The root of all evil?
The RSA has Labour leader Ed Miliband speaking tomorrow on the NHS. His team has kindly let me see a draft of the speech and I am impressed. It is, of course, a critique of the Coalition’s reforms, but rather then being an oppositional or ideological diatribe it is much more thoughtful and balanced. As I guess I am likely to post tomorrow on how the speech goes, I thought I would briefly now add to my thoughts last week on corporate responsibility.
Some of the comments on last week’s posts were pretty scathing about the idea that major corporations – like PepsiCo or Kingfisher – can really commit to doing business in a more progressive way. Maybe I am being a sap, but I do think some retailers are waking up to the idea that it is not a sustainable long-term business plan to encourage people to do things that are bad for them, society or the planet.
Building a second assumption on the first, my sense is also that while businesses that sell stuff to consumers may be open to new ideas, businesses that invest money on our behalf – in other words financial institutions – show few signs of a similar openness to change.
Many people argue that the short-termism of financiers is inimical to a more responsible way of thinking about business development. At last week’s FRSA Profit with Purpose event I was told that while ethical funds are growing, and while those funds avoid investing in certain industries (tobacco, arms etc), they are otherwise just as short term as just about everything else in the market.
So why is that those investing our life insurance, pension funds, unit trusts etc are so unreconstructed? And why is that our desire to know out retailers are responsible isn’t matched by our aspirations for our fund managers? Here – from a position of substantial ignorance (which is a bit worrying as my lecture on ‘Big Society business’ is only two months away) – are three possible reasons:
1. Structural: the way investment happens through funds which combine billions of pounds from millions of investors with shares in thousands of companies means that stewardship and responsibility are almost impossible to exercise, both from the point of view of investment managers and ordinary citizens.
2. Cultural: As we have seen vividly before and since the banking crash, those who are senior in the financial sector seem utterly impervious to any sense of responsibility or any concern about public opinion. Perhaps talking about social responsibility with financiers is like talking about feminism at the local rugby club.
3. Money and the mind. There have been experiments that suggest people simply need to be prompted by the word ‘money’ to become less likely to display altruistic motivation. Perhaps when we think about goods and where they come from and what they do we are able to use our critical faculties, but when it comes to the idea of using money to make more money those faculties get switched off.
If any or all of these theories are true there isn’t much room for optimism. The way modern capitalism – and perhaps all capitalism – works the investing tail wags the productive dog. Even if there are good intentions in many global boardrooms they may rarely get turned into authentically different ways of doing business.
Comments
5 Comments on The root of all evil?
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Will on
Sun, 3rd Apr 2011 9:19 pm
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Will Davies on
Mon, 4th Apr 2011 7:43 am
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Neil McNaughton on
Mon, 4th Apr 2011 3:37 pm
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Sarah on
Tue, 5th Apr 2011 5:15 am
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matthew taylor on
Tue, 5th Apr 2011 2:42 pm
Hi Matthew,
You might be interested in this – http://www.guardian.co.uk/sustainable-business/aviva-chief-city-failure-sustainability
Surely one part of this is how investment time horizons relate to economic externalities. Ethical investment is typically about trying to cost in externalities (to the environment, to health, to vulnerable labour), but not, as far as I know, concerned with extending the time horizon of investment. Private equity is allegedly concerned with taking a longer term view, but it compensates for this by making ruthlessly short-termist managerial interventions, to ensure that their 3-5 year investment works in their own interests. ‘Social’ private equity still seems to be too much of an oxymoron.
But surely one way of understanding externalities is as things which WILL rebound on the purchaser/investor, but only over a longer period of time than they are able to think in terms of. Destroying a ‘useless’ piece of heritage is a genuine act of ethical and cultural vandalism, but tearing up the countryside is a negative externality, because business itself will suffer in the long run (arguably). I wonder how measurement of externalities (triple bottom line accounting, social investment etc) can be made more explicitly connected with the critique of short-termism and corporate governance…
Just a thought………
Perhaps we approach the problem of companies that do not recognise social responsibility the right way. I am speaking here especially of tax avoiders and evaders. ( I’d include financial institutions, but I suspect they are so out of touch with normal human behaviour that they are a lost cause). Possibly we might persuade such companies and entrepreneurs to show some social responsibility, not by asking them to pay taxes, but by more direct social investment – with their name on it. If some capitalists are reluctant to pay tax because they are not prepared to accept that they should be spent by governments, sometimes in ways of which they do not approve, they should spend it themselves. This follows, I suppose the American model of philanthropy in return for modest corporate taxation. Foundations which engage in investments in health, education (already being done through academies, I know), university bursaries and research grants etc, could be the answer. Doing deals of this kind smacks of appeasement, I know, but if pursuing them for tax will not work, perhaps we should make a virtue out of necessity and make a new social contract with them.
…….. Just a thought
you’ve probably already seen or heard of this, but I did an essay on Bob Garfield who pushes the optimistic experience of the future in corporate-consumer relationships with his theories on “listenomics”, and in my essay mentioned Pepsico as one of the leaders in the “purpose” motive in advertising. His book is quite an interesting perspective in opposition to writers like Nicolas Carr who have little faith in the “digital” revolutions.
http://www.youtube.com/watch?v=IXG8zaB4eGw&feature=player_embedded
Some great comments. Thanks. Will, thanks for the really interesting link, Will D I agree it’s all about time frames. Neil it’s funny I had a similar idea years ago – a voluntary but public corporation tax which the company can hypothecate to a charitable cause in exchange for which they get to display a philanthropy mark on their products. Sarah, I saw lots of wonderful photos but no essay on your amazing website
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