Updated: Aug 4, 2022
Originally published in Jericho Chambers
Be not too hasty to trust or admire the teachers of virtue. They discourse like angels but they live like men. – Samuel Johnson
If you choose to get to the end of this ramble, you might prefer to call me a cynic or a realist. Whichever makes you feel better. Reflecting on our discussions at the fantastic online colloquium, I was struck by the challenges posed by the issues we discussed as well as the inherent contradictions that all such difficult issues inevitable surface. The main thrust I tried to pursue in my book was a simple one. The political climate has changed dramatically over the last couple of decades. The nature and tone of political debate has become more heated. Political positions have become more polarized. Previous certainties have gone out of the window – our views on globalization; the primacy of laissez faire neo-liberal ideology; the supposed effectiveness of trickle-down economics; our tolerance of the externalities generated by business activity; the acceptance of the idea that the role of business is exclusively to maximise shareholder value; the perils of financialization; and many other political issues too numerous to list.
The world has changed and those businesses that are to continue to thrive will have to find their own way of adapting to the new and still evolving environment. So far, so relatively uncontroversial – maybe.
The challenging questions are:
How do individual businesses adapt to this changing environment and over what period of time?
If the role of business is to extend beyond the maximization of shareholder value, what is a reasonable and realistic span for that expanded role?
Does ‘stakeholder capitalism’ have any real meaning given that, in effect, every single person, group and institution can be considered a stakeholder in what business does?
Hence my preference for ‘political capitalism’ over ‘stakeholder capitalism’. The term political capitalism recognises that politics is how we collectively (and inevitably very messily and imperfectly) find ways forward in pluralist societies where multiple and conflicting views, interests and moral perspectives exist – and, indeed, are to be encouraged.
The idea that business can somehow please all its stakeholders is for the birds. Being political, on the other hand, is “the ability to turn impossible demands (in given circumstances) into possible substitutes.”
I posit that people and institutions act primarily in their own self-interest. How they define such self-interest varies.
It may be looked at over the short term or over a longer term (how long is a reasonable long-term outlook given that the longer the time horizon the greater the uncertainty – especially in a volatile world?). Or, more usually, some balance between short- and long-term interests.
Some may define self-interest narrowly as being personal. Others may define selfinterest as being broader to include some definition of societal interest – always being humble enough to bear in mind that, in a democracy, views of what constitutes ‘a good society’ will always be contested. One person’s vision of utopia is another’s vision of Hell.
If one accepts the primacy of self-interest – however broadly defined, then a reasonable starting point is that business should act in its own self-interest and, some would argue, that self-interest includes having reasonably well-functioning democracies, well-structured, functioning markets, a planet in which we can actually live and conduct commerce, a level of trust within our societies that does not make the cost of doing business astronomically high, behaviours that are commensurate with the spirit of the times rather than being reactionary or going against the grain, and so forth.
This approach may be more realistic and more resonant with many than moralizing stances that business has a moral duty to defend our democracies and to do this, that and the other. To which some will respond that business leaders’ job is to run their business and the job of ‘defending democracy’ is a job for us all as citizens and for the political leaders that we have chosen to elect. And/or that it is foolish to swing from one silly end of the pendulum (business should only focus on maximizing profit) to the other, just as silly, end (business has the responsibility for sorting everything in our lives). This is the danger of other buzzwords like Corporate Social Responsibility.
Of course, it all also depends on the time horizon over which one wishes to engage as well as the perceived likelihood of having a meaningful impact relative to the resources required.
To do and/or to speak out
Another discussion emerged.
Is the role of business leaders to focus on running their business given all that is outlined above?
Or do they legitimately have a role in using their position and the resources they can mobilise to speak out publicly on political issues?
When we examine the substance of this debate, we again find many difficulties and contradictions. And, some would argue, quite a bit of hypocrisy.
Just some provocative examples:
During the Brexit debate many businesses refused to take a stance on the basis that it is not their role to get involved in political issues. Yet, most businesses seemed to have no hesitancy whatsoever in speaking out publicly on other political issues – the minimum wage, the rate of corporate tax, financial regulation in the City, employment laws, and, today, the proposed energy Windfall Tax. Maybe more believable were those businesses who said explicitly that they did not wish to get involved in that heated and polarizing debate for fear of alienating half their customer base – self-interest.
When businesses claim that it is not their role to get involved in political debate, how does that square with the masses of funds spend on lobbying to influence the political system, their large political contributions, and so forth? The cynic would argue that this simply shows that business would rather influence politics in the shadows than do so openly and publicly.
Neither do those contradictions emerge only from one side. Here is a short extract from the book: “When corporations took a stand against the new, more restrictive voter eligibility law in the US state of Georgia, Senate minority leader Mitch McConnell claimed that it was ‘stupid’ for companies to jump into controversial political issues such as the Georgia voting law.‘If I were running a major corporation, I’d stay out of politics,’ McConnell reportedly said. Of course, what we all know he really meant is that businesses should avoid taking political positions that are counter to his own. I suspect he would have welcomed wholehearted support for his own policies as he has for many decades. …McConnell also reportedly clarified that when he said that corporations should keep out of politics, he did not mean that they should stop making campaign contributions. Make what you will of that combination of statements.”
A number of activists and NGOs are now pressuring companies to speak out on their particular issue – be it climate, abortion laws, LGBT rights, whatever. Yet these are often the very activists and NGOs that, ‘in the interests of democracy’ have spent years complaining about the power of money in politics, about the large amounts of funding poured into conservative think tanks, and so on. Neither are these activists, in the interests of pluralistic democratic debate, encouraging businesses and the wealthy of all political colours to take a public stand. Just those who might support their own political position.
I guess, rather than conclusions, these sorts of discussions end up raising more questions:
How will different businesses adapt to the highly polarized political environment and the shattering of previously held ‘truths’?
Do we want to encourage businesses to focus on running their business in ways that capture the spirit of the times and see their contribution as being limited to how they choose to run their businesses in line with the spirit of the times?
What is the role of business in influencing political debate? None? Through lobbying in the shadows? To speak out publicly on political issues?
If the last, do we want to be encouraging them to be activist, take sides and do battle – possibly thereby contributing to more polarisation? Or do we want to encourage them to be political, help take the heat out of the current polarization, and attempt to find viable ways forward in a divided world? Do they realistically have the skills and capabilities to do that, and might they be willing to devote the time and resources given all the pressures they are under?
When we say that we want business to contribute to democracy what do we mean? Do we mean that they should support our own particular view of what democracy should look like? Or should we be encouraging a pluralistic debate where we also encourage those who have views that are fundamentally different to ours?
As always, there are no easy answers.
Dr Joe Zammit-Lucia 20 May 2022
Dr Joe Zammit-Lucia is the author of “The New Political Capitalism: How businesses and societies can thrive in a deeply politicised world.” He is co-Founder of Radix and a Trustee of Radix Big Tent. He has had a career in multinational business and as an entrepreneur before turning his attention to political and policy issues. His interest is in the nexus between business and politics. He advises business leaders on leadership in contemporary culture.