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UK ... Politics
The Guardian ... Will the new British Prime Minister shake up corporate responsibility?
This Wednesday, the UK will have a new Prime Minister - Theresa May - only the second woman ever to hold the role. All the other contenders have now fallen away and the prize will be hers. It is perhaps surprising that she chose executive pay and reforming corporate governance as key facets of her (very brief) leadership bid. What might this mean when she shortly becomes Prime Minister?
Ms May has the reputation as a straight shooter so maybe she meant what she said yesterday: that she wants to emulate some of Germany's corporate governance measures - such as those that place worker representatives and others on the supervisory boards of companies. Frances O'Grady, the leader of the UK's main trade union, came out quickly in support - two women that are not often on the same page. It is no coincidence that CEO pay in Germany - whilst still considerable - does not reach the stratospheric levels seen at large UK companies over recent years. It is much harder for renumeration committees to set salary levels that are up to 300 times higher than those on the factory floor if they have to look these workers in the eye. It sets a new tone of inter-personal accountability: key to restoring the social licence of any business activity.
The recent EU referendum in the UK, and its surprising if not disconcerting outcome, did remind those in power that very many British people feel little or no benefit from the way the economy is run at present. The forces of globalisation are marginalising communities the world over. This is no less true in the UK where large part of the country have still to recover from the economic shifts of the 1970s and 1980s: where education and health can be amongst the worst in Europe, and social aspiration is stymied by a class system that has not really changed in decades. Unlike David Cameron or Boris Johnson - the 'tweedle dum and tweedle dee' of the referendum campaign - Theresa May did not attend an elite private school. In fact, she was born in my home town of Eastbourne and attended a state school (which became a 'comprehensive school' whilst she was there). The UK has never yet had a Prime Minister that attended a Comprehensive School (even in part), and until this week I thought we never would. It is perhaps an irony this this should be a Conservative and not the privately educated Tony Blair, the last Labour Prime Minister.
But is she serious about corporate responsibility? The main evidence for must be the 2015 Modern Day Slavery Act which she oversaw during her six-year run as Home Secretary. I am told that she was personally committed to the supply chain chapter of the Act even though it was not include in the original Bill tabled by the Home Office. This Act now means that thousands of British companies, and countless other foreign companies trading here, need now to fully disclose their supply chain procedures and impacts relating to avoiding forced labour, human trafficking and labour agencies.
But finally a word of caution. During the Referendum Campaign Theresa May promised to remove the UK from the European Convention on Human Rights (EHCR) - despite (or perhaps because) she was backing the 'remain in the EU' side of the argument. This would not fit well with any commitment to reforming corporate responsibility - not least because human rights are now a cornerstone of the most meaningful UN and OECD responsible business standards. It must be hoped that her pronouncements on the EHCR were more a reflection of her frustrations as Home Secretary (Home Secretaries are meant to find it an irritant) or a bit of 'non-straight' shooting to help the 'Remainers' appear tough. We must hope that her commitment of 30 June to have dropped 'Brexit from the ECHR' still stands and that she might come to see the utility of human rights as the basis for corporate responsibility.
John Morrison John Morrison Chief Executive, Institute for Human Rights and Business and author of 'The Social License' (Macmillan, 2014) 56 posts
22h Peter Burgess Founder/CEO at TrueValueMetrics developing Multi Dimension Impact Accounting Some good questions, and from my understanding of the situation some reason for cautious optimism. While the idea of the EU is very good, the practice of the EU is, at best, quite mixed, and with good management it is possible that a post Brexit Europe and a post Brexit Britain and a post Brexit world can be a better place. For a long time I have been a tepid supporter of the ideas of Corporate Social Responsibility (CSR), tepid because the implementation of CSR has often been seen as something to benefit the company and its investors. There is a complex system involving three domains: (1) People; (2) Man-built systems; and (3) Natural systems. This system needs to be managed so that people as a whole are beneficiaries, and the other systems are not degraded. Financial wealth is a part of the man-built system, but often accumulated at the expense of people and the natural systems, neither of which are taken into account in mainstream conventional accounting and financial analysis. I get the feeling that the incoming Prime Minister might understand this a little bit better than the outgoing PM. Ever hopeful ... Peter Burgess truevaluemetrics.org LikeReply2
