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The “unacceptable face of capitalism” leads Theresa May down the interventionist path

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”.

 

  • Just 18% of the UK public had a positive view of “big business” and 15% had a positive view of “multinational corporations”, compared with 48% who felt positively about “SMEs” and 67% who felt positively towards “family-owned firms”.
  • Only 17% said they felt they had a good understanding of how big businesses operated, while 35% said they had no idea how big businesses operated and they felt like they existed in a different world.
  • 51% of the public said businesses put attracting investors as one of their main priorities, when just 13% said it should be one their main priorities. Conversely, 28% of the public said businesses currently put operating in an honest and transparent manner as one of their main priorities when 56% said it should be one their main priorities, and 36% of the public said businesses put creating and protecting jobs as one of their main priorities when 58% said it should be one their main priorities.
  • 68% supported compulsory worker representation on the boards of businesses in the UK with more than 500 employees, and 67% supported a maximum wage meaning no employee or manager can earn more than 10 times the average wage of staff.

 

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.


Owen Thomas

Owen Thomas is an Associate Director at Populus managing a wide variety of stakeholder, political and reputation research projects that aim to equip clients with a better understanding of the issues that matter most to them and their stakeholders. He is a key member of the Reputation & Strategy team who has developed his expertise overseeing qualitative workshops and consultations, examining the reputation of some of the UK’s largest companies among political stakeholders and conducting extensive research into senior opinion-formers’ attitudes towards the post-crash economy.

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