Ed Miliband has announced himself in favour of good business. I am delighted he has. So am I. It's astonishing that some are saying that by declaring himself against spivs, chancers, asset strippers, speculators and tax avoiders he is somehow anti-business. Far from it: he's declared himself very pro-business precisely because it is these people who are any-business.
But being anti-something is not good enough. Being pro-good business is what is required and that requires a clear understanding of just what a good business might be. I'm not seeking to offer a definitive guide here, but take these as examples. A good business:
1) Makes clear who it is so people know who they are dealing with
2) Makes clear who runs it
3) Makes clear who owns it
4) Makes clear the rules by which it is managed
5) Puts its accounts on public record if it enjoys limited liability, and does so wherever it is incorporated whether required to by law or not
6) Seeks to comply with all regulation that applies to it
7) Seeks to pay the right amount of tax due on the profits it makes in the place where they are really earned and at the time they really arise
8 ) Seeks to pay a living wage or more to all who work for it
9) Recognises trade union rights
10) Operates a fair pay policy so that the pay differential between highest and lowest paid in the company cannot exceed an agreed ratio that should never exceed twenty
11) Makes fair pension provision for all employees
12) Does not discriminate between employees on the basis of race, nationality, national origin, gender, sexual orientation, age, disability and similar such issues
13) Does not abuse the environment
14) Has a clear code of ethics that it publishes and is seen to uphold
15) Is transparent in its dealings with customers
16) Seeks at all times to minimise risk to those it deals with and takes all steps to ensure they know what those risks are
17) Accepts responsibility for its failings and remedies them
18) Works in partnership with its suppliers and does not abuse them
19) Advertises responsibly
20) Creates and supplies products meeting real human need
I could readily add to that list, which I do not think I have tried to prepare before. But the gist is obvious.
So what would this look like in practice, meaning how could this status be assessed? This was a question I was asked by a councillor last night who wanted to put good ethics into practice in his council's procurement policies.
I hope that the assessment criteria for the above should be clear in most cases with the exception perhaps if the fact that this list clearly implies the need for country by country reporting to explain:
- What it is called where it operates meaning it must name each subsidiary and specify where it operates
- Its profit and loss in each country and jurisdiction in which it operates
- How much tax is pays on the profits it earns in each jurisdiction
- What its internal trading is so that its transactions within its internal supply chains can be identified
- How many people it employs in each jurisdiction that operates in and how much it pays them in aggregate plus their pension cost
- How much it has invested in tangible assets and working capital in each jurisdiction on which it works.
Only then is the data to assess whether it is a good corporate citizen available for assessment.
The final part in this equation is suggesting an assessment criteria for what is a good company. In some cases this will, again, be obvious from the suggestions made. For example, it might be expected that a company either recognises a union or it does not. However things are rarely that simple. Different subsidiaries in different countries may or may not recognise unions so composite scores are possible.
Other indicators can be prepared using this data. For example explainable and unexplainable presence in tax havens becomes an issue when the number of subsidiaries in such places are known. The proportion of trade through or assets in such places also becomes significant assessment criteria if country by country accounting data is available. The likelihood of tax compliance can also be assessed properly when country by country reporting data is available.
'So what?' might then be the question. What would be the point of all this? Well when things are measured behaviour changes, we know that. But more significantly the government is a major purchaser from many companies. If its procurement policy was based on the requirement that a company meet a minimum standard or no contract could be issued then this becomes a very powerful tool indeed, and those criteria need not be consistent. So, for example, in the case of PFI offshore might simply be a non-starter.
The point though is this: we can identify good companies and the introduction of country by country reporting would make the whole task a lot easier.
What this means is simply this: reform to our currently unacceptable corporate culture is possible. All it takes is political will and we can do it.
Is that will available? That's the question.
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Are you suggesting the establishment of a government ministry of ‘Good Business’,reinforced by legislation to incorporate your wish list,plus a new special court to adjudicate and enforce?
I’m suggesting no contracts for those who can’t comply, at least over a certain size
That makes the onus self policing
To stop the red tape whingers, could you list a “Top 5”?
