Anthony Hilton: May moves on with bid to be business-friendly

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Back at the time of the Republican Convention, Donald Trump’s latest wife Melania was roundly teased when it was discovered that her speech to the delegates included a substantial chunk of text that was not actually original.

She had lifted it without attribution from a speech given a few years before by Michelle Obama, hardly her political soulmate.

Step forward Prime Minister Theresa May. In her speech at the annual conference of business lobby group the CBI yesterday, she did something similar when she said: “Government can also step up to help drive innovative procurement, particularly from small businesses, just as the United States does so effectively. 

“There, strategic use of government procurement not only spurs innovation in the public sector, it gives new firms a foot in the door. In fact, many of the technologies in your smartphone,  from touchscreens to voice recognition, were originally commissioned  not by Apple or Microsoft but by the US government.”

This idea is lifted not from a speech as such but from a book, The Entrepreneurial State: Debunking Private Vs Public Sector Myths.

It was written by Mariana Mazzucato, who holds a chair in economics and innovation at the Science Policy Research Unit at Sussex University. Her book even has a chapter heading that reads Back to Apple: What Did the US Government Get Back for its Investments?.

Now for the significance. Mazzucato could hardly be described as May’s political soulmate.

I first met her in the early years of the coalition government when she was a key member of the team advising Chuka Umunna, then shadow business secretary on the Labour front bench. 

The ideas she espoused about the role of business in pioneering research that the private sector could pick up and exploit formed a major part of what became Labour’s industrial plan under Umunna. 

But it was not just him — the then science minister David Willetts was also listening, and cited Mazzucato when devising his eight great technologies platform.

They are the same ideas that form the core of the book. Mazzucato has also assisted Jeremy Corbyn  on Labour’s economic advisory committee. 

Mazzucato is absolutely right in debunking the myth that the public sector has no role to play in fostering private enterprise. 

These comments are not intended to criticise the Prime Minister for lifting her ideas or stealing Labour’s clothes although the ideas were ridiculed at the time by David Cameron and George Osborne and their acolytes, — including, of course, May, Philip Hammond and Sajid Javid (who really did not get it).

They said Conservatives don’t believe in industrial policy. My intention is rather to underline how far May has moved.

What’s amusing is that the business lobby does not seem to get it either.

To deflect attention, Downing Street did the usual thing of leaking an irrelevant titbit the morning before — in this case rowing back from its hints about putting workers on company boards — in order to orchestrate headlines about how the Prime Minister wanted to be business-friendly. 

The CBI and others focused on the olive branch and failed to notice that it was the covering for an elephant trap underneath. 

Good for the country, though, if Government can actually follow through and make it work.

Stakeholder idea that could work

The Prime Minister’s statement that her proposals for improvements in corporate governance are not aimed at re-creating mandatory works councils, or about the direct appointment of workers or trade union members to boards, was to be expected. 

It was not something she had promised — her spinners had merely implied it to gullible hacks — and you had to be pretty naïve to believe it was ever likely to happen. That won’t stop the howl of outrage, but it would be better if it was refocused. If the point of the exercise is to remind boards that they have a responsibility to all stakeholders, there are better ways to achieve it. 

Writing in a personal capacity, Charlie Geffen a former senior partner at London law firm Ashurst and now at Gibson, Dunn & Crutcher, came up with one such idea in a recent submission to the Business, Innovation and Skills Committee on Corporate Governance. 

He said the hardest task for any board is to have the confidence to recognise that the interests of the company are not the same as those of their current shareholders. “Shareholders owe no duties to the companies they own — and by their nature are transient owners. They have the power to change the board and sell their shares. Directors are responsible for the long-term interest of the company. This distinction matters.”

Geffen thinks the way forward is to create a stakeholder committee, which could include representatives of employees, customers, suppliers, pension funds, shareholders and other community interest groups — so casting its net much wider than just the employees. Its members could be proposed by the board and elected by shareholders, but the key point is that the committee would have the right to be consulted on major board decisions although it would have no right of veto. 

It would challenge boards but it would also provide them with cover to resist pressure from shareholders who were pushing for short-term results rather than seeking to secure the company’s long-term interests. And, as a committee sitting alongside the board rather than above it, it would  not offend against the principle of  the unitary board to  which the British seem wedded.

Government clearly wants to be seen to do something to reconnect business with the wider community as part of its declared agenda to make business work for everybody. In that context, Geffen’s stakeholder committee could be an idea whose time has come.

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November 23, 2016 |
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