Business is tackling the difficult questions politics has dodged

Simon Caulkin on the big issue politicians dodge

What does it mean to be pro or anti-business? The question is prompted by the stereotypical views displayed during the autumn UK political party conference season. Conservatives proclaimed a “generational struggle” for an “enterprising, business, low-tax economy that delivers prosperity for the people and generations to come”; Labour reverted to type by proposing to generate public funds through opportunistic levies on bankers’ bonuses and tobacco profits.

This is more than a pity; it is an evasion of responsibility. You would not know it from UK party politics, but there is indeed a generational debate and our prosperity does depend on it. However, the answer will come neither from the Conservative offer – business as usual – given that it was business as usual that brought us the banking crash, soaring wage inequality and a shrinking corporate sector unable to provide jobs, pensions or growth, nor from Labour expediency, fudging real debate while pouncing on unpopular industries to levy one-off taxes.

It is in business that the debate is happening. In recent months the pages of Harvard Business Review, the blogosphere and, to an extent, the Financial Times, have been fizzing with arguments about maximising shareholder value and the alternatives, and for once revisionist voices are audible.

Not all the alarm is among those with most to lose and who hope to head off future Occupy movements by tinkering at the edges. Organisations in the mainstream, such as the Aspen Institute and the Drucker Society, together with ad-hoc groups such as the Purpose of the Corporation Project, are to the fore. Even a few courageous chief executives, among them Unilever’s Paul Polman and Dominic Barton of McKinsey, have conceded that the governance system relied on since the 1980s is fundamentally flawed.

As a new report from Cranfield School of Management, Combining Profit and Purpose, puts it, the “fundamental question of the purpose of business is, once again, up for grabs” after a long period when it was taboo. Current and future leaders were polled on the social purpose of business. All agreed that business should have a social purpose but, unlike their elders, few future leaders (current or recent MBA students at European business schools) thought it currently had one, a lack they attributed chiefly to “management attitudes”. In general they were much more impatient about slow progress.

Given the comic-book versions of business and management adhered to in Westminster, one might be tempted to say we should keep politicians out of the debate. That would be a mistake. First, the corporation is not part of the natural order. It was devised – and can be reinvented – by human ingenuity. As Martin Wolf noted in the FT recently, almost nothing is as important as thinking through how this institution is governed. Involving as it does choices about ends, means, legitimacy, power and fairness, this goes to the heart of politics. Today’s model has demonstrated the consequences of getting it wrong.

Gotham City illustration

Second, in a 1990 lecture to the RSA (Royal Society for the encouragement of Arts, Manufactures and Commerce) entitled “What is a company for?”, Charles Handy argued it was a cop-out to exhort companies to do the right things when the rule book and short-term pressures pushed in the other direction. Many companies tried to act responsibly, he noted, but it was unreasonable to expect them “to play fair when the rules of the game allow everyone else to play rough . . . No wonder that they sometimes pay only lip service to the other stakeholders and pander to the short-term needs of the punters.”

So the rule book needs to be changed. “We must not be slaves to our history but trustees of our destinies,” Handy said. “Our companies are too precious to be lost because we have not dared to question the past, or to dream the future.” That involves tough technical and, yes, political choices. But it is also a huge opportunity, with sky-high stakes. The idea that business and politics are separate is itself a political statement, one that, ironically, has caught both in a destructive vicious circle.

Business is paralysed by the trap Handy describes, while politics is prohibited from intervening by political caricature, fuelling public cynicism and disengagement. Could breaking the deadlock by engaging constructively with the real politics of organisation thus constitute the first step towards not just economic but equally needed political renewal?

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