Who decides ‘no contracts for those that can’t comply’?The UK is a democracy with a legal framework,isn’t it?
I think you will find that someone is called parliament
1) If you are talking about public sector procurement, I think you mean Europe, not the UK Parliament which doesn’t have much say in it any more.
2) Some of these issues (e.g. environmental practices, targeted recruitment & training, etc) are already being addressed with some success (especially around apprenticeships). However, there is legal debate on how far, say, your local authority can go in asking questions in the procurement process not directly relevant to the goods or services being purchased.
3) Any set of questions in a public contract must be capable of being broadly answered by any applicant across Europe. And their answers must be treated as equivalent. So an apprentice scheme in Slovakia must (all things being equal) be given the same marks as one in Norfolk. Otherwise your process is open to challenge on the grounds of being unfair, discriminatory and not providing ‘equal treatment’.
And if you want, say, applicants to be able to certify being a good employer, tax citizen (or whatever – and you would need a certification system – public authorities could not physically check each one independently), you would need comparable certification across every EU country. Good luck with that!
As a question, what do you mean in item 20 ‘Creates and supplies products meeting real human need’. Do you mean ‘wants’, or something different?
Kind regards
First, the French are doing things like this
They do discriminate on the basis of tax haven usage, for example without legal difficulty
Second, re 20 – I mean needs – very different from wants
The French? What have they got to do with it?
Challenges to UK public procurements go through British courts, not the French ones. And telling a British court that ‘this is what the French do’ is unlikely to cut much mustard. If the British court enforces the treaty obligations and overturns your procurement process, that’s it.
Needs v wants? Big can of worms and where do I start. Who decides what a need is? Beer, TV, board games, cars, ice cream and hats would all seem out — we can live without them so are probably not ‘real needs’. Point 20 suggests you don’t want any of these things supplied.
Are you on record as saying that?
I am quite sure that there are grey areas between needs and wants
But no one needs SUVs, cars costing more than £20,000, designer handbags, most expensive clothes, many electronic goods (especially when churned as often as they are), drinking to excess, a great dedal of the foods on offer in many stores that are positively harmful to health and much more
Advertising induces these purchases
And the sole aim of most advertising is to spread dissatisfaction
When Gerald Ratner called his products ‘crap’ consumers voted and his business died. When Arthur Anderson went on a shredder-fest, their brand was trashed and they died. Two very different example, and very different customer basis… but the principle is that companies who don’t conform to the standards desired of them by their customers will fail.
The popular narrative is that the big banks ruined the economy. It’s obviously more complex than that, but for this purpose we can run with it. Has there been a mass migration of current and savings accounts away from the big banks over to the remaining mutuals and the Co-Op?
No. Why? Because whilst people are happy to moan about the banks, they’re not bothered enough to fill in a few forms.
There have been significantly weighty boycotts of Nike and Nestle due to poor corporate responsibility. But did the vast majority of people give a monkeys? No. But, of course, the actions taken did lead to one or two positive changes.
So here’s my issue. Forget arguing about the definition of a good company, or how we sort one from the other… why should the government get to decide this when the electorate, it appears, don’t really care? And on the odd occasion that they do, they take their own action and get results proportional to their collective actions.
Maybe I missed it, but I’ve not seen the stories about the non-NOTW News International titles taking a hit, I’ve not heard about thousands of people cancelling their Sky subscriptions.
It’s fairly well known that Tesco like to exploit their suppliers and contribute to killing high-streets.. but they have been rewarded for being better at it than everyone else by the great British public, not penalised. I was in town on Monday and the Topshop and Vodafone stores seemed to be bustling away nicely.
I struggle with the idea that politicians and regulators should get to decide who’s naughty and who’s nice, when the people who give them their mandate have more than enough information to make informed decisions themselves, and have the power to really hurt companies they disapprove of, but choose to carry on shopping.
