The relationship between business, government and society, shattered during the financial crisis of 2008, shows little sign of repairing itself.

President Barack Obama has criticised the “corporate deserters” who have “renounced their US citizenship” by moving abroad to cut their tax bills.

President François Hollande’s French “ responsibility pact”, promising labour market reform, tax and spending cuts, is not producing the jobs he wanted in return.

In the UK, the Serious Fraud Office is examining possible criminal charges against former and current staff of Lloyds Banking Group. The bank paid £218m fines to the UK and US authorities for manipulating interest rates, including the one that set the fee Lloyds was paying to the Bank of England for cheaper funding during the financial crisis.

The Lloyds traders’ behaviour, which Mark Carney, BoE governor, described as “highly reprehensible” and “clearly unlawful”, is staggering. Who diddles the authorities who are both helping and regulating you? You read about people who commit burglary when they are on probation, but they usually have the sense not to burgle the house of the chief probation officer.

Sir Richard Lambert, head of the Banking Standards Review, said the traders “appeared to have lived and worked in a culture where the behaviour didn’t seem out of the ordinary”.

The banking industry seems to be taking time to absorb the lessons of its loss of reputation. Obeying the law would be a good start.

What of non-banking businesses that have not been involved in law-testing shenanigans but have still, like the US companies in tax-cutting “inversions”, incurred the wrath of lawmakers and the wider society?

To restore what he calls a “broken” relationship, Lord Digby Jones, former head of the CBI, the UK employers’ group, has called for a new “covenant” between business, government and society.

“I think a business covenant should be loosely based on the military covenant, which has been around for years as an unwritten moral agreement between the armed forces, society and government,” he said in a BBC online article that accompanied a Radio 4 broadcast.

The UK’s armed forces covenant was actually written down in 2011 and its key principles were incorporated into law. “For most of the armed forces community, the covenant is about removing disadvantage so that you get the same outcome as the civilian community,” the government says. The children of servicemen and women killed on active service are entitled to scholarships for their final years of school and for university, for instance.

How applicable is any of this to business? Lord Jones quotes David Ison, Dean of St Paul’s Cathedral in London, who says businesses need to commit themselves to a locality and that “one of the things which people have found very difficult is the way that business appears to be able to uproot itself and say, ‘We’re not making enough profit here, we’ll close our factory and move’.”

On his website, Lord Jones talks about how, in the community he grew up in outside Birmingham, everyone relied, directly or indirectly, on the Austin car plant.

But that sense of place is lost. The internationalisation of markets has not only made it easier for companies to move. It has also made it harder for those that don’t move to compete. When companies began shifting their manufacturing to countries where wages were lower, competitors were eventually forced to follow. US companies that shift their tax location have an advantage, in attracting investors or cutting prices, over those that don’t.

What can be done? Business leaders say governments need to reform. American companies would have no need to move abroad if US corporate tax rates were lower.

Similarly, French business leaders say they would be keener to invest if the government had begun its reform programme earlier.

But there is always going to be somewhere easier and cheaper to do business. And if you don’t take advantage of that, your rivals will.

How, under these circumstances, can companies win back the trust they lost? A covenant won’t help much. Many of those service personnel have lost their jobs too.

Globalisation and free trade have brought many advantages. But that sense that companies are part of the communities they were born in is, sadly, gone for good.

michael.skapinker@ft.com
Twitter: @Skapinker

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Letter in response to this column:

Roots keep family businesses honest / From Prof Joachim Schwas

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