Recent announcements of the government’s plan to “tackle the unacceptable face of capitalism” illustrates the main corporate reputation issue facing companies in the UK: that the reputation of corporates has (at least partly) led to an increasingly interventionist government, spurred on by a tiny majority and a Labour Party led by an energised and apparently popular Jeremy Corbyn.
Theresa May wrote, in the Mail on Sunday on 27 August, that:
“Too often in recent years, we have also seen another, unacceptable, face of capitalism. A minority of firms are falling short of the high standards we expect of them. Some have deliberately broken rules that are designed to protect their workers. Others have ignored the concerns of their shareholders by awarding pay rises to bosses that far outstrip the company’s performance.”
The Prime Minister went on to write:
“When I first became Prime Minister, I said that it was vital that we tackled abuses and excess in the boardroom, to restore public confidence in big business. The package of measures we will publish this week will help to do just that. A simple principle runs throughout our proposals: workers and shareholders should have a bigger say and a louder voice in the running of the companies in which they invest their labour and capital.”
Those measures – despite not going as far as Labour and trade unions would like – will include the requirement for hundreds of publicly listed companies to reveal the pay ratio between chief executives and their average UK-based worker, as well as the establishment of a public register of those listed companies with a significant number of shareholders opposed to executive pay packages.
Some of Populus’s polling from late 2016 provides clues as to why the denunciation of businesses appears to be popular as well as why Theresa May has regularly called for a check on “the abuses and excess in the boardroom, to restore public confidence in big business”.
Faced with this kind of public opinion, it is perhaps not surprising that the government – faced with an opposition keen on market intervention and nationalisation – has reacted the way it has.
All political parties across the spectrum are reacting to the signs that a significant proportion of people don’t like the system and are prepared to vote for change, whatever that looks like. If corporates don’t get ahead of the game they could easily become a target.
There may well be a reputation dividend for the company that applies a pay ratio policy, or for increasing transparency, before it is forced to (see, for example, this CEO who cut his pay to enable his company to give employees a pay rise). But it does seem incumbent now for businesses concerned with the government’s direction of travel to come up with firm, clear and easily communicated actions that signal their corporate virtue.
After all, Theresa May’s article ended with the threat that “if we do not see sufficient progress, we reserve the right to take further steps.” Companies can no longer rely on the government’s goodwill to protect them from popular interventionist policies.