IoD Director General speech on the challenges for capitalism
13 March 2013
Speaking yesterday to members of the Chartered Institute of Public Relations (CIPR), Simon Walker, Director General of the Institute of Directors, addressed the crisis of public confidence facing capitalism. He emphasised that most business serve their customers responsibly but criticised ‘excessive’ rewards at some large companies which understandably produce revulsion.
It is not merely a question of presentation, he added. Capitalism’s strength is that it is based on the decisions of millions of consumers, leading companies to create the goods and services that people want at reasonable prices. Business fails society when instead its efforts are focused on manipulating markets for cynical gain. If business is to regain the trust of the public, and avoid misguided intervention from Government, it must eradicate this unacceptable behaviour.
The text of the speech is below:
“We have a constant job to do in the media and in Westminster to combat bad ideas and to promote good public policies intended to create a more beneficial business environment in the UK.
“But it would be irresponsible to think that successfully representing business simply involves a closed conversation between those with legislative power and the business community. Indeed, the biggest challenge for business that this century has offered so far is one of public confidence.
“We all know what a battering the free market, and the principle of for-profit business has come in for in the last few years. There have always been critics of capitalism, and there always will be, but the discontent has clearly spread well beyond the professional anticapitalists in their Occupy tent cities and into the wider population.
“That is a serious cause for concern. The wider population are starting to become concerned, incensed even, by the perceived failings of private business. These are the people who make up our work force, our consumer base and often our investors through their pension funds and other routes.
“Capitalism’s strength is that it is a system based on consent, not compulsion. Every minute of every day the people have the power to reform and refine it by the mass referendums of their purchasing decisions. Every basket of goods at the supermarket checkout is a collection of votes cast for different products, brands and trends. Each day sees new data flow back into companies about what people want and what they don’t want.
“Those voters are now starting to question the system itself. And that is understandable.
“Most companies do the right thing, work hard for decent but not excessive rewards, serve their customers and end the year with sustainable growth in return for a job well done.
“But those are not the firms who are hitting the headlines. At the weekend, we saw reports that 521 members of staff at Barclays and RBS earn more than £1 million a year. Thousands of people in those two companies alone earn more even than the Prime Minister. This is in scandal-hit companies who have had a far from successful year.
“Now I recognise that Anthony Jenkins and Sir David Walker at Barclays are working hard to introduce a new culture in Barclays in particular. And as you can imagine given my job, I’m not a rabid anticapitalist. But even I believe that this state of affairs is unacceptable. Shareholder value has been destroyed, capitalism has been given a bad name, key measures of the market have been manipulated for cynical gains, taxpayers have shelled out billions to bail banks out, and yet vast rewards packages are still being handed out.
“That is why I think it is understandable that many people are concerned about the state of rewards for failure, and the disastrous effects of short-termism in some businesses. Many IoD members are concerned about exactly the same things.
“People outside the communications industry sometimes think that it is possible to spin anything – that the proverbial turd can indeed be polished, if you’ll pardon the metaphor. But sometimes it can’t – sometimes the underlying facts are the problem, and there is nothing that cunning presentation can do about it other than make it worse. Sometimes the best communications advice has to be to change the behaviour that is inviting bad publicity.
“The IoD’s role is to promote good business, not simply defend everything that any business does. To defend the reputations of the millions of businesses who do the right thing, we must call out those who do wrong. To represent good business, we must set right the failings which have allowed some to go bad. Most importantly, to secure the future for a free market, entrepreneurial economy in the UK, we must ensure that there is a voice for good business out there, fighting to improve our economic system.
“If we do not do those things, then the justified public revulsion will end up spilling over into cack-handed and hugely damaging government action. That would devastate good and bad businesses alike, which none of us wants. Just look at the EU’s bonus cap – wrong-headed and counter-productive as it is, the behaviour of some of our banks makes it difficult for anyone to stand at their side to credibly fight against it. They are harming the whole of British business by focusing only on their own short-term self-interest.
“That has to change, and it is the IoD’s responsibility to make the case for reforming capitalism and capitalism’s reward structures in order to make it happen – and to communicate to the public what genuinely good businesses look like. That is key to the delivery of better business in the UK.”
Contacts for further comments or to arrange interviews:
Media Relations Manager
Head of Media Relations
Institute of Directors, 116 Pall Mall, London SW1Y 5ED
+44 (0)20 7451 3263
+44 (0)7764 883 417
Institute of Directors, 116 Pall Mall, London SW1Y 5ED
+44 (0)20 7451 3392
+44 (0)7814 386 243
Notes to editors
- The Institute of Directors (IoD) was founded in 1903 and obtained a Royal Charter in 1906. The IoD is a non-party political organisation with approximately 38,000 members in the United Kingdom and overseas. Membership includes directors from right across the business spectrum – from media to manufacturing, e-business to the public and voluntary sectors. Members include CEOs of large corporations as well as entrepreneurial directors of start-up companies.
- The IoD provides an effective voice to represent the interests of its members to key opinion-formers at the highest levels. These include Government ministers and their shadows, parliamentary committee members, senior civil servants and think-tanks. IoD policies and views are actively promoted to the national, regional and trade media. Follow us on Twitter to get the IoD’s reaction on business and public policy issues.
- The IoD offers a wide range of business services which include business centre facilities, with ten UK centres (three in London, one each in Reading, Birmingham, Cardiff, Manchester, Nottingham, Norwich, Edinburgh, Glasgow and Belfast) and one in Paris, conferences, networking events, virtual offices, issues-led guides and literature, as well as free access to business information and advisory services. The IoD places great emphasis on director development and has established a certified qualification for directors – Chartered Director – as well as running specific board and director-level training and individual career mentoring programmes.