“CAN BUSINESS EVER GET IT RIGHT?” was the question posed to some 350 business leaders, policy makers, regulators and finance professionals at Mansion House last night.
Organised by the ICAEW’s Audit Quality Forum, as part of its ten-year celebrations, the event sought to draw out the views of the audience about how it can elevate and rekindle public trust in business after the recent spate of scandals over incompetence, corruption and greed.
Helping to fuel the debate was a diverse range of speakers that included Business Secretary Vince Cable, Financial Reporting Council chairman Sir Win Bischoff, Oxfam GB CEO, Mark Goldring and former chief executive of Thomas Cook Group, Harriet Green.
Kicking off with ‘What is the role is the role of business in society’, Bischoff stressed that “democracy and capital were intrinsically linked” as people who get up in the morning and go to work in business don’t suddenly become members of society when they go home in the evening.
Business, he said, creates prosperity by developing goods and services that people want and need. It satisfies people’s desire to contribute to society by working while contributing directly to society through taxes.
“If businesses are to contribute to society they must be aware of consumers’ needs, be good employers and pay the tax they owe. It’s the strong moral culture that makes business a cause for good in society. It is an inclusive agent of change.
Companies need to set a cultural expectation for their staff and must do all they can to ensure that their products and services meet that culture of expectation, Bischoff stressed. And as boards have the ultimate responsibility for culture both within the boardroom and across the organisation they must continue to monitor it to ensure it is being embraced and lived by all tiers of the organisation.
“Business is ultimately accountable to society and corporates are afforded the societal privilege of limited liability and should then be willing to govern themselves,” Bischoff stressed. “To me the role is clear, the application by business of its governance needs to be overhauled and improved.”
Schroders fund manager and co-head of its pan-European small- and mid-cap team fund manager, Andy Brough, bemoaned the lack of long-termism in much of the contemporary business landscape.
“Long term for a fund manager these days is one quarter, four quarters of the year, that is long term – if you’re lucky. People now ask ‘how did you do yesterday?’ Money flows in and out in huge amounts.
Pushing against short-termism
“At Schroders, $2bn (£1.3bn) a day goes through our platform – that’s not long-term investing, that is speculating and we are the people handing out chips in the casino”. A scenario, he said, that is indicative of the huge pressures to deliver. “Yet over the past six years the best performing asset class in the world, has been the UK small companies sector because the characteristics which we look for to make success are found there,” and why he’s so happy to work with that entrepreneurial section of the business community.
Vince Cable, Secretary of State for Business, Innovation and Skills, said the issue of long-termism – or lack of it – was “probably the most important” challenge facing business and society. He explained, how before he entered politics, he used to embark on 20-year planning with Shell and struggles to reconcile that with how the short-termism of the Stock Exchange influences corporate behaviour.
Much of his current role has been spent trying to change, “as best I could”, the way in which short termist culture affects companies, especially PLCs.
Building public trust
“I do think we have begun the process by which the culture of short termism is gradually being lost,” he said stressing that excessive executive had seen some proof of being reined in in recent years, but much more still needed to be done to restore levels of public respect for the political classes and to erode the endemic suspicion around business and bankers.
Improvements in corporate governance, giving shareholders more of a binding vote on executive remuneration, tougher laws on pre-packs and late payments, alongside greater transparency, ‘responsible capitalism’ and still greater transparency would all help make major inroads into reversing this trend, Cable believes.
Harriet Green, the only female speaker at the event, said: “We cannot as business people sit on our hands waiting for public appreciation. We have to earn respect, engage with our customers, open up, listen, and embrace social media. Leaders need to be seen as much more human, much more people focussed, visible and very much more accountable to their stakeholders. Businesses now have a real chance to inspire the next generation that a career in business can be exciting.
Business needs more diversity, she said, so that the public can identify with people like them – “That’s less male, less pale and overall, less stale”.
At the end of the session, some 72% of voters said they “believed that business can get it right”. That still leaves almost a third of the audience far from convinced, indicating that much more real work – and change – needs to happen.