an abuse. It should not be done. It may not be illegal, but it should not be done. If businesses do it they are inviting their political masters to make it illegal. Because politicians in an election cycle are scouring the horizon for populist issues they can seize on because there are votes in it.’
He should know having been a policy adviser at No10 under John Major. He continues: ‘An election cycle is a febrile environment.’
So for Walker it seems the best thing would be for business not to attract too many nasty headlines over the next few months and for politicians to resist electioneering with anti-business rhetoric.
Along with that free-market zeal, Walker is obviously also quite an optimist.