It ought to be the engine of the economy that will pull the country out of recession but there is evidence the public, and probably politicians, see commerce as contributing to the nation’s predicament.
Pay is part of the problem but the discontent goes wider. Four out of five people don’t trust business leaders to put the needs of staff or shareholders above their personal interests, according to Edelman’s Trust Barometer. A similar proportion think business ethics have deteriorated.
Business and banking and commerce and capitalism are being equated in the public mind and industrial directors are being tarred with the same brush as City financiers.
The current crisis has given good reason to argue that the market system has broken down and that competition does not always advantage the consumer.
When the economy was growing, everyone gained together. But as the going got tough, ordinary people found themselves pitted against business as companies laid off workers and closed services. Pay was frozen and small investors’ dividends slashed. Yet boardroom pay has continued to rise.
Instead of defending big business, the public is ready to criticise companies on all fronts. Andy Bond, chief executive of Asda, part of the mighty Wal-Mart, argues we are now in an era of “democratic consumerism” where people have lost faith with the traditional holders of power, whether business people, bankers or politicians.
He argues for greater transparency to regain that trust — bankers, MPs and even the BBC have had to respond with more detailed disclosure.
But the danger is that the backlash against business results in both more regulation and red-tape as well as fiscal penalties. The ‘non-dom’ levy, 50p income tax and talk of a windfall tax on banks are all evidence of clobbering business rather than priming the engine of recovery.
Richard Lambert, director-general of the CBI, is clearly worried that politicians see business as a pariah rather than saviour. He cited the rewards for failure taken by the ‘Phoenix Four‘ — the brief owners of MG Rover — in a speech in October 2009, saying: “If business people behave in this way and the rules don’t stop them, it’s only a short step to saying let’s have more rules”.
Business must be on the right side of the argument, at the heart of a healthy society — “not some venal vested interest doing its own thing on the sidelines”.
That’s tough talk from the champion of commerce. But he has correctly caught a public feeling that most boardrooms have missed or dismissed.
Company chairmen will heed his warning and adjust their corporate behaviour accordingly. Compensation committees are a good place to start but a lot of goodwill has evaporated in the past two years.
