The blog below is taken from the HuffPost Political Blog Series by Gavin Devine.
Quite a few years ago I had a minor disagreement with an old schoolfriend. He was a Top City Lawyer working on a big banking merger. I was a Parliamentary Clerk toiling away in the arcane Private Bill Office. Our worlds collided because his merger required amendments to be made to a Private Act dating from late Victorian times (I told you it was arcane). My friend was confident this was just a formality; I knew it could be an issue, potentially delaying the deal by 6 months or a year. Don’t worry, he assured me loftily, this is a four billion pound merger – Parliament won’t be a problem.
Even now, 20 years later, it still gives me pleasure to say I was right and he was wrong. But his attitude lives on in large parts of the business world, where all too often Westminster, Holyrood and Brussels are treated as sideshows which can be dealt with by mid-level government affairs staff – or handed over to the Chairman who may or may not be a big party donor and may or may not know someone who they claim can help (Hint: they rarely can, by the way). Only very occasionally, when something really bad happens like a regulatory threat to the whole business, or a failure to win a very large contract, or, I don’t know, Britain deciding to leave the European Union, do the majority of Chief Execs and senior management start to pay serious attention.
Brexit has been the absolute nadir in terms of business fecklessness about the possible impact of political change. Early on the Government bizarrely asked companies not to intervene, but in truth very few of them ever really planned to do so anyway: certainly the efforts of most firms were not in proportion to the risks they faced. This was not a one-off: the Scottish referendum saw the same behaviour, and the story has been repeated countless times in relation to UK and European legislation. We pay trade bodies to look after us, is the common refrain, and anyway it’ll never happen. We are a Big Business. Good sense will always prevail.
This reckless attitude is about to be challenged again with Theresa May’s promises to reform capitalism, to make it more inclusive and more responsive to ordinary folk. Thus far it is unclear exactly what Mrs May and her Joseph Chamberlain-inspiredsidekicks have in mind, beyond giving workers some sort of representation on the board. However, it seems clear that they really mean what they say, and will push forward a wide-ranging suite of proposals over the coming months: moral conviction coupled with electoral logic tells them this is the right thing to do.
In this context the news yesterday that average wages of FTSE100 Chief Executives went up by 10% last year, and that these top guys now earn 140 times more than the typical worker, came at a particularly bad time. Whatever the truth it is at best tin-earred for co-called Fat Cats to be seen to be lining their nests to this extent when their businesses are not growing anything like as fast as their pay packets, and when many ‘ordinary’ people are still struggling post-recession. And it is very easy, and all too tempting, for politicians to tap into public unhappiness about what looks like an unrestrained binge. Some means of enforcing pay restraint looks certain to be part of the package of reforms the new Government will pursue; and yesterday’s report will be cited in evidence repeatedly as the debate about what to do goes on over the next few months.
In the past company heads have gambled that no British politician would dare make their lives too tricky since firms could simply up sticks and base themselves elsewhere. This was always a risky calculation, given that outside a few hedge funds and asset managers most organisations have deep roots in their home nation that are hard to pull up. But moving is even more of a gamble now, given that anti-business rhetoric is reaching ever greater heights elsewhere in the world. America, in particular, looks set to become less of a ‘safe haven’, given that the next President will either be unsympathetic (Clinton) or enraged (Trump). No, executives are likely to have to stay where they are and deal with public opprobrium and political meddling at home.
Some business leaders have recognised the risks. In the US a number of senior figures including the head of JPMorgan Chase, Jamie Dimon, Warren Buffett and the CEO of General Motors, Mary Barra, recently published their view of ‘commonsense’ principles for corporate governance. What they set out were sensible proposals, which could be emulated here (and in some instances have been already), and which could go a long way to curbing some business excesses. In normal times they might have been enough to set the agenda and deal with the threat of political intervention. But these are not normal times.
Chief Executives are facing an uncomfortable moment. They are not controlling this debate: Downing Street is and the White House will be. Bosses need to wake up to this reality. In the UK they are going to be required to explain what is good and what is bad in the measures proposed by Mrs May – and why. They will have to set out their own proposals. In short, they will need to engage. And once they’ve got into the habit they can and should also take leading roles in other debates that are so critical to their businesses. It is past time for business to start taking politics and political risk much more seriously.
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