Transparency vital to create truly responsible capitalism
The Secretary of State for Business, Innovation and Skills today described government plans to promote transparency in business that will ultimately lead to greater public trust and will help realise his vision of responsible capitalism.
The plans include introducing legislation that will "create a transparent public register of ownership" and promote greater diversity on company boards.
Vince Cable MP told the 2014 Good Deals social investment conference that the debate around responsible capitalism "is not necessarily modern", but has been brought to the forefront of public interest for a number of reasons.
The first of those reasons "was clearly the banking crisis", which he described as "a sort of orgy of greed and incompetence that led to catastrophic results and raised fundamental questions about whether modern financial capitalism actually works at all".
He also cited the "misalignment of executive pay and corporate performance" as a key factor in pushing the responsbile capitalism debate forward and the "gap between short term shareholder interests and long term performance".
One of the problems about being in government is that you’re constantly dealing with incremental, relatively modest changes.
Steve Waygood, chief responsible investment officer at Aviva Investors, asked the Good Deals audience if they knew where their pension is invested. The modest percentage of people who raised their hands illustrated his key point – that there was a lack of responsible ownership and therefore responsible capitalism because there was a lack of demand for it.
"You should be putting pressure on us by using your vote at AGMs effectively to support long term change. You should be putting pressure on us to make sure we’re factoring in environmental and social governance issues when we’re running your money.
"If you care about responsible capitalism, if you care about sustainable capital markets – it’s your money. We need a level of literacy within the system that is significantly higher than it is at the minute so you know how to put pressure on people like us," said Waygood.
Cable described his vision of responsible capitalism as involving "a sense of long-termism" and "a belief in responsibility for the community" within business.
A member of the audience questioned whether these incremental changes in legislation discussed by Cable were actually enough to create a trustworthy, responsible capitalist system or whether more radical action was needed.
"One of the problems about being in government is that you’re constantly dealing with incremental, relatively modest changes where you can get agreement from the rest of government – that’s how the system works. There is a danger in that whole process that you lose sight of the bigger picture.
But these two things were not incompatible, assured the minister. You can still keep the bigger picture "in perspective while advancing in tiny steps – and that’s what I’m trying to do," he said.
The Responsible Capitalism panel discussion at Good Deals 2014 was organised by Responsible 100 – an organisation which promotes transparency within business and is one of the leading researchers into how social, environmental and ethical issues affect business and wider society.
Photo credit: Nik Voigt, Matter&Co