Responsible capitalism: a contradiction in terms?

http://www.ifb.org.uk/ I was an invited guest at the Prime Minister David Cameron’s speech on the market economy where he invoked a wish to see the rise of popular capitalism with a social conscience. His speech followed close on the heels of Vince Cable, Ed Milliband and Nick Clegg, all of whom have been calling for a commitment to responsible capitalism.

Nailing his colours to the capitalist mast the PM acknowledged that the pursuit of enterprise and opportunity are what lies at the heart of a thriving economy, where the most capable are rewarded for success. At the same time he wants to promote an economy where more people have a stake in the success of their business- this could be by way of share ownership, or as being part of a mutual co-operative. Deputy PM Clegg has talked in a similar fashion wanting to support more of a John Lewis style economy with employees participating in ownership.

But are the market and a social conscience compatible bedfellows? The general media frenzy around pay echoes a popular view that big business has tarnished its reputation, driven by unjustified bonuses and pay differentials and excesses that lead to the financial crisis.

Maybe the key to success lies less in whether employees have shares in their employer, but more about how companies are driven by the right set of values, creating great workplaces.

It won’t surprise readers to hear that family businesses are often the winners in terms of employee engagement and commitment - because the best firms stand out for their clarity of purpose and values. Recent research showed that family businesses inspire greater worker loyalty, and feelings of greater job security and inclusivity than all other employers in the public or private sector.

Patient capital - the elephant in the room

http://www.ifb.org.uk/ I was part of a delegation of family business owners that met with Mark Prisk MP, the Business Minister, on Monday, together with other mid-sized business (MSB) leaders for a roundtable discussion on growing the MSB sector. In the recent Government report on MSB firms (turnover £25 - £500M) family businesses accounted for nearly half, (5,000 firms) making them critical to the success of the sector. The report also highlighted the strength of many of these companies as engines for growth, but also the challenges competing with countries such as Germany with its Mittelstand of mid-sized companies.

One of the lesser known values of MSBs is their belief in the benefits of “patient capital”. At the meeting John Cridland, Director-General of the CBI, which has published Future Champions - its own report on MSBs - described the issue of ‘patient capital’ as the elephant in the room. By mobilising this capital the CBI estimates that there is the potential for MSBs to contribute an additional £20bn to the economy by 2020 creating new ‘national champions’.

Critics could argue that a speed-dating culture has emerged in business where short-termism predominates - entrepreneurs start up ventures, grow them and exit at the earliest opportunity. Quoted Plcs have also been accused of taking short-term decisions driven by the stock market’s focus on quarterly results. Short-termism has become embedded in our DNA.

On the other hand the values associated with stewardship and long-termism have been less fashionable. Successful MSB family businesses often embody ‘patient capital’ values supported by stable ownership that prioritises long-term investment, progressive employee relations and a culture of continuous improvement within their businesses. The MSB Growth review is focusing Government’s attention on this vital part of the economy – and family buisnesses will be at the forefront of this drive for growth.