In a recent Radio 4 programme Lord Digby Jones argued that it would be useful if there were a covenant between business, society and government to address the lack of trust between these organisations. “The relationship between business creating wealth, government and society—all of us—is broken”, he said.

My understanding of a covenant is that it is an undertaking between parties to do, or not do, certain things. I am not sure how an undertaking to do anything in particular could be obtained from “society”, but let that pass.

The covenant is:

Business creates the wealth on which the nation depends.  The government commits to supporting business through providing an environment in which it can flourish, including infrastructure and an educated workforce.

Business, in turn, commits to society through investment, job creation, fair treatment of its workforce, customers, suppliers and shareholders and through the payment of taxes.

Through its deeds, business will establish, enhance and promote the existence of quality social capital in the communities of our nation as well as the economic capital that only it can develop.

If I may say, I felt there were two large omissions in Lord Jones’s argument.

Firstly, many people use money as a simulacrum of something else which they feel, or felt, is missing from their lives.  The business and financially minded of them use business and finance to aggregate large amounts of wealth almost invariably at the expense of other people. Warren Buffett is only the grotesque apotheosis of this phenomenon.  At his peak, he possessed $64,000,000,000 and was the 25th richest person in the world since the beginning of time.

JP Morgan asserted that the most senior in a business should receive no more than twenty times that received by the least well paid.  I understand that, currently, for FTSE companies, the average of this ratio is over 150:1.

The drive to accumulate money by individuals in a position to do so, and able to use their companies as their weapons of choice, is unstoppable in the absence of rock solid resistance from politicians acting in concert; something which hasn’t materialised in the UK since the second world war (if then).

Secondly, as the lawyer Joel Bakan argues in his book The corporation, “The corporation’s legally defined mandate is to pursue, relentlessly and without exception, its own self interest, regardless of the often harmful consequences it might cause to others.  As a result, I argue, the corporation is a pathological institution, a dangerous possessor of the great power it wields over people and societies.”  Bakan, clearly not a man to mince his words, describes corporations as “psychopathic creatures”.

He also points out that, “The notion that business and government are and should be partners is ubiquitous, unremarkable, and repeated like a mantra by leaders in both domains.  It seems a compelling and innocuous idea—until you think about what it really means”.

My point is that, a covenant such as that unveiled by Lord Jones at the end of the programme surely cannot work unless the concept of a company undergoes wholesale legal redefinition.  Businesses cannot but behave in the way that they do and few, if any, of them will look kindly on governmental attempts to dilute their powers. Should any government whisper such ideas into their ears, they would simply do what they are already criticised for: that is, up sticks and move to a