Gareth's Blog

All of a sudden corporate social responsibility has been thrust into the UK political spotlight. The three major party leaders have spent the last few months jostling for pole position, and business secretary Vince Cable has this week published proposals for more transparency on executive pay which is probably the hottest of the current hot potatoes.

Now in the interests of transparency, I should make it clear I'm a Liberal Democrat party member and councillor, but I try to keep this blog free from party politics. So I'm not going to critique the different party records on this - if you want an good objective assessment, try this piece by Allegra Stratton in the Guardian. I will reflect instead on the opportunities and threats posed by the current emphasis on this issue.

Overall, this debate can only be a good thing - the whole point of our democratic system is for the opposition to keep snapping at the heels of Government and keep them on their toes, so competition for who's making the boldest calls is welcome. Previously politicians have shown far too much obeisance to big business, especially those who employ large numbers of people in unemployment blackspots, but now we have a great opportunity to make some movement in the right direction. Also, the debate itself can lead to cultural change. If the zeitgeist is that excessive pay is evil, then those setting pay levels will think twice before continuing with business as usual.

However, there are a number of threats. Firstly that political point scoring can lead to a focus on issues which are easily translated into newspaper headlines rather than getting to the underlying (and relatively dull) issue. For example, there's been much debate over a putative bonus for one bank chief, when the nub of the problem is the more technocratic issue of linking reward to performance.

Secondly, crafty politicians and political journalists like to try and undermine good proposals using an extreme exception to the rule. OK, the ill-fated Lehman Brothers bank was sort of a co-operative, but evidence shows that co-operatives on average are more responsible than other business structures, so we shouldn't let that one bad apple spoil the barrel.

Thirdly, getting regulation right is difficult. There is a massive risk of unintended consequences with major changes, and fear of getting egg on their faces often drives politicians to be conservative (with a small 'c'!) in their ambition. This fear is exacerbated by the fragility of the economy. Therefore change is more likely to be incremental than revolutionary.

Of course, the best solution is for business to voluntarily embrace true corporate social responsibility. This means going beyond a few handouts and embracing values like fairness, equity, transparency, respect and co-operation. That view might seem naive to some, but there is a stack of evidence that more ethical businesses do better financially than their bottom-line fixated equivalents. The new maxim is "doing well by doing good" and business would do well to adopt it so they can come up with solutions which work for them, rather than being bent into uncomfortable positions by politicians.

If they don't act, they can't complain if CSR is forced upon them.

Photo credits: Creative Commons Licences: David Cameron and Nick Clegg photos are from the World Economic Forum, Ed Miliband from Mandate for Change