Anthony Hilton: Capitalism is running rings round democracy

The CBI has for some months now been trying to build public trust in business by running a series of challenging debates in association with Sky, and yesterday’s topic was Can Businesses Be Profitable and Responsible?

The well-connected sponsors assembled an impressive panel of Sky chairman Nicholas Ferguson, CBI president Paul Drechsler, Institute of Directors chairman Lady Judge, Mark Price of Waitrose and Matthew Taylor, chief executive of the Royal Society for the Encouragement of Arts, Manufactures and Commerce.

Taylor was head of the Number 10 Policy Unit under Tony Blair and later his chief adviser on strategy.

It made for a stimulating hour during which the general theme for half the panel was that business not only could be profitable and responsible but that it had to be if it wanted to survive.

Employees and potential employees demanded it, customers expected it and shareholders were increasingly reconciled to it, they said.

Taylor and Price suggested all was not always ideal in the best of all possible worlds, with Price pointing out that survey after survey shows business has lousy approval ratings and this country scores appallingly in employee engagement and productivity.

But Taylor made the most telling intervention when he pointed out how technology had given rise to a new breed of companies that really did have huge power over people’s lives and, while generally claiming to want to change the world for the better, they were ruthless at squashing people and things which got in the way of their world vision.

One of the key themes of MP Andrew Tyrie’s time as chairman of the Treasury Select Committee has been his push to bring greater accountability and transparency to the workings of the Bank of England and to modernise its governance.

His reasoning is that, as the Bank exerts huge influence on people’s lives by dint of its remit to set short-term interest rates, at the very least it should be seen to be subject to some sort of democratic control and oversight.

Few would disagree, but why stop at the Bank? Thousands of corporations have influence over our lives to a degree never before encountered, but where there is effectively no mechanism to hold them to account. Shareholders are in theory supposed to do this but in practice they are more often part of the problem than of the solution — and anyway they do not address the democratic deficit.

In politics, we abolished more than 100 years ago the idea that only those with property are allowed to vote. But in the corporate world, you have to be a shareholder.

The key reason business is in trouble, not just in the UK but also across the world, is that the costs of globalisation have fallen on normal people through greatly increased job insecurity and a 20-year squeeze on living standards while the rewards appear to have gone almost entirely to a global business and financial elite.

At the same time, the chances of anyone progressing from the shop floor to join the elite in the boardroom — as used to happen to a hard-working few — have been destroyed by the de-layering technology.

Computers have taken out the ranks of junior and middle management through which they would have risen. People at the bottom can no longer climb the ladder because its middle rungs are missing.

Members of that elite argue cogently against that perception but it is still what a lot of people believe.

In the past, most would accept that business was in general good for society; today, they are more sceptical.

When seen from the coalface, looking up from the shop floor or simply from the outside looking in on the bright lights, it is easy to believe business has been hijacked and its new primary purpose is to reward those at the top.

It does not help either when business treats politicians as its poodles — by threatening to leave the country whenever it loses an argument, by employing and spending a fortune on armies of lobbyists to block or water down any legislation it thinks is against its interests, and most of all by doing everything is can to avoid paying tax in the countries where it should be paying it.

It is unconvincing for business to argue that it is good for society while at the same time ensuring all its profits are booked in tax-free Liechtenstein.

But the real issue is accountability. People see all this but get cynical because they know there is no one likely to bring business back down to earth.

The shareholders won’t do it and the politicians can’t, either because they lack the clout or because they want campaign contributions today and well-paid directorships once they have left office.

Politicians — the current crop in particular — seem too much in awe of businessmen to hold them to account.