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Business as Usual?

Learnings and ideas on the way we could do business after the COVID-19 crisis.

It’s not unprecedented to say we live in unprecedented times.  Corona Virus means that we do.


The good news however, amongst all the chaos and disruption to our economy and health, is that we also therefore have an unprecedented opportunity to learn, innovate and improve the way we do things: including- perhaps especially- around business.


In many ways these last few weeks have caused us to look inward at the very basics of how we have structured the way we live. The economy has been directly or indirectly central to virtually every public decision made around Corona Virus, I have much pondered on how we have structured it, how fragile it is to shocks and even down to questions like why does business and the institution of the company even exist?  What’s its purpose, is it fit for that purpose and can it be improved?


I landed on the view that companies exist to profitably and sustainably create products and services that improve lives whilst creating wealth and - crucially- a plan of what to do with that wealth to improve more lives. It’s a definition that I’ll use to build up an argument for the need for unprecedented change in the way we view companies and do business. My argument is based in equal amounts on experience of 30 years in business: as an employee, employer, entrepreneur, investor and board director; and of these 10 first unbelievable days of ‘lock down’ as an observer of how the COVID-19 pandemic has pretty much changed everything.


Those 30 years have taught me that business isn’t really primarily about profits and assets; it’s about people: their motivations, values and their mission. Business plans are delivered through building trust, abilities, inspiration and innovation and its the profits and assets that lubricate the machine that delivers the mission and company success. 


Those 30 years have taught me that Milton Freedman, who I studied extensively at university, was wrong with his trickle-down economics and monetarism and that business has responsibilities beyond only to its shareholders’ welfare.


Those 30 years have taught me that the Companies Act is in real need of reform as it sets the purpose of business in the wrong context - simply to maximise profits. And it charges us to measure the wrong things (quantity not quality, short term not long term), rewards the wrong behaviours and often the wrong people.


Those 30 years have taught me that capitalism does bring prosperity, innovation and wealth; but also that the resources it exploits are finite and alarmingly depleting; that where carbon is matters; that consumerism teaches us happiness lies in purchasing; that productivity gains often trump mental wellbeing - and even human rights;  that unregulated markets create risk, increase regional and generational inequality and often lead to monopolies;  and that seemingly most of us have accepted this whole status quo.


In contrast, these last 10 days have taught me that things can change, and change rapidly, and that we can reset norms, we can use evidence and science whilst still taking risk to innovate into the unknown, that companies can act when people demand they act and that the balances of power can be utilised - for the common good - to drive change through. 


These 10 days have taught me that an economy can lose a third of its ‘value’ in that timeframe; meaning that real jobs, security, supply chains, revenue streams and human welfare can be catastrophically turned upside down in an instant  - but also that value is lost as much to practises like shorting and opportunism to ‘bury bad news’ as it is to real sales and job losses.


These 10 days have taught me that innovation can thrive in hard times, with the right focus, support and need.  Car and vacuum cleaner manufacturers can be inspired to innovate to make hospital ventilators, beer companies can make hand sanitizers, taxi companies can become logistics and distribution providers and an exhibition centre can, within a week, become the largest hospital in the world.  But of course, this isn’t the businesses doing this, it’s the amazing people in the businesses, who have been inspired, persuaded or been enlightened to innovate, create and invent through their business. 


These 10 days have taught me that Government (read people in Government) can revolutionise thinking, philosophy and action in that timeframe, and gain trust and confidence with innovative policies and drastic actions.  It can bring society together and create the environment for companies to collaborate and union and business leaders to find common ground quickly.  They can save businesses and save lives with massive macro-economic decisions.  And they have.  They have fundamentally changed the relationship between business and society - in just the first 10 short days - and I’ve learned that they must make sure that now the rules can change, they must change for the long term.


These 10 days have taught me how powerful language is, how carefully we must choose words, and how framing can make all the difference to behaviours.  In the last 10 days cleaners and hospital porters, supermarket cashiers and shelf stackers, warehouse staff and fruit pickers, nursery assistants and white van drivers - each have been transformed from ‘low skilled’ employees - bottom of the pile on the payroll and top of the pile on immigration checks to ‘key worker’ heroes, keeping the rest of us alive.  We now see the people not the job.  We have become more connected and human.  In just 10 unprecedented days.


So, with 30 years and 10 additional days to draw from, what practically do I think should happen next to give the best chance for business and companies to thrive for the benefit of all of society?  Here are 6 suggestions: -

  1. 1. Re-define what business is for, in law. Amend S172 of the Companies Act to recognise business’ equal responsibility to all stakeholders (including the environment and communities) as already exists to profit for shareholders.

There have been so many examples of companies leading and doing this in this current crisis, that it can become the norm.  The B Corporation movement has shown such focused companies thrive - for example in the UK growing 28 times faster (and more sustainably) than non B Corporations (here).  In 2015 I opened the London Stock Exchange arguing for the establishment of a Public Benefit class of company, who in exchange for doing more ‘good’ should pay less tax.  (Reported in The Times here) These 10 days have taught me all companies should really be Public Benefit companies, and that Government has the power and good will to set this fundamental re-frame as soon as we are through the COVID-19 crisis. 

  1. 2. Refine what business reports upon, in law. Move away from the quantity of sales revenue and profitability measure of success, to a more human and sustainable quality of impact measure. 

Companies and their shareholders have been granted by society (through the Companies Act) an incredible benefit of limited liability and now it is the time that society needs to re-balance the ‘deal’ it gets.  In exchange it should demand that all limited liability companies share their policies and actions taken in society’s space and be more publicly transparent and accountable for them. Government should introduce legislation requiring businesses of all sizes, including financial institutions and institutional investors, to disclose and report against ESG (Environmental, Social and Governance) policies and Triple Bottom Line standards. Similar legislation was implemented in 2015 by the French Government. [1]

          1. All businesses would be required to deliver an annual report to Companies House at the same time as it files its financial accounts, measuring:
        2.                 i) Social and environmental performance, against a third party standard
    1.                 ii) Broader social impact e.g. job creation in-work training and treatment of workers, of tax compliance, carbon impact and community support.

James Kirkup of the Social Market Foundation, has also focused on this in their excellent ‘Returning the Favour’ Report published this week (here).

  1. 3. Incentivise long term investment and sustainable growth, through tackling the culture of short-term thinking in investment and business strategy. Current short term thinking, led by both institutional incentives and by market failings, creates volatility in share prices, and encourages a corporate strategy that focuses on immediate financial gain, at the expense of sustainable long term growth. In order to drive behavioural change, and encourage longer-term thinking and financial planning, the Chancellor should introduce:
            1. a) A fiscal policy, common to those in the US, to implement lower rates of Capital Gains Tax if shares are held longer than a year, allowing businesses  to priorities their ‘mission’ and ESG impact.
  1. b) A regime of tiered stamp duty charges on share trading, based on the length of time the stock is held between buying and selling, to dissuade short term shareholding and shorting.
  1. 4. Place more value on those jobs that ensure our society operates smoothly. Before Corona Virus these were often seen as ‘low skilled’ and low paid.  These jobs, be they in the private or public sector, are critical to society functioning.  Business and the public sector need to be persuaded to value them more, through all paying living wages, offering training and career development and recognising added value to their product or service.  Rachel Reeves MP has written extensively about why such recognition and protection is vital for business and society success, including in her pamphlet ‘Everyday Work’ (here).
  1. 5. Support and encourage innovation in the UK for our entrepreneurs, big business leaders, research centres and universities so that they can better collaborate and de-risk short term impact through fiscal and market access incentives, including public funding to build on this country’s existing legacy of superb innovations, discoveries, inventions and patents. The UK already has a world leading position in this with investment schemes like EIS and SEIS, fiscal measures like The Patent Box and programmes like the Knowledge Transfer Partners (KTP) -and the Government should deepen, extend and add to such incentives to build on one of our nation’s genuine competitive advantages.  Engaging universities and business schools are a key to tapping such a seam of opportunity and the Government has recently taken welcome first steps to supercharge opportunities here. 
  1. 6. Invest in people: their skills, aspirations, ideas, welfare - economic, physical and mental. Such as:
  1. a) Refocusing our education system so that skills beyond the academic are taught, focused upon, tested and -crucially- rewarded; such as
        1.         i) Integrating more soft skills into education, including empathy, teamwork, notions of the social impact, citizenship and responsibilities of government. These should be taught, tested and accorded equal weight to academic subjects, achievements and qualifications.
    1.         ii) Integrating notions of social and environmental impact measurement, alongside financial reporting and success measurement into business education.
        1.         iii) Implementing compulsory work experience for 14-16 year olds, that spans a variety of business environments, and
        2.         iv) Encouraging more business-education partnerships and knowledge transfers.
        4. b) Implementing mandated teaching and testing of advanced digital skills in schools.
        6. c) Upgrading the framing of apprenticeships and on-the-job learning so the qualifications have equal meaning, desire and recognition to university degrees.
        8. d) Rewarding companies for investing in learning and development for their employees with legal, fiscal and grant incentives; and
        10. e) Increasing business ownership so that more people are invested (emotionally and financially) in the long term success of the business they build their career with, through employee ownership and share option schemes.

In my 30 years of business experience I have had first-hand knowledge of a system that creates undoubted prosperity and improves lives immeasurably but it also encourages overproduction (44% of the bread baked today will never be eaten - on every level that is crazy), over consumption (40% of London’s children are at an unhealthy weight), concentrates influence that does not necessarily operate in the national interest (think of the data held and used by major digital companies) and fails to recognise the value added by its lowest paid (seasonal fruit pickers and online retail warehouse staff come to mind right now). 


As society we have an unprecedented opportunity to change this failing now, and thereby create better businesses to serve our economy and therefore serve each of us.  Every business could better live, love, learn and leave their legacy if we collectively grab this opportunity and push forward with some of the ideas I have set out as we enter the immediate post Corona Virus era.


[1] In August 2015 France introduced mandatory climate-change-related reporting for institutional investors - reporting obligations are set out under Article 173 of France’s law on ‘energy transition for green growth.