Thank you Guy for that 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 Andersen 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 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 are now consumers in the job market. Those with the right
skills and the right personal attributes can increasingly choose whom
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 work life 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 businesses 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.
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.
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 Work life 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.
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 wins and
maintains 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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