U.S. Stocks Erase Losses As Consumer Confidence Increases

Earlier this week, far-reaching proposals for a shake-up of companies were published in Britain. They came not in the election manifesto of the Labour Party but in a report from a group led by a prominent business school professor under the aegis of the British Academy, the U.K.’s national academy for the humanities and social science which has been running its Future of the Corporation program since 2017.

The latest report, Principles for Purposeful Businessbuilds on last year’s initial document, Reforming Business for the 21st Century. Rather than prescribing certain actions, the document from Professor Colin Mayer of the Said Business School, Oxford proposes eight principles for business leaders and policymakers that set out how business might deliver on purpose while accommodating a range of business models, cultures and jurisdictions. The principles are:

  1. Corporate law should put purpose at the heart of the corporation and require directors to state their purposes and demonstrate commitment to them.
  2. Regulation should expect particularly high levels of engagement, loyalty and care on the part of directors of companies to public interests where they perform important public functions.
  3. Ownership should recognize obligations of shareholders and engage them in supporting corporate purposes as well as in their rights to derive financial benefit.
  4. Corporate governance should align managerial interests with companies’ purposes and establish accountability to a range of stakeholders through appropriate board structures. They should determine a set of values necessary to deliver purpose, embedded in their company culture.
  5. Measurement should recognize impacts and investment by companies in their workers, societies and natural assets both within and outside the firm.
  6. Performance should be measured against fulfilment of corporate purposes and profits measured net of the costs of achieving them.
  7. Corporate financing should be of a form and duration that allows companies to fund more engaged and long-term investment in their purposes;
  8. Corporate investment should be made in partnership with private, public and not-for-profit organizations that contribute towards the fulfilment of corporate purposes.

That all sounds fair enough. As the latest report from the Future of the Corporation project acknowledges, “purposeful business has become more mainstream” in the past couple of years. But well thought out and thorough as they are (as you would expect from an academic of Prof Meyer’s standing), the principles will not necessarily bring about the changed approach to business that those involved in setting them out and many others crave.

Just how difficult it is to bring about such fundamental change — even when there is general acceptance that the existing system is not performing as it should — is demonstrated by the experience of Mark Goyder. He founded the London-based think tank Tomorrow’s Company back in 1996, in the wake of the corporate scandals and collapses earlier that decade. Although the organization has received plaudits from many and has paved the way for a redefinition of directors’ duties in the U.K.’s company law and also played parts in such areas as the development of the U.N.’s Principles of Responsible Investment, it remains relatively unknown.

Goyder seems to acknowledge this. In Entrusted: Stewardship for Responsible Wealth Creation, a recently-published book, he and co-author Ong Boon Hwee, chief executive of Stewardship Asia Center, Singapore-based leadership center, write: “We were all supposed to have learnt our lesson after the global financial crisis. There is now an abundance of codes, guidelines and ‘comply or explain’ regimes. More countries have instituted new rules, reporting requirements and auditing standards. Company reports are now much longer and more detailed. But have we achieved anything by doing this?”

As the research papers that support the reports from the British Academy’s reports indicate, a big part of the problem is that — for all the agreement that something needs to change — it is complex and resistant to easy solutions. Goyder and Ong certainly do not see the approach they are advocating — stewardship — as simple. “Stewardship is a systemic concept and its power lies in its ability to help address systemic issues. Wealth creation is a team game. Its best fruits come from the synergistic contribution of entrepreneurs, employees, managers, boards, asset managers and asset owners,” they write. At a recent event in London to promote the book, Goyder explained: “Owners should have a stewardship mentality and stewards should have an ownership mentality. Stewardship needs to be a joint activity between the owners and the managers of the business.”

Inevitably, there is a lot in common between this notion of stewardship and Prof Mayer and co’s principles. Neither advocate is calling for business to be curtailed in the ways being demanded by some politicians. Both see it as playing an essential part in solving many of the problems, from social inequality to climate change, that are currently confronting the world. But both are seeking to help it heal itself and become more centered on meeting human needs.

It is to be hoped that enough business leaders really take note and — most important — do something positive in response to the challenging ideas being put forward because the alternative would be bad news indeed. More than ever, the world needs the energy, inspiration and ingenuity of business — provided it is focused on responsible wealth creation.

[“source=forbes”]