Let's end the executive greed debate and focus on growth
Banker-bashing and Euroscepticism might be vote-winners, but only business can rescue Britain as economic clouds gather once again, writes CBI president Sir Roger Carr in the Sunday Telegraph
There is no doubt that 2012 will be a challenging year for all of us. Business is faced with continued uncertainty in Europe and the harsh realities of withdrawal from a debt-fuelled lifestyle are only too clear.
Despite some positive signs of improvement, this recovery is going to be a long haul.
More from the CBI on executive pay
We must still reward success, says Cridland
Profile: Sir Roger Carr
The impact of austerity on societies that have grown up in an age of entitlement is transforming lives through lost jobs, lost income and lost opportunity – aspiration can give way to desperation.
With much of Europe in intensive care, the prognosis may be encouraging but the medication can have devastating side-effects. Writing the prescription is only the beginning. Administering the medicine is our real challenge. The cure must not compromise the recovery of the patient.
The best antidote can only be delivered by a dynamic business community expanding into growth markets, developing new products, generating wealth, creating employment and encouraging those where work and opportunity seem a distant dream.
We have all seen the social symptoms of a depressed economy inflamed by anti-business political rhetoric. The initial, and in some cases justified, attack on bank bonuses is now infecting the public perception of big business – seen as the undesirable led by the untrustworthy.
The corrosive anti-business sentiment feeds the view that all banks are despicable; all energy companies rip you off; all defence firms profiteer; all boardrooms are full of cronies and all in private equity are asset-strippers. In such a world, anyone who earns more than the Prime Minister is overpaid and bonuses go to the greedy and self-serving – never the over-performing.
Facts are ignored, prejudices easily confirmed and the position of business irrevocably weakened. For the unemployed and those struggling on low incomes, it can be an easy message to absorb.
When most people earn less than $2 a day, the fairness of those earning $2 a minute – however able – will always be questioned. But it is a function of markets, not morals.
So, just as football clubs pay millions of pounds for their top talent, and Hollywood pays millions of dollars for its stars, global business pays similar amounts to its top tier.
Increasingly, responsible boards are clear that it is their duty to be both market-aware and socially sensitive when determining performance and remuneration levels today.
Those that fail in their duties deserve neither the support of their peers nor the approval of their shareholders.
Responsible shareholders must be engaged as stewards, empowered as owners and equipped with the tools to facilitate informed, constructive involvement, but not meddling micro-management.
Business recognises the own goals scored by banks, media companies and multi-nationals. Increased self-discipline and proportionate regulation has become a necessary and appropriate outcome.
But sadly the volume of abusive rhetoric – while justified for the few – undermines the many. Damaged businesses run by demoralised managers are not a firm foundation for encouraging vital inward investment.
Mining the seam of popular anti-business feeling may be successful for short-term poll ratings, but risks weakening the industrial wealth-creating foundations on which our whole society depends.
It is time to leave the greed debate and return to the growth agenda.
Our Government is committed to proving that the UK is open for business, with improving corporation tax, a programme of deregulation and an eye to lower personal taxation when the politics and economics permit.
The bedrock of our recovery remains dependent on the commitment of government to its policy of financial rigour – underpinning low interest rates at home and providing a competitive currency edge to assist exports abroad.
In the medium term, success will come from achievements in new markets – in China, South America, Africa and the Far East. This is the responsibility of courageous, energetic management.
In the short term, our uneasy relationship with Europe, recently strained by veto, is the key to our future, as so much of our trade is across the Channel. To heal the recent rift, bridges must be built. This is the responsibility of enlightened politicians.
On occasions, government must take a position in Europe at the risk of collegiate disruption. Above all, we must remain an influential and authoritative insider rather than become a belligerent and distant outsider. Euroscepticism may be a vote-winner in some quarters but European trade is critical to everyone.
More than ever, we need the voice of government and politicians to articulate the merits of free trade, to celebrate business success and support deserved rewards.
The Chancellor’s speech last week was a welcome line in the sand, but we need to see advocates across government, and across political parties, that publicly acknowledge the contribution of private-sector businesses. We employ 24 million people and pay almost £11 billion in wages weekly, providing the financial support for millions of hard-working families. Another £163 billion is paid in tax.
Business also works quietly in the community to train the young unemployed, work with schools and charities and fund the arts. And this is just the tip on the iceberg. The fortunes of small and medium-sized companies are often interlinked with the success of big business via the supply chain.
But business should not rely on supportive politicians and commentators to champion the cause. Business leaders, committed to good governance, known for their achievements and focused on growth and recovery, must be heard more loudly.
As Stephen Hester, pictured above, told his staff at RBS: “Let’s prove them wrong.”
Looking ahead, judicious injections of cash from the Bank of England when needed, falling inflation and the effects of a memorable Diamond Jubilee and Olympics should all help boost recovery and lift the mood of the nation.
Business leaders must capitalise on these opportunities, pursue new markets to deliver growth and good shareholder returns, while at the same time achieving high standards and taking fair rewards.
In parallel, government must complete its review into pay, revitalise its drive on reduced regulations and reinforce the message that growth and job creation are its priorities for business.
In combination, such action will make the prospect of recovery more plausible and the difficult journey more bearable. It will help ensure that Britain is seen as the destination of choice for good business to do good business. But if we in business want to be valued in the communities in which we operate and for the UK to be the destination of choice for the ambitious and talented, we have to lead by example – in what we pay ourselves and how we behave.
We must all play our part in both advocating the case for business and demonstrating by example that doing the right thing is the right thing for business to do.
Greater transparency in reporting, thoughtful judgment in rewarding and wider diversity on boards will help rebuild the reputation of business. Trust and respect – like bonuses – must be earned.
Sir Roger Carr is President of the CBI, chairman of Centrica and senior independent director of the Court of the Bank of England