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Business in the Community Keynote: Patricia Hewitt

Business in the Community Keynote: Patricia Hewitt

Published 07-22-03

Submitted by Business in the Community

LONDON - At Business in the Community’s annual ‘A Better Way of Doing Business’ conference July 10, The Rt Hon Patricia Hewitt MP, Secretary of State for Trade and Industry, gave the following keynote address.

Introduction

It’s a great pleasure to be here this morning, particularly as I have just returned from Baghdad this morning.

It’s exactly a year to the day since I joined you at your 20th anniversary conference. I’m very pleased to be with you again today. And pleased that Stephen Timms is presenting your prestigious awards of excellence tonight.

You’ve called today’s conference “A better way of doing business 2003”.

One of the key themes I’m sure will be emerging is how trust is vital to business success. Customers trust, employee’s trust in the organisation. Trust is declining across society as a whole.

Over the last year or so, we’ve seen our business community under a spotlight following the collapse of Enron, WorldCom and Andersens in the States and the revolt over big rewards for failure in Britain.

We have seen how the actions of a few can damage and sully the reputation of the many. Markets have been shaken. Confidence has been lost. Reputations have been damaged.

This affects everyone in business. The vast majority of whom are running their companies with trust and integrity. Investing their life savings and even putting their homes on the line in order to try to build a business.

The whole issue of corporate reputation is now moving up to the top of the agenda in many of our leading boardrooms.

As Sir John Egan has said recently,

    “Reputation matters. Reputation for reliable performance attracts investors. Reputation for fairness guarantees good industrial relations. Reputation for quality and value for money wins customers.”
There is no doubt that our top business people agree and if you are a top company in Britain you are one of the top in the world.

Take Stephen Harvey from Microsoft - Microsoft is one of the top 3/100 best companies to work for as voted for by their employees. Or Luc Vandevelde from Marks and Spencer – who’s put the spark back into Marks and Sparks.

Stephen, Luc and many of our best business people are speaking over the next couple of days here.

To summarise my point of view I see how successful businesses are putting more and more effort into reaching and understanding their

  • customers;
  • workers;
  • and investors.
Not just because it’s right. But because they know that, in the modern economy, a successful business is a responsible business.

Customers

Customers are becoming more and more demanding. This is a natural consequence of greater competition, technological progress and easier access to information.

We must welcome this. It’s good for the High Street and it’s good for the economy. Driving innovation and productivity.

It’s a huge challenge for all of us.

Businesses need to win hearts as well as minds.

Harley Davison inspires such brand loyalty that their customers get their corporate logo tattooed on their arm! Loyalty is about feelings and emotions rather than a rational response to figures and numbers.

Employees

Employees are now consumers in the job market. Those with the right skills and the right personal attributes can increasingly choose who they are going to work for.

Graduates are coming out of university saying they want to work for a company that puts something back into the community and into the environment. They want an interesting job, good colleagues and a good working environment within a responsible company. A good salary is not top of the list.

Another challenge for business.

Being more socially responsible.

But also delivering worklife balance policies that meet people’s needs. Tackling the fiction that work comes first – a fiction that costs us dear in high stress and low productivity.

So business are changing workplace cultures. Some are finding quite radical solutions. The head of a UK car manufacturer I spoke to recently identified the need for them to become more diverse. 90% of his workforce, he said, are white, middle aged men. But 90% of the job market are not 90% white, middle aged men. And 90% of his customers are not white, middle aged men. He recognised that things had to change.

I know you’re having breakout sessions on diversity and employee impact later today. Let me say, from my perspective, any business or economy that fails to use the talents of all its people is failing.

Investors

The final group I want to refer to is investors – as I mentioned earlier.

Increasingly they are looking at more than the bottom line when choosing where to invest. Voting with their hearts, their minds and their feet.

For business - another challenge.

Role of Government

So, in this modern economy, we all have a stake in promoting more responsible business. And we are all playing our part.

As individuals – challenging conventional thinking. Driving innovation and standards. Exerting our rights as investors; demanding as consumers; saying “we have lives” as employees.

There’s a challenge for NGOs. I don’t need to say this to Business in the Community. With the Corporate Responsibility Index and the work of your Business Impact Review Group – you’re constantly pushing the agenda along.

There’s a challenge for business. Reaching out to customers, employees and investors. Embracing trust and transparency. BITC have been great advocates of this, with initiatives like the Corporate Responsibility Index launched last year. I hope more companies, particularly FTSE 100 companies, will take the challenge of the Index this year.

Finally, there’s a challenge for Government.

Firstly promoting best practice – as we are with the Partnership Fund, the Worklife Balance Fund, our investment in the Community Development Venture Fund.

Secondly, promoting links – between trade associations, NGOs and trade unions.

Thirdly, making sure that the regulatory framework is right.

The Enterprise Act has made our markets the most competitive in the world. The Employment Act has promoted parental choice about work/life balance. We are reinforcing cultural change that is already happening in many companies with legal backing.

And, with my corporate law reforms, we are strengthening investor confidence. Making sure the UK stays a world leader in corporate law and governance.

We didn’t rush in following the Enron and World Corp failures. We took a measured and proportionate approach. The principles based approach we have in the UK and the changes to corporate law in the 1980’s mean that the situation here is quite different to the rules based, box ticking that lead to problems in the USA. We launched two reviews - Derek Higgs’s review on non executive directors, Laura Tyson’s report into boardroom diversity and we have consulted on rewards for failure.

Following these reviews I can announce today that we are drafting a Bill to help restore investor confidence after Enron and WorldCom. This follows our extensive reviews and consultation, and will be introduced as soon as parliamentary time permits.

The Bill will

  • strengthen powers to regulate auditors
  • strengthen powers to investigate companies
  • strengthen auditors’ powers to obtain information from directors, employees and others
  • strengthen requirements for companies to disclose non-audit services they are buying from their auditing company;
  • strengthen the Financial Reporting Review Panel’s role in enforcing accounting requirements.
The Bill will also enable people to form “Community Interest Companies”. A huge development for social enterprises – offering the legal device for combining social good with entrepreneurialism.

Making it easier for more people to set up social enterprises like Blackburn House in Merseyside. Set up 20 years ago by Claire Dove, this technology and education centre for women is helping women get back into work.

In parallel with the legislation, we’re implementing the proposal for a statutory Operating and Financial Review (OFR) – so our largest businesses report fairly and transparently on the factors which affect them. Including their impact on the environment and society where relevant. This will complement the BiTC report that has been published today – “Indicators that count” - and is an excellent example of Government, business and NGOs working in partnership.

Alongside that work we’re still working on the larger proposals of fundamental reform of company law. This is hugely important. We’re committed to doing it and we’re committed to doing it right.

I know some people would like faster progress. But it is better to get it right, than to get it soon. When we legislate it will be clear, coherent, and stand the test of time.

Conclusion

So it all ties together.

Different companies need different solutions and we can all of us – as individuals, business, NGOs and Government – play different roles.

But there’s one common outcome that we all want. Successful and responsible businesses. Businesses that are profitable. That win and maintain the trust of their customers, their employees and their investors.

I’d like to thank Business in the Community for putting these issues on the map. I look forward to continuing to work with you over the coming months as we promote even greater trust and transparency in our business community.

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