The standards you expect are all well and good. I’m with you on most of them. I will reward those companies I approve of with my custom, and I’ll penalise those I don’t by avoiding them. I don’t need a complex and dangerous regulatory regime to help me out.. and I see no evidence at all that there’s a substantive public desire for such a structure.
Well in beg to differ
But I also agree we are early in the process
Lee T
I think your examples actually demonstrate the opposite. Faced with greedy & corrupt MPs the public were able to take action. Faced with greedy & corrupt businesses the public are completely unable to take action. All of them seem as bad as each other & the only result of changing your bank is a big £25 penalty charge. So what’s to do ?
I`m not quite sure whether you mean all this has a regulatory basis,or is just a code of conduct-and does it just refer to making Government business deals,or commerce in general? I think I foresee plenty of work for the legal profession anyway!
I’m seeing it as a procurement package right now….but maybe more
As for lawyers – generally not the most useful people
William
What action did the public take over greedy and corrupt MP’s? Ah yes, we made a bit of a fuss and then re-elected almost all of them. Well done us!
In terms of companies there is almost always an alternative. There are plenty of places one can bank to avoid giving business to those casino types. Most people just don’t really care enough to do it (though a commentator below says that the Co-Op have seen some influx.. he doesn’t say how big, but it’s good that some people have taken action.. we need more of that!)
Of course, sometimes we really are stuck with either no choice at all, or no real choice. Well, in those instances, what difference would it make if the government put an extra tax on the ‘bad’ companies? Given that, by your admission, we don’t have the option to switch to a better one.. well I think I can see who’s actually going to bear the burden of said tax!
On the Co-Op bank question: in the year to July 2009 (spanning the original credit crunch), they put on over 10% growth in current accounts (http://www.ft.com/cms/s/0/09d03af6-9e2b-11de-b0aa-00144feabdc0.html#axzz1ZG8LB4jZ) They have continued to report growth and increased evidence of deliberate switching from the big banks. Some would put this down to service standards and ethical practices, but I am sure many of these new customers are attracted to the mutual model as a clear alternative to the big banks. And I’m sure deposits will have gone up a lot as well, as people look for a relatively safe haven for their savings.
Just applied for another account with them myself…..
UnionSteve.. Thanks for that. Whilst I’m quite comfortable that my point stands (we’re still talking about drops in the ocean here) I’m glad that the Co-Op has seen notable growth.. and I have no doubt that dissatisfaction with the big banks is a key factor. As a reward for their action, these people can now look forward to banking with someone who, in my experience, is streets ahead of most of the opposition when it comes to customer service.
If I was of a UKUncut mindset, instead of turning my local branch of Barclays into an impromptu knitting club, I’d stand outside it handing out account switching forms. That might actually piss them off!
First, the fact is that the Co-Op Bank HAS experienced an influx of current account customer. But on the main point, in addition to procurement levers, how about designing a scale of tax breaks available to firms who meet the various criteria? I’d include provision of apprenticeships in the list as well.
I like the apprenticeships idea
And the tax one too
Will muse on them…
I have suggested something not wholly dissimilar in the past that might be adaptable
What an excellent idea. Maybe UK Uncut will suddenly find themselves sponsored by the Co-Op Bank!
You better stand for parliament,then,to discover whether or not your myriad of views carry sufficient weight with the electorate of any part of the UK.Dare you!
But which party?
but why stand with a party? Parliament does not require you to have a party, and there are examples of independents around.
Only on special issues
And not with much history of success!
hmmm, perhaps you should take ghandi as your inspiration.
It is about time that the tide is turned and challenges are raised to current flawed assumptions about how businesses are run – and indeed chellenge the current foolish perception of what a good environment for business is.
For a good business environment is not about slashing red tape or making workers lives less bearable, it is about ensuring prosperous and stable markets to sell into, strong supplies of well trained, motivated and well paid labour, a banking sector which supports rather than rips off.
You don’t need a ministry for this, which is about the sum total of the feeble responses to Miliband’s rhetoric thus far. You just need to change the hue of the national conversation away from all that cobblers which supports supply side nonsense in most anglo-saxon economies, towards something much more realistic and grounded in real human experience.
Standing for parliament may not be the way forward.
The Labour Party already has a considerable number of members who agree with many of your ideas yet little progress is being made.
By continuing to publicise your views both in and out of Westminster eventually the Labour Party AND the electorate will understand that for them (and the world) to survive requires international agreement to dismantle the global network of nefarious tax havens — so that EVERYONE is fairly taxed and able to access and share, evenly and equally, the benefits and amenities realized by taxation.
Then you may wish to be the Secretary of State for Impartial Taxation
Your own!
OK – I hadn’t expected that response
Make me a cross bencher in the Lords then!
Umm, where would the bidding cost apply in your ranking of who should get a Government contract? OK if I am thoroughly ethical but my company’s bid is ten times as much as my less ethical competitor, I can see the decision would not be too hard, but what if I am just say 20% more than his company? Yet another set of rules maybe?
There would be an entry requirement to bid
Don’t meet standard – no chance
It sounds an excellent idea to me. Maybe Vince Cable could be convinced.
I suppose the company return to Companies House could include some attestation of which items in the list are complied with.
[…] Richard Murphy at Tax Research UK says it is quite easy to identify what makes a responsbile company. He produces a 20-point […]
name one car manufacturer that dosent make a car costing more than £20k………… the government would never be able to buy another car again !
RM – your list reads like you want to turn the UK to communism where we must all wear the same “inexpensive” clothes and presumably sing the national anthem every morning.
im glad you are not in a position of power………. my prius cost more than £20k, so i must go and exchange it for a cheaper second hand car which will do more damage to the environment………doh
I am saying that the choices some make exclude most from choice
And that many of these choices aren’t choices we’d make unless driven by advertising
So what I’m actually promoting is liberty – the freedom to choose unimpeded
I’m not saying such things should be banned
I am saying their true cost should be paid by those who buy them
That’s very different indeed
An interesting comment from Ricahrd Holway (one of the most respected independent analysts on the UK IT industy):
http://www.techmarketview.com/ukhotviews/archive/entrylevel-it-jobs-in-the-uk
“Yesterday’s Leader’s speech by Ed Milliband talked of punishing ‘predators’ and helping ‘producers’. Autonomy’s (or is that HP’s?) Mike Lynch on the Radio 4 Today programme this morning described this as ‘motherhood and apple pie’. Even senior Labour people described the policy as ‘vague’.
But one point really did resonate with me. Milliband suggested that ‘companies that secure Government contracts will be required to offer apprenticeships to young people’. This is something I have been banging on about, to Government, Intellect, the industry and, indeed, anyone willing to listen to me, for several years now.
A year back we ran a quick survey of about 20 of the top IT services players to the UK market. Nothing very scientific although they were roughly in proportion — UK-owned, Global-owned (US, French, Japan) and the Indian players — to the overall revenues from the UK market. We found that UK-owned and HQed IT services companies provided the highest number of IT entry jobs in the UK proportionate to their UK:global revenues. Global (non Indian players) created 26,000 entry level jobs worldwide of which 1100 were in the UK. If they had recruited proportionate to their UK:Global revenues they should have recruited 3000 here. But the Indian players provided the starkest picture. Out of the 24,000 entry level jobs they created just 6 were in the UK whereas if they had recruited proportionate to their UK:Global revenues they should have recruited 3200 here.
When I suggested that the creation of IT entry level jobs in the UK should be used as one of the criteria in the awarding of government contracts (and why not private sector too?) I was told that this was ‘impossible’ and would break all kinds of EU and other conventions.
I wrote last week in Top Marks for new IT schools curriculum of my joy at the possibly of ditching the current awful IT courses in schools in favour of teaching software development skills. Let’s assume that is successful and we get more youngsters interested in entering the IT sector. That will be useless unless there are the entry level jobs for them and for those that go onto take Computer Sciences degrees.
Anything that might redress the quite appalling job prospects for anyone trying to enter the IT industry in the UK should be examined closely. Maybe one policy the Coalition should adopt too?”
Excellent commentary
Thanks