Menu
Fri, 29 March 2024

Newsletter sign-up

Subscribe now
The House Live All
Communities
Mission possible: Delivering tomorrow’s homes today Partner content
Economy
Data: driving the UK’s growth and productivity Partner content
Economy
Economy
Economy
Press releases

Lord Hodgson: If the corporate sector is to regain public trust, it needs to do more within wider society

4 min read

Ahead of his debate on Thursday about balance between rights and responsibilities in the corporate sector, Lord Hodgson of Astley Abbotts writes for PoliticsHome urging the corporate sector to do act.


The background to my debate on the balance of rights and responsibilities for the corporate sector arises because for some time I have been aware of increasing public concern about various aspects of corporate behaviour.  Now the issue has burst into the forefront of public consciousness.  The two seminal events of the last six months – the UK decision to leave the EU and the US decision to elect Donald Trump – were fuelled in part by the rage of a large section of the population who felt that our economic system was not delivering enough and that where it was delivering the rewards were not being fairly shared.  In short a great many people did not feel empowered.

And now the Government has reacted to this by producing a Green Paper on possible changes to our system of corporate governance.

So how does the balance look?  As for rights, business needs an established system of law – particularly company law – evenhandedly enforced.  It needs an administration – local or national – which will deal with it fairly and will provide a stable framework within which business decisions – many of which inevitably are long term – can be taken and implemented.

And this Government has served business pretty well.  Only in the last category – providing a stable framework – has it, in my view, fallen short.  And that is because of the rapid turnover of Ministers.  Not only are they often not there long enough to master all the complexities but every new Secretary of State wants to make his or her mark.  That can all too often mean unnecessary jerks on the tiller of the ship of state.

But what of responsibilities?

Too many companies appear to show little interest in their private shareholders; increasingly these have to hold their shares through nominees.  And too many nominees do not (or cannot be bothered) to send on information to the underlying shareholder who consequently receives no information about financial results or AGM’s.  Companies could, and should, intervene to change this democratic deficit.

Instead they have concentrated on their institutional shareholder base.  The historic short term oriented stewardship of the latter has been well documented.

And then there is the issue of increasing pay differentials and rising executive pay.  I have served in the past as Chairman of the Remuneration Committee of a Stock Exchange listed company so I know at first-hand what a difficult topic this is.  But there is a problem and the sector needs to get ahead of the curve and come forward with its own proposals.  The current position of merely criticising every proposal brought forward does it no favours.

Finally, if the corporate sector is to regain public trust and confidence it needs to do more – and be seen to do more – within wider society.  This means looking at recruitment policies as a means of improving the economic prospects of our settled population.  It means helping the charity and voluntary sector – not just with money – but with skilled expertise.  It perhaps could be a badge of honour for every executive, especially the rising stars, to have spent some time in a voluntary endeavour.  I am sure they would learn a lot from it.

Our current liberal, democratic, capitalist system is under challenge.  Of course politicians have to set the strategy but business cannot afford to stand aside saying ‘nothing to do with us’.  The corporate sector has a duty to show the wider population the relevance, value and rewards of the system which guarantees their own continuing existence.

 

Klara Kozlov of Charities Aid Foundation, responded to Lord Hodgson, saying: "To improve perceptions of corporate giving, it is vital that businesses work even harder to be transparent, and regularly report on how they fulfil their charitable commitments and deploy their assets to deliver sustained social change." Read the full response here

PoliticsHome Newsletters

Get the inside track on what MPs and Peers are talking about. Sign up to The House's morning email for the latest insight and reaction from Parliamentarians, policy-makers and organisations.

Categories

Economy
Podcast
Engineering a Better World

The Engineering a Better World podcast series from The House magazine and the IET is back for series two! New host Jonn Elledge discusses with parliamentarians and industry experts how technology and engineering can provide policy solutions to our changing world.

NEW SERIES - Listen now