Responsible companies will be the winners in the post-Brexit era, argues Jo Swinson
Government is often criticised for moving at a snail-like pace. Not this summer. The speed of politics has been breathtaking: from Cameron’s resignation to the Game of Thrones-esque Conservative leadership race, then the installation of a new prime minister and government with ruthless efficiency the Labour party can only dream of.
As the dust settles and the long process of negotiations begins, Brexit has shown us a country divided. Anyone viewing this as solely a political matter is missing a dimension.
For sure, the Brexit vote stuck two fingers up to the political establishment, channeling anger and frustration from the Welsh valleys to the Wash, from the urban North to the rural South. But it is also symptomatic of a wider disconnect between those with power and those without.
The traditional British traits of deference and automatic respect for authority belong to a bygone age: public trust in institutions has been fracturing for years. The MPs’ expenses scandal, revelations of media phone hacking and the financial crash have hastened and deepened the mistrust of the elites wielding power.
Rebuilding reputations takes time: uttering a few contrite words then returning to the way it’s always been done won’t cut it. Business as usual is not an option.
A few weeks before the referendum I was chatting with a senior executive at a business dinner. He was bemoaning the pension changes introduced by George Osborne, which capped the lifetime tax relief allowance at £1m. This, he complained, was going to cost him £36,000 a year. I pointed out that he was in an incredibly fortunate position: the sum he was losing was a small proportion of his earnings, but more than the total income for the majority of people in this country – and the government was freezing the tax credits many rely on as they struggle to pay the bills.
In that context, justifying generous pension tax relief for ultra-high earners is impossible. Yet most high earners don’t think of themselves that way, believing they are in the “squeezed middle”. Try it yourself on the IFS website to see just where your income places you – you’ll probably be surprised. Then consider the plush and pristine central London corporate HQ buildings, meticulously kept shiny and spotless, and imagine how the workers who clean them make ends meet on £7.20 an hour.
Business acting more responsibly is part of the answer to the division in society. This was crystallised here in the UK with the Brexit vote, but is also evident in many other countries. Leaders need to tackle the thorny issue of executive pay, with CEO remuneration mushrooming to 183 times the average pay for workers, often regardless of company performance. Tax is not just a cost to be avoided, it’s the rent we all pay for living in a civilised society, and that applies to business as much as to individuals.
When the Government is wading through the treacle of many years of complex trade negotiations and unpicking the thousands of EU regulations that are interwoven through UK law, there are simply fewer hours of civil service and ministerial brain time available to focus on the other challenges our country faces.
Businesses can harness ingenuity and innovation to meet the challenge of climate change, and conduct their operations in such a way that improves and adds value to their local communities. Of course government must continue to deliver for society, but the contribution made by responsible corporate behaviour is more important than ever.
This is recognised by our new prime minister. Theresa May made reforming capitalism a key theme of her truncated leadership campaign and has returned to the “industrial strategy” put in place during Vince Cable’s tenure as business secretary. She has promised a crackdown on irresponsible corporate behaviour, with new regulations to increase transparency, curb executive pay and secure representation for workers and customers in corporate governance. When a right-wing Conservative appoints a minister for corporate responsibility, business needs to take the hint.
Companies at the vanguard will reap rewards, with goodwill and a positive reputation attracting the best talent and more customers. The laggards will ultimately be dragged towards more responsible behaviour by regulation, or be forced to change by new entrants disrupting the market. The powers that be – both political and corporate – need to reshape the economy so the benefits of globalisation are widely shared and understood. If they fail, then the Brexit shock is only the start of a volatile future.
Jo Swinson is a former business minister (2012-15), Liberal Democrat MP, and is now director of Equal Power Consulting. @joswinson