1d Tobias Webb Founder, Innovation Forum Excellent post John. The key question for me is how international she wants to be in her outlook, particularly when it comes to UK companies and the activities in their overseas supply chains, from human rights safeguarding to climate change and financial and tax transparency . She doesn't have much international experience politically or professionally as far as I know. One might argue I suppose, that the most 'positive' tenet of the Leave campaign ('Let's look to be much more global, beyond the EU') may mean she grasps the advantage many UK-based companies have for fair dealing, human rights defending and sustainable supply chain thinking, and sees the promotion of those ideals, and the progress made to date, as national sustainable advantage, rather than a drag on international business sales or FDI. Recent history suggests it will alas be the latter and there are many concerns about the future UK political climate being ever more laissez-faire on key social and environmental issues as a 'drag on growth'. Let's hope she and all the civil servants we are scrambling to find, who know anything about the world beyond the EU, can understand the long term advantage of sustainable thinking, and encouraging that through UK based and operating companies. LikeReply31
1d John Morrison Chief Executive, Institute for Human Rights and Business and author of 'The Social…
Indeed. I am always the optimist. As you know, I am very much not a Tory but lets see who she appoints in her cabinet... LikeReply
1d Tobias Webb Founder, Innovation Forum
She, or her advisers, may want to re-read and re-invigorate the thinking and mechanisms in this report I co-authored for David Cameron back in 2008: http://fr.slideshare.net/Tobiaswebb/csr-a-light-but-effective-touch-conservative-party-policy-march-2008 (with David Grayson, Dr Peter Davis and others) The 'Responsibility Deals' mechanism we created could be used to tackle so… See more LikeReply1 1d Ian Bretman Board Member at Fairtrade International
It's a very interesting proposal but as always the devil is in the detail. Wider stakeholder representation in corporate governance operates in Germany as part of a their model of dual-level Boards (Supervisory and Management) whereas I would have thought that simply adding worker or consumer 'representatives' to UK Boards as we know them would still leave those Directors with a primary responsibility to shareholders and potential conflict of interest. So this probably has to be part of a wider review of company law and it's encouraging that this will happen at a time when business leaders and investment strategists are recognising the need to tackle inequality and wider sustainability issues. It seems likely that we will see a strengthening of the role of CSR and corporate citizenship in the coming years. LikeReply1
1d ANNA BORGSTRÖM
Director & Head of Safer Society Solutions Interesting post John Morrison! 👍 LikeReply1 3h Tom Rotherham-Winqvist Vice President, Institutonal Investors Roundtable (IIR)
Hey Toby, remember our discussion in the working group about 'the role of governments to empower through transparency those market actors whose interests coincide with public good' ... And whether we could mention trade unions as something the Tories should consider supporting? Changing board composition is interesting but big problems need effective institutions - and society already has one whose role is to protect workers. Would be more interesting to see a progressive Tory vision for the role of trades unions (would also be interesting to see a Labour vision of the same). LikeReply1
1d Volker Soppelsa Founder and Managing Director at Strategies 4 Sustainability - (S4S) LLC
She will be elected by 160k Tory party members who represent 0.03% of the U.K. Voting population and whose average age is 68. Does that answer the question? LikeReply1
1d John Morrison Chief Executive, Institute for Human Rights and Business and author of 'The Social…
Sorry she won't, just 330 MPs. But it still does not answer the question about what she will do on corporate responsibility. LikeReply
22h Peter Augsten Owner at AUGSTEN - Consulting
Hopefully we will soon be moving forward from superficial CSR tactics, to impactful CSA ( accountability ) strategy. We need to see benefits for normal people, not only support for selling ( eternal quantitative growth needs to come to an end ). LikeReply
21h Ronald Animus Sustainability Leader at Animus Sustainability Portal
If the anti-modern slavery act is a measure of her commitment then there is room for more. With the UK having left EU, it means crafting robust ways to help reduce for eg deforestation, use of conflict minerals amongst others. Whether having such domestic laws/commitments would bring wider impacts is subject to whether the EU and other international parties would buy-in or frustrate implementation especially where supply chains run across borders. Just stopping use of conflict minerals alone demand close collaboration, and on the other hand effective implementation of slavery act demand for eg more human resources on the ground something that is not possible given cuts in the force. LikeReply
5h Fred Shortland Chief Exec at Shortland Associates
I very much doubt it ! The establishment will not allow it ! Needs to start with the U.K. Government responsibility !! LikeReply
John Morrison ... Chief Executive, Institute for Human Rights and Business and author of 'The Social License' (Macmillan, 2014)
Published on July 11, 2016
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