Corporate Social Responsibility in action
DOMINIC LAWSON
the sunday times
Virtue, Carillion could do. Profit, not so much
The firm was big on social responsibility, but forgot what a business is for
The speed with which politicians are distancing themselves from the bankrupt construction firm Carillion might impress Usain Bolt. Ministers are even hinting at the possibility of criminal behaviour on the part of the board (without any evidence that I can discern).
For Jeremy Corbyn, it is enough of a crime that Carillion was the biggest contractor for projects that government “outsourced” to the commercial world. This meshes conveniently with the Labour leader’s Marxist article of faith that the state should buy stuff only from itself and never from the wicked profiteers of the private sector. It’s a mystery how Corbyn thinks the NHS will meet the medical needs of the public without drugs developed and sold by pharmaceutical companies, but he will doubtless enlighten us.
Corbyn’s other problem (rhetorically, at least) is that the proximate cause of Carillion’s disgrace was not that it charged extortionately, but that it had been failing to charge enough. Already suffering from deals going sour, it won tenders for government contracts at unfeasibly low margins, in a desperate bid to generate more cash flow. The victims are not the general public but creditors, who stand to get back almost nothing out of the wreckage.
However, to those who insist there must be a crony-based explanation why government, both national and local, favoured Carillion so much, here is a suggestion: the business was a model for what politicians now demand from such firms. It ticked every box of the corporate social responsibility agenda, and then some. In fact, its chairman, Philip Green (no, not that one) had been a “corporate responsibility adviser” to prime ministers David Cameron and Theresa May.
Go to the company’s website (now a sort of accidental memorial) and you will find the greatest prominence is accorded to its virtuousness, not its profits. There is page after page of its “sustainability strategy”, under the main slogan “Making tomorrow a better place”, subheaded “Better communities”, “Better environment (tackling climate change)” and “Better business”. Underneath that divine triptych, Carillion boasts that it can make “specific contributions to at least nine of the UN sustainable development goals”.
Among its countless declarations, one of the most prominent is about Carillion’s determination to be a force in the battle against “modern slavery”. Doubtless the company was aware this is a cause particularly close to Theresa May’s heart, though I am not so cynical as to allege this was just an attempt to gain the good opinion of the current prime minister: Philip Green is an active CofE communicant, involved in numerous charities, and could easily be sincere. Anyway, in its “Modern Slavery Statement 2017”, his firm wanted the world, and not just Whitehall, to know that: “Carillion condemns slavery in all its forms . . . We have developed and rolled out online and face-to-face mandatory training modules for all of our employees.”
Many argue the government should award more work to smaller businesses, rather than behemoths such as Carillion, but this sort of stuff impresses civil servants beyond measure. Smaller businesses simply don’t have the wherewithal to imitate the general assembly of the UN or the Intergovernmental Panel on Climate Change. Of course, this virtue signalling did not prevent Carillion from signing off on sumptuous pay packets and bonuses for its most senior executives, even when, according to the Financial Times, they “scored zero on key performance targets introduced to instil capital discipline”. And its board (which, also in full accordance with the latest guidance on “best practice”, contained two female non-executive members) recently implemented a measure to strike out corporate failure as a reason to claw back those bonuses.
This is nothing like a scandal of similar scale and consequence as the failure of RBS a decade ago, yet in this respect it reminds me of that shattering fall from corporate grace. RBS was in the vanguard of the “corporate social responsibility” movement, regularly praised by Ethical Performance, the news service “for the global corporate social responsibility audience”. Only three months before RBS collapsed, Ethical Performance noted admiringly how “100% of RBS’s contracted electricity in the UK and Ireland [was] sourced from renewables”. Never mind that the world’s biggest bank loan book was out of control: at least its head office was heated entirely by wind power. And never mind that Carillion had misjudged a whole series of contracts: at least it was firmly opposed to slavery.
In her fateful manifesto for the 2017 general election, which seemed to want to match Mr Corbyn in its horror of the profit motive, Mrs May proposed we should follow German corporate practice and have worker representation on the boards of big companies. Anyone who thinks that a panacea for antisocial business practice should consider the car maker Volkswagen. Half its supervisory board were members of its own workforce, and its interim chairman was the former head of the IG Metall trade union . . . while the firm was illegally manipulating emissions tests, in the biggest corporate scandal of recent history.
The truth is that no amount of corporate “best practice” seminars, nor even the most lavishly staffed HR departments emitting reams of semi-comprehensible politically inspired jargon, have the force of individual conscience. And it doesn’t take special training for managers to know that if they treat employees and customers with respect, the business is much more likely to succeed.
It was another Green — Sir Owen Green — who most impressed me as a business leader. He was on the board of The Spectator when I was editor and he never uttered a word that didn’t make perfect sense to me. He died last year at the age of 92; his obituaries should be read by anyone running a big business today.
A stake of £1,000 in BTR when Sir Owen became that conglomerate’s managing director in 1967 was worth £1m when he retired in 1993. But even when he had turned BTR into the UK’s seventh biggest company, he worked from a dingy office in an unfashionable part of London. He eschewed a lavish pay package (he got an increase of £804 in his final year as chairman) and in retirement lamented the greed of the modern FTSE business chiefs. He never wanted to get close to politicians and even refused to affiliate BTR to the CBI, which he regarded as an establishment talking shop.
I shudder to think what he would have made of Carillion and its “sustainability agenda”. He might have said that the only sustainable businesses are those that can reliably make a profit. That’s something Jeremy Corbyn wouldn’t understand. Sometimes I wonder about the PM too.
Comments
Post a Comment