The reputation of big business has not recovered from the crash of 2008 at the same pace as their balance sheets. Big business and bad business remain largely synonymous in the public imagination. Once-celebrated forces of globalisation and technology are now political and social anathema, blamed for destroying more jobs than they create. And workers feel they’re failing to move ahead at the same time that a tiny boss-class appears to be accumulating vast wealth for themselves. In the US some CEOs now earn over 340 times more than the average employee.
In the prevailing social climate, the biggest companies today are coming to terms with the fact they’re not just huge financial entities; they’re also social and political entities –and they offer an easy point of leverage for the populist instinct to seek out and scapegoat concentrations of power and influence
To a growing majority, the whole capitalist system seems like a stitch up. Now voters are prepared to act. It’s often said that history is written by those who turn up. The momentous upheavals we saw last year are the effects of a traditionally politically inactive segment of society now motivated to turn out.
Those they’ve elected must in turn deliver. That expectation, combined with the populist instinct, threatens to cast corporations as society’s antagonist. It’s a sticky narrative that’s gaining momentum: from Theresa May’s opening swipes at UK business to Donald Trump’s regular attacks on some of America’s largest corporations – Apple, Boeing, Carrier, Amazon, and Ford among them.
Eyes on four “i”s
Four big flash points are likely to gain ground in 2017. Defining and divisive issues, each embodies parts of the populist, anti-business narrative, which threaten to frame and inflame conflict between business and society in 2017. Big businesses must demonstrate they’re part of the solution rather than part of the problem.
Inequality presents itself in different ways. Big business is drawing heat on four fronts: growing income gaps between CEOs and the average worker; pay differentials between women and men; the concentration of wealth in metropolitan centres that has left regional areas behind; “obsoleting” low skilled employment through technology and outsourcing to cheaper markets.
The dynamics driving inequality are bigger than big business but companies are being held to account. Theresa May has promised to force U.K. companies to publish the ratio between CEO and average worker, a disclosure that US companies will be compelled to adhere to from the 1st January. Last month, Portland, Oregan, became the first city to use the data to introduce an incremental tax surcharge for companies with a ratio exceeding 1:100.
Such measures will highlight key challenges, but are unlikely to solve them. The prudent corporate will want to determine where they’re exposed, where in their core business and broader value chain they have opportunities and perceived responsibilities to act, and where there’s a strategic and defensive case to demonstrate a serious-minded contribution to the problem.
History shows that political security underpins economic security and social stability. Today, only a quarter of workers worldwide now have a “stable employment relationship,”according to the International Labour Organization. At the same time, half a billion people in 25 of the west’s richest countries experienced flat or falling pay packets in the last decade. Corporations – by driving globalisation, relocating low skilled jobs, and replacing workers with robots – are seen as fuelling instability.
The question is: given the inevitability of globalisation, how can global businesses help? And what kind of future can they offer to low-skilled workers in the age of the algorithm?
Some potential answers are beginning to bubble up out of the tech sector, where workers skilled in the old economy are most at risk. AT&T for example has made significant progress on ambitious plans to help its 280,000-strong workforce to retool for the time of big data. Meanwhile, recognising that there won’t only be more tech jobs in the future but “all jobs will require some aspect of tech”, BT’s CEO Gavin Pattersonhas set a long-term plan to help the UK build a culture of tech literacy – starting with the next generation. Both are efforts designed to create a future-facing workforce equipped to harness technological change, rather than become “obsoleted” by it.
For populism to take root, says the Harvard historian Niall Ferguson, people have to start believing that the political establishment and its relationship with business is no longer clean, and likely corrupt. The proportion of US adults ‘very dissatisfied’ with how much influence that major corporationshave has practically doubled in the past 16 years, from 17% to 32%. Even fiercer scrutiny of dealings between big business and government is likely to follow.
There are some issues where business has begun to play a constructive role. Private sector consensus has been pivotal on climate change, for example. However, to rebuild society’s trust in business, business must lean into society more determinately. Not seek to withdraw – or submerge – in order to minimise censure. That would be disastrous for global issues such as climate change where, and it would only deepen suspicion of corporates as shadowy, narrowly self-interested, faceless entities. Instead, businesses need to become more not less socially engaged in the issues that affect their customers, employees, and the communities in which they operate. That’s how they will build trust and strengthen their freedom to operate: as leaders in society and advocates for positive change.
The new brand of populist politics has given voice and vocabulary to genuine divisions in society – and in some cases added to them. It has anchored long-term, complex, macro trends in the political topographies of the U.S’s ”rust belt” and the post-industrial regions of the Midlands and northern England. It has named and humanised the groups these abstract factors affect: they are the “left behind”, “the forgotten”, “the just about managing.” Because in the end, Brexit and Trump didn’t come down to policies. It came down to the complex commingling of issues of identity, economic realities, and the perceived indifference of the elites. That’s why the reach and symbolism of these results transcends political norms.
Navigating these social, economic and political fissures will force companies to look hard at their own identities: not just what they do, but who they really are, why what they do matters in the world today, what they stand for, and where they’re heading. With the spotlight on issues affecting employees the clarity of that picture internally as well as externally could prove decisive.
A new contract with the world
All this requires corporations to integrate a business-in-the-economy perspective with an evolving business-in-society perspective, as GE’s former General Council advised chief executives. But ultimately, changing the optics is only the beginning: as entities which are inextricably financial, social and political in nature, big businesses must find radical newways to act in common cause with those on the front-line and sharp-edge of rapid change.