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Is the 'Good Company' Possible in a Not So Good System?

13/06/2014 12:50 | Updated 11 August 2014

Following the global banking crisis, and the consequential recession and pressure on public expenditure as well as a series of business failures and scandals, it is perhaps understandable that public confidence in the business sector is not strong.

However, the reality is that there are many businesses in this and other countries that are striving to be successful, both commercially and socially. There are many companies that are ethical; which strive to be responsive and contribute to local, national and even international communities; and are determined to be positive 'corporate citizens'.

Tom Levitt in his new book, "Welcome to GoodCo - using the tools of business to create public good" has identified some these companies, commends others to follow, and makes some practical recommendations on what businesses should do in order that they may be regarded as 'Good Companies'.

Of course, it could be said that Tom Levitt is being naïve to assume that businesses can be 'good' or that their owners and leaders would wish to be 'good', and sadly, there is much evidence, which suggests this may be the case. How far can individual companies change for the 'good' in a global, profit-driven capitalist system? There will inevitably be barriers and limits. However, many have and are trying to do so, which is where this book comes into its own.

As with his previous book, "Partners for Good", Tom Levitt has written a very erudite and persuasive contribution to contemporary public/business policy and practice. He builds on his earlier and correct thesis that social and economic success requires a strong civil society, responsible businesses, and an effective and active democratic state.

In this new book he uses case studies well to support his argument - though at times, some - but not all - of these give a sense of being a little like the script from the particular company's marketing department. A slightly more critical analysis and evaluation of some of the claims would undoubtedly have added rigour and value to the book and for the reader.

And inevitably, I did wonder at the wisdom of the inclusion of Serco as a good example of a socially-minded business after the recent allegations of fraud and poor performance. Tom Levitt appears to be sympathetic to the company's defence and makes the point that the public service contracts in question are a small part of the firm's overall business. I have heard former senior Serco executives be rather more questioning about the culture and performance of the company. However, it would be wrong to dwell too long on Serco alone; as much as it would be to ignore the failings of the public sector that procured and woefully inadequately managed some of its contracts.

"Welcome to GoodCo" suggests various ways in which a company can be 'good' - and, ideally, such companies will be able to demonstrate a combination of these attributes. They include:

  • being exemplar employers, paying decent salaries and wages, having a reasonable ratio of the lowest to the highest remuneration (with staff on the remuneration committee), practicing active staff engagement, etc.
  • being active in the local community, supporting local community groups and charities - financially and in kind - and participating in local social and economic initiatives such as having a progressive apprenticeship scheme, offering good work experience to school students; etc.
  • being good corporate citizens by paying rather than avoiding taxation - and being clear that some form of Corporate Social Responsibility is no substitute for paying taxes and recognising that every company benefits from publicly funded services and infrastructure
  • partnering with charities and social enterprises to deliver public services on a contractual basis with the public sector where organisations from the two sectors bring complementary skills, expertise and credibility to solve a problem or meet a social need (though I suspect that many charities would not always agree with Tom Levitt about the impact of the Work Programme, even if, as he says, some prime-contractors such as Serco have been more generous to their supply chain than others)
  • encouraging and facilitating employee volunteering and seeing this as part of their people talent strategies
  • adopting environmentally sustainable practices
  • having responsible and ethical supply chain policies and management based on the above

Rightly, in my view, Tom Levitt appears to be a little cynical of those companies that place Corporate Social Responsibility (CSR) not at the Board table but in the marketing or corporate affairs department. To mean anything, CSR has to be based on the issues highlighted above, and not on some photo-opportunity, cheque ceremony.

Interestingly, whilst recognising the differences in ability and resources between large companies and SMEs, it is encouraging to note that Tom Levitt argues that a 'Good Company' can be large such as Unilever or a small locally-based business, albeit on a different scale.

And many large companies can and do support SMEs and smaller social enterprises, and can foster their growth. This is surely a good example of being a 'Good Company'.

In the same vein, SMEs can support local community groups and often do. They often find that they have more in common than they may imagine. For example, in Merton (south London), the local Chamber of Commerce and Council for Voluntary Service have established joint training on subjects such as HR management and business planning, appointed joint staff, and found many common agendas. I have visited Merton to see this partnership in action and it works very well to mutual advantage.

Of course, companies have specific duties to shareholders and owners to maximise sustainable profits. I emphasise 'sustainable' because short termism is of little advantage to anyone. They have to be convinced that being a 'Good Company' in the ways being described here has a business benefit. Tom Levitt argues, supported by quotes from senior business leaders, that this is in fact the case.

There are both self-interest' and altruistic motivations for companies adopting progressive approaches. However, given that some companies seem to want to pay zero or next to no tax whilst running major community and educational programmes, it would seem that there may have to be some external pressure through carefully designed regulation and/or customer activism in order to move such companies in the right direction. Given that many quoted companies are owned by the state (in the case of the banks) and by pension funds as well as individuals, there is surely scope for some shareholder pressure too!

Regulation may well include issues relating to: employment practices; treating customers fairly; measuring social impact when reporting on financial performance; being transparent about investment, remuneration and supply chain practices; and more. And such regulation might well encourage more companies to the 'Good', and help to restore public confidence in the wealth creating businesses of this and other countries.

No one should expect companies to become social enterprises unless they wish to do so. And one should be very suspicious of any company that claims to be a 'social business' unless it can verifiably prove that it is, although the more that can do so the better. Perhaps there is a case for an independently auditable certification?

And there is a powerful case for arguing for more employee ownership and control of businesses, although on its own, this does not make a business a 'Good Company', any more than becoming a charity would. Actions, behaviours and impact rather than form are what count.

Unfettered and unregulated markets do not aid business, consumers or citizens, and Tom Levitt is very strong on this. What is required is the right regulation regime, and in the final pages of his book, Tom Levitt proposes ten 'urgent demands' of the business community and governments.

Ultimately, it is fair to ask the question - how many 'Good Companies' can be encouraged to develop and thrive in a not so good economic system? Accordingly, it seems to me that we need 'system change' as well as individual company good practice.

Tom once was a legislator in the UK Parliament. It would be fantastic if a future Government and EU Commission were to use his ten 'demands' and the wider book as the basis for the reform of the UK and EU business regulation, to contribute to a more socially responsive and responsible capitalism. And it would be even more fantastic if every business leader were to read to the book and take the argument, case studies and 'demands' as a strategy for moving their companies towards being 'Good'!

Welcome to Goodco is published by Gower June 2014