Following Ed Milliband's speech on the need for banking reform and an ethos-driven economy, the latest publication from the think tank ResPublica argues that a radical change in attitude from our businesses is needed if the private sector is to regain the trust of British consumers.
With public trust in businesses at an all-time low and bankers at the “bottom of the league”, ResPublica’s publication The Virtue of Enterprise: Responsible business for a new economy, calls for an improved model of corporate governance and responsibility that ushers in a new era of accountability and transparency.
The collection urges for radical policy reforms and issues recommendations for better business practices:
♦ Baroness Lister proposes a concept of stakeholder capitalism which views the employee as a stakeholder and compensates them in recognition of this.
♦ Andrea Leadsom MP argues for a business environment that allows free entry and exit by market players in order to ‘compete away’ the need for increased regulation.
♦ Stephanie Elsy, consultant and ex-Senior Director at Serco – argues that Government can lead by selection, as opposed to regulation, and create a good business culture across its supply chains. She calls for the state to adopt the role of commissioner of ethos and good practice, in the context of rising public procurement trends.
♦ Prof Roger Steare, Cass Business School refutes the argument that more regulation means less wrongdoing. Instead, he promotes the ideal of better regulation that encourages culture based on trust between companies, customers, colleagues and communities
♦ Dr Shann Turnbull of the International Institute for Self-governance proposes a model of network governance that allows companies to involve wider stakeholders as economic citizens. This in turn would localise corporate accountability and increase self-governance in line with a human scale.
Through this publication ResPublica warns that, without a new moral framework for business that commits to producing long-term value, the mismatch in expectations between consumers and shareholders will lead to even lower levels of public trust in business. The beginning of the 21st Century has already marked a wave of remarkable transformations in social, economic and technological life. As a consequence, the public and political perception of the way in which capitalism and business should operate has also changed – and so should business practices.
The publication brings together essays from a range of policy-makers and key figures in the business world, including Ian Powell, Vice Chairman, PwC, Baroness Ruth Lister CBE, Member of the House of Lords and Emeritus Professor of Social Policy, John Mann MP, Michael Izza, Chief Executive, ICAEW, Andrea Leadsom MP, and Chi Onwurah MP, Labour’s Shadow Cabinet Office Minister. Drawing on their diverse backgrounds and fields of expertise, together these authors argue for a concrete implementation of the principles of responsible and moral capitalism.
Baroness Greengross, Chair of the All-Party Parliamentary Group on Corporate Responsibility, argues that neglecting values can have dire consequences for companies’ reputation and sustainability. Responsible businesses are a vital force for good in our societies, creating jobs and providing necessary products and services. Businesses without good corporate governance, on the other hand, will only ever be tolerated by British consumers and will remain vulnerable to external shocks.
The publication is launched following intensive debates in Parliament on the need for a reformed banking system, triggered by a collapse of trust in banks. According to a recent poll by British Social Attitudes, only 19 percent of people believe banks are well run and unfortunately this is just one of the manifestations of this ‘trust crisis’ facing the British private sector, as 51 percent of Britons no longer trust in business.
Taking a keen interest in this debate, one of the publication’s authors, Andrea Leadsom MP, said:
"As others have highlighted in this collection, one of the most significant crises in modern business is the decline of trust in the banking industry and wider financial services.
"This is a fantastic collection of essays and I am delighted to have been able to contribute to this publication advocating the case for full bank account number portability. This collection of essays should be essential reading for anyone committed to good business and responsible capitalism."
The deteriorating relationship between businesses and consumers is damaging other sectors of the economy, as John Robertson MP, Vice-chair of the APPG on Corporate Responsibility said:
"This collection rightly highlights the real lack of trust we have in some of our most important companies. Energy companies, for example, over the last decade have shown their pursuit of profits to be more important than the welfare of their customers, through hiking their prices, avoiding tax and manipulating their role in the market.
"We need a better society, where business is about more than profit and companies also contribute to our communities. I think ResPublica has made an important contribution here to the debate on how we begin to create that society."
The Virtue of Enterprise: Responsible business for a new economy draws together fourteen essays from thought leaders, policy-makers and practitioners, including:
· John Mann MP, on the issue of tax and consumer value
· Baroness Ruth Lister CBE, on fostering good employment relations and a ‘responsible pay structure’
· Chi Onwurah MP, on the importance of social enterprises and the concept of ‘shared value’
· Michael Izza, Chief Executive, ICAEW, on a case of best practice in good corporate governance
· Ian Powell, Chairman and Senior Partner, PwC on the ‘trust deficit’
Phillip Blond, Director of ResPublica, said:
"There is now a market demand for morality in financial services and ethics in economic outcomes. Hardly anyone is Britain is proud of British businesses and this is an economic tragedy as well as a damming indictment of current business models.
"This essay collection sets out the various institutional and cultural reforms that are needed to achieve the economy and society we all want. If business does not reform, the state will regulate and regulate again. Ignoring the moral demands of countries for better business practices will lead to businesses being driven from markets and shunned by customers. The market will select for morality, it is time business responded to the market."