Trust in business is at an “all-time low” with bankers coming at the “bottom of the league”, according to the thinktank ResPublica. The organisation said “radical policy reform” was needed because of the growing “market for morality” in financial services.
ResPublica is calling for an “improved model of corporate governance and responsibility that ushers in a new era of accountability and transparency”. In a collection of essays titled The Virtue of Enterprise: Responsible business for a new economy, the organisation sets out proposed reforms that are needed to achieve “the economy and society we all want”.
Failing to implement a new “moral framework” for business that commits to producing long-term value will lead to contradicting expectations from consumers and shareholders and result in even lower levels of trust, the think-tank argues.
Phillip Blond, director of ResPublica, said, “There is now a market for morality in financial services and ethics in economic outcomes. Hardly anyone in Britain is proud of British businesses and this is an economic tragedy as well as a damning indictment of current business models.
“If a business does not reform, the state will regulate and regulate again. Ignoring the moral demands of countries for better business practices will lead to businesses being driven from markets and shunned by customers. The market will select morality, it is time business responded to the market.”
One of the suggestions from Dr Shann Turnbull of the International Institute for Self-governance, proposes that corporate entities should become self-regulating, describing this solution as “win-win”. He argues that regulation is not one size fits all and efficient and effective regulation needs to be custom-designed for each corporation.
By including stakeholders in a corporation’s governance, they become co-regulators to take responsibility for protecting and furthering their interest without recourse to laws, regulations, regulators, governance codes, legal actions and civic activism, he says. The model of network governance localises corporate accountability, Turnbull added.
Other recommendations include the concept of stakeholder capitalism, which views employees as a stakeholder and compensates them in recognition of this, and the argument that the government can create a good business culture by leading by example, as opposed to regulation.