Last week, the Federal Reserve put up interest rates by a quarter of a percentage point for the first time since the financial crisis, signalling its belief that the US economy is finally on the road to recovery. Looking back over the last seven years, one thing stands out: the extent to which it has been taxpayers, rather than the banking industry, who have absorbed the pain of the crisis is remarkable.
This has remained a constant theme in relation to corporate malpractice. Since 2008, plenty of other examples have emerged of companies deliberately engaging in illegal or unethical practice at the expense of consumers and taxpayers. Further scandals, such as Libor rigging, have engulfed the banking industry. This year, VW was found to be illegally cheating emissions tests in the US. In the last month, Sports Direct has faced serious allegations about mistreatment of staff. The manufacturer of Nurofen was exposed selling identical pills marketed for different types of pain at different prices. Multinationals such as Starbucks, Amazon and Facebook engage in corporate tax avoidance: Facebook last year paid £4,327 in corporation tax despite a global profit of £1.9bn.
Other sectors are far from immune from illegal and unethical practice: in recent years, politics, charities and sports have also been beset by scandals. But it is notable that the worst abusers of the MP expenses system ended up in jail; when unethical charity fundraising practices were uncovered, charities backed tough new rules that were quickly put in place; athletes are regularly banned from their sports.
In contrast, companies seem to get away with being treated far more leniently when they break the law. Company executives are rarely held liable. The fines corporate lawbreakers have faced pale in comparison to the profits to be made by flouting the law. Some firms see fines as a cost of doing business rather than a punitive disincentive.
Large companies also have extensive lobbying operations to ensure laws are drawn up in their favour in the first place. We often – complacently – think of big money as an affliction of American politics. Yet we are not immune: Brussels and the UK have the second and third largest lobbying industries in the world after Washington DC. Car industry lobbying in Europe has been so effective that the European emissions testing regime is significantly weaker than in the US. New revelations about the extent of Google’s lobbying – it got members of Congress to whom it had made political donations to lobby members of the European parliament on its behalf – suggest the practice is becoming more sophisticated.
Some business leaders might make a distinction between those companies following board-sanctioned strategies to make money based on unethical practice, and those businesses in which a small group of individuals break the law, which top executives claim to have no knowledge of, as in the case of VW. But company leaderships are just as implicated in the latter as the former. Global corporates employ masses of people: there will always be some within who don’t see a problem with flouting the law. The question is whether a company has a zero-tolerance culture that roots them out, or a permissive approach to rule breaking that allows this practice to spread across a company. The buck for this must stop with the board.
Government, businesses and consumers should all be doing more to challenge bad behaviour. Government needs to create a stronger regulatory system that focuses on firm cultures and promoting the consumer interest rather than compliance with a specific set of rules, in which loopholes can always be found. There have been some positive developments, with tougher regimes introduced in finance and energy: energy regulator Ofgem now has the power to ban companies from proactively marketing. But there remain many uncompetitive markets without a strong, consumer-focused regulator. And a government-commissioned report has found huge cuts to trading standards departments, which bear much of the responsibility for clamping down on illegal practices and scams, have significantly weakened their ability to police illegal business behaviour.
Government can also do much more to reform corporation tax to prevent avoidance, for example by taxing companies a proportion of their global profits based on UK sales. It should promote international tax transparency, which would require all large companies to report profits and taxes paid in all countries in which they trade, and should take greater steps against the use of tax havens, many of which are British crown dependencies.
But in order to take tougher action, government needs to do more to insulate itself against the influence of corporate power: greater transparency for lobbyists and tighter restrictions on political donations. Yet in contrast to its aggressive restrictions on trade union funding, the Conservative government has shown far less appetite for restricting corporate donations.
Businesses themselves must play a greater role in calling each other to account. While the business community condemns companies that have broken the law in the immediate aftermath of a scandal, when people outside the business community try to provoke a longer-term debate, its response has been to close ranks around the response that businesses collectively create jobs and growth, as if this puts the whole business community beyond criticism. This is a poor defence: we need to see companies leading the debate about how to reduce bad corporate behaviour.
Consumers are not blameless: many of us want to buy cheap goods from businesses such as Sports Direct and Amazon without facing up to the consequences. But if consumers are going to play a greater role in holding businesses to account, they need better information. For example, the European parliament has called for a fair tax kitemark so consumers and governments can make better decisions about who to buy from. Investor power is also important: the NGO ShareAction has played an important role in improving business behaviour, for example getting companies to pay the living wage, by raising the issue at company AGMs.
It is a handful of bad companies that persist in making money by breaking the law or engaging in unethical behaviour at the expense of consumers, taxpayers and employees. But it remains too easy for them to get away with it and their behaviour tarnishes the whole private sector. All of us – government, the private sector and consumers – have a responsibility to do a better job of holding them to account.
0 nhận xét:
Đăng nhận xét