So after all the hype following British Prime Minister, David Cameron’s ‘Popular Capitalism’ speech, has a new era for modern capitalism finally arrived in Westminster? Not quite.
After the new Cooperative Bill was announced, Cameron was quizzed about what he intended to do about the ongoing issue regarding excessive executive pay for average performance. We were told to expect an announcement from Business Secretary, Vince Cable.
On Monday last week Vince took the stage, a day earlier than expected, to reveal what was being touted as the biggest shake-up in corporate pay in a decade. Hurrah, thought I! However, one of the key parts of the reform – the move to insist that 75% of voting shareholders would need to agree with the proposed remuneration – was met with widespread scepticism and I’m afraid I was one of the doubters. Sorry Vince, good intentions, but are these actions practical?
I sympathise with Mr. Cable, he honestly believes ‘there’s no magic bullet’. However, he needs only to turn to the cooperative and mutual industry to see examples of best practice. Our members are driven by a long term, transparent outlook based on rewarding responsible behaviour, as well as financial returns. There’s a reason why our members trust us above the plc model – it’s because they know that they are at the heart of every decision we make.
We’re long term commercial strategists and we do not apologise for having a conscience. Quarterly financial results are less important to us than the performance against our three or five year results. Our Boards tend to incentivise executives using a transparent mixture of long and medium-term objectives.
Mutuals and coops are also leading the way by giving more strategic consideration in their Responsible Business activities. We know:
- It matters to our members that we manage our impact properly and report on this.
- It matters whether the Government manages the country’s social impact properly.
- It matters that our regulatory environment is failing to incentivise its top city executives with a mixture of socially responsible, as well as financial Key Performance Indicators (KPIs)
Cameron really could achieve a fairer economy and responsible capitalism. Most companies already produce annual CSR reports, albeit to varying degrees of quality. Why not make it a requirement that these reports are audited to a certain regulatory standard by external organisations?
Given the amount of regulation that is focused on protecting customers this shouldn’t be too difficult. Market forces can continue to dictate executive pay levels while refocusing executives away from purely share price, profitability and short-termism to a more balanced set of targets.
The British Government is undertaking much greater change in many other areas such as education and health. What I’m describing is not a major change from what is currently being done. I am merely calling for the addition of broader regulation.
We are now at least on the road towards capitalist reform. OK so it’s more of a jagged path than a road, but nevertheless it’s heading in the direction of the cooperative model. For now, that is pleasing progress.