A thoroughly bad business

Notwithstanding David Cameron’s genuinely good PMQ’s joke at Ed Balls’ expense (‘Bill somebody’ isn’t a person, it’s Labour policy’), the row over Labour’s rift with business carries the already dispiriting general election story to a new low.

Labour hasn’t handled the issue well and it will, I suspect, be one of many factors likely to lead to a deterioration in the Party’s poll rating. Ed Miliband’s problem is twofold. On the one hand, the enthusiasm with which some Labour politicians bash the unacceptable face of capitalism - in contrast to their relative silence about the virtues of enterprise - gives credence to the argument that Labour is anti-business. On the other hand, when Labour tries to translate general criticisms of excess or negligence into specific examples it either has difficulty (as Miliband did on the Today programme the day after his ‘predatory business’ conference speech) or looks like it is seeking to scapegoat or bully individual business people.

None of which makes the suggestion by Conservatives and their corporate and media allies that challenging business practice is tantamount to a declaration of class war any less disingenuous. This is like arguing that because the Daily Telegraph criticises the views of Justin Welby or condemns the antics of an errant vicar, it is intent on a war against Christianity.

The worst thing about this tawdry level of debate is that it detracts from a much more important and nuanced debate about business and the public good.

The undeniable fact is that social progress in Britain (and the world) relies on significant changes in corporate behaviour. Whether it is paying taxes in the places where profits are generated, moving to more environmentally sustainable business models, directing capital toward innovation and useful investment, responsibly collecting and using data, or a host of other more industry-specific public interest concerns, the business sector needs to up its game.

But, as intelligent business leaders recognise, there is profound collective action problem. On the one hand, company accountability is overwhelmingly to owners not to any collective corporate endeavour (few business leaders feel it necessary to accept responsibility for the performance of their sector). In the case of PLCs this effectively means no stewardship beyond the share price. On the other hand, market competition between businesses is often used as a rationale for businesses not doing the right thing. As one retail CEO said to me a few weeks ago, ‘I would love to pay all my staff the living wage but if I did we would be closing stores within months’.

A good example of the problem is to be found in a commendable report from the UK Commission on Employment and Skills published late last year and jointly endorsed by Sir Charlie Mayfield, Chairman of John Lewis partnership and Cahir of UKCES, John Cridland, Director General of the CBI and Frances O’Grady, General Secretary of the TUC. Addressing fundamental economic problems of poor productivity, low wages and the hollowing out of the labour market, the report rightly urges a revolution in investment in people and skills.

The report’s top ‘priority for action’ is this: ‘Employers should lead on skills and government should enable them’. But although exhortations like this are difficult to disagree with, the report contains no credible system-wide model of change. The reason is simple. The authors implicitly recognise there is little support for the imposition of wide ranging statutory requirements in the field of skills and investment. Even if such requirements were imposed, by their very top-down, one- club nature, they would be likely to be clunky and unsuccessful. Yet, as much as imposition might be controversial and counter-productive, mere exhortations for corporate responsibility generally produce small effects.

So, as the UKCES report concludes in relation to local action;‘how best to build genuine employer leadership on skills….must be a key consideration if we want sustainable growth through people’.

There are, of course, examples of business sectors’ getting their acts together and achieving substantial change. The oil industry made great advances on safety after the Piper Alpha disaster, the car industry has transformed the energy efficiency and emissions of automobiles, some of the sector skills councils have provided effective and impactful leadership. In all these cases change came about as a result of the benign interaction of regulation (and expected regulation), corporate responsibility and innovation.

Yet still, overall, the good intentions and fine words of individual companies fail to manifest themselves in system change at an industry or economy level.

So the question ‘how do Government and industry work together to affect real change while operating successfully in a competitive global market’ is as important as it is complex. The answer is not about hectoring business. It’s not about generating more heavy handed regulation. It’s not about relying on warm words and the actions of individual companies.

It is about a grown up, realistic and responsible conversation and leadership. For example, dispensing with the ludicrous right wing myth that businesses are always adversely impacted by regulation and the ludicrous left wing myth that the pursuit of profit is inimical to the public interest.

Which is why the election message that we must choose either to love or hate business, right or wrong, is a particularly depressing example of politicians dumbing down the public discourse in the pursuit of cheap headlines.