For most Australians the ability of Australia’s business lobby to continually offer a “tin ear” to the views of average Australians is flabbergasting.
The latest example is the proposal by the Business Council of Australia to levy its members for a pro-business “information” campaign based on Cambridge Analytica style data harvesting.
Not content to continue fighting for tax cuts which some surveys show have as little as 18% public support, the BCA now claims that it is time “to fight back against anti-business rhetoric dominating public debate”.
Unfortunately, this argument fails to appreciate that the so-called anti-business feeling currently at large in the community is not a result of the propaganda of activist groups, but is a direct result of the actions of businesses themselves.
Let’s just look at the roll call of misdeeds brought to the public’s attention in the last six weeks alone.
The revelations out of the financial services Royal Commission, massive fines on our major telco for charging tens of thousands of customers for services they didn’t receive, formerly hushed up revelations about sheep dying on export ships, not to mention Facebook’s various woes.
Yet BCA CEO Jennifer Westacott still seems incredulous that the public at large are distrustful of big business.
But distrust business the public certainly does.
According to the respected Edelman Trust Barometer for 2018 only 45% of Australians trust business to do the right thing. This is a sad commentary on many of those the BCA represents. More importantly it represents a significant danger to the Australian economy.
The good news is that as smart companies are realising, the power to change these numbers lies in the hands of individual companies themselves.
Indeed, the Edelman Survey also showed that 65% of Australians say that “CEOs should take the lead on change rather than waiting for Government to impose it”.
I’m not sure that what they had in mind is CEOs outsourcing to the BCA a propaganda campaign talking about how awesome business is for Australia. In fact if Edelman shows anything it is that the time for talk about what you are going to do is past – the time for action is now.
That’s actually why many businesses of goodwill across the country are grappling with how best to improve the reputation of their companies. They have a genuine commitment to working out why they got so alienated from their customers and are seriously embarking on systemic changes to how they service those customers.
Smart companies have realised that they’ve got a problem and are heavily investing in changes to systems, processes and behaviours to ensure that putting “customers first” is not just rhetoric.
However, actions by individual companies alone may not be enough to restore public trust in Australian business.
That’s because the fault lies as much with the system as it does with individuals within it.
For too long the balance in corporate life has swung towards prioritising the needs of shareholders over other groups of stakeholders.
Indeed, the structural incentives baked into the way our economy currently works actively reward short-term benefits to shareholders at the expense of the wants of customers and employees.
This is exacerbated by the fact senior executives are actively rewarded for meeting these short-term goals ahead of longer term priorities.
As APRA Chair Wayne Byers, has said, such short-term incentive schemes, “encourage actions or attitudes that are contrary to the long-run interests of the company itself”.
There is a strong body of international evidence (not least of course, the GFC) that shows that over recent decades long-term objectives for companies have too often been neglected because of concentration on short-term financial goals.
As the evidence of corporate malfeasance in Australia piles up, it is clear that the phenomenon of short termism not only destroys a firm’s competitiveness it increases systemic risk and reduces the long-term potential of the entire economy.
It is more than ironic that the obsession with short-term earnings results and immediate returns to shareholders at the expense of customers too often results in major shareholder value being lost once the chickens eventually come home to roost.
Yet many companies actively find it hard to break out of this cycle as both investors, analysts and media remain fixated on judging a company’s value based on short term profit results.
The market has clearly failed in this regard so it is high time to look at what interventions might be needed to tilt the balance away from short termism.
We urgently need a proper policy discussion in Australia on issues such as the structure of executive compensation, a tax regime that encourages longer term investment and corporate rules that lead to the empowerment of longer term investors.
Only through such structural change will trust be restored in our major business institutions.
Indeed, if the BCA was really interested in doing things for the common good they’d be actively advocating for changes that reduce short-termism and encouraging their members to clean their own houses, rather than playing the victim of so-called activist groups or taking their members’ money to fund a politically motivated astroturfing campaign.