This is a speech I gave at the Institute of Directors in London, 2007
Nine Propositions that constitute an inclusive approach
Let me begin by making nine common-sense propositions which I believe, say most of what needs to be said about the relationship between purpose and values, and the prosperity of business. They are, not surprisingly, a restatement of the inclusive approach of Tomorrow’s Company. But having made them, and challenged the other speakers to identify the statements with which they disagree, I want to go out on more dangerous ground, and link two topical news stories – the shortcomings of the Hampel Committee’s Interim Report, and the debate about journalistic intrusion.
Six Propositions
1) Business is subordinate to society.(Licence to operate)
2) Every business is different (Uniqueness)
3) Businesses are started by individuals (Entrepreneurs)
4) Motives vary but profit or dividend for entrepreneur /shareholder is rarely dominant (The fallacy of Homo economicus )
5) Sustainable shareholder value creation depends more than ever on inspiring loyalty, creativity and trust in and
learning and feedback from all key relationships.
(Business is about leadership through relationships) .
6) Companies cannot inspire these responses without generating a clear, pervasive, and enduring sense of the purpose and values of the whole organisation (Purpose and values are the basis of leadership)
Three Conclusions (the case for the inclusive approach)
7)Each business will make its own choices, but a business which fails to include all key relationships in its definition and measurement of success (its success model) misses opportunities
incurs undue risk and thereby puts itself at a competitive disadvantage
8) Alongside business skills and strategy, purpose and values are central to the creation of shareholder value.
9) This holds for individual companies and for the business community as a whole whose freedom of action depends on the level of public confidence (Licence to operate)
I offer these nine propositions to this seminar as a logical statement of the importance of purpose and values to business.
So often people imagine they can “park” values somewhere round the back of the organisation, well away from its engine room. Let me illustrate how wrong they are by linking two topical concerns – journalistic intrusion, and the recent Hampel Committee Report.
My worry about the Hampel Committee’s Interim Report is that it appears to ignore the pendulum effect. It wants to do away with the box ticking without saying anything to business about the confidence-building, and the leadership by example.
I would like Sir Ronald Hampel in his Final Report to conclude with a clear appeal to business. I would like it to say.
“Few businesses are greedy or grasping, but by the actions of a minority and the silence of a majority of companies, they risk being tarred with that brush. Help us to withstand the intervention that will otherwise follow. Stand up and be counted. Say clearly why you are in business, and who benefits. Explain why you pay your top people and your lowest paid people what you do pay them. Be more open to criticism and show that you know that no company is perfect. Have more of a dialogue with your stakeholders. Practise what you preach. That way we will all earn the freedom from bureaucracy that we desperately need.”
Now let me turn to the tragic events of the last few days and apply some of this to a practical case. Following the death of Princess Diana, and the speech by Earl Spencer at her funeral, it has become clear how ruthlessly and cruelly she, and other public figures have been hunted.
How have we allowed this to happen? The paparazzi were suppliers, deliberately and consciously used and encouraged by their ultimate customers, the newspaper proprietors. The editors knew what they were doing: but they argued, they had no choice: their proprietors wanted more sales and these brutal techniques were good for profits. They were only obeying orders, either from their bosses or from their readers.
Practical solutions have yet to be found around the framing of privacy laws – although public feeling is now so strong that such interference is possible. The newspapers have gone a long way towards the destruction of their licence to operate, something that takes decades or centuries to build.
The link with the Hampel Committee is simply this: the long history of invasion and intrusion could not have happened unless there had been a major failure of governance by the boards of these newspaper companies. Few I guess of the executive or non-executive directors of the tabloid press would now defend the brutal intrusiveness their newspaper imposed o people like the Princess of Wales. How many of the non-executives challenged the intrusion at board meetings. How many of them insisted that the executives set out and monitored the code of values by which they intended to abide? How many of them resigned and drew public attention to the amorality of these companies? I would be interested to know.
Governance is too often assumed to be exclusively about (financial) audit committee, and remuneration committees, and accountability to shareholders. Governance is
about these things, but it is also about values, and no board member should allow him or herself to get into a position where they are sanctioning corporately behaviour which they privately deplore.
Of course it is hard to fight these evils singly. That’s where the ethical code, not just of a company, but of a whole profession is important. Journalism, like medicine, has a massive impact upon human wellbeing. Unlike medicine, it has no widely respected Hippocratic oath by which to guide the behaviour of its members.
What if there were a Royal College of Journalists – or its international equivalent – which defined such a code, and granted honour and recognition to those journalists which upheld it, and withdrew the same from those who ignored it.
What if the newspaper proprietors were then challenged by the public, and, if necessary, by their regulator, to commit themselves never to put pressure on an editor who acted against the code. We would all have something to judge them by: we could see if they were practising what they preached. No press baron would be compelled to make the commitment, but at least those who failed to do so would be making a public choice to make themselves the ethical rump, and in due course they would expose their publications to the risk of the withdrawal of immunities and privileges enjoyed by their more professional competitors. (See my letter to the Financial Times 6 September 1997)
As I am speaking to the Institute of Directors, let me end with a challenge to its Director General and Council. How many of the directors of intrusive tabloid newspapers are members of the IOD. Is there any code of behaviour against which their action or inaction might be compared? Is it likely, as part of the admirable Hub initiative upon which the IOD is now embarked, that future IOD members will be asked to subscribe to a clear professional and ethical code?
We have a living issue of purpose and values in our midst: I welcome this seminar as an opportunity to raise these issues, and show how central are values to everything we do – our ability to work for companies we can be proud of and really believe in, and, through that our continued ability to create wealth with the wholehearted encouragement of the wider public which all wealth creation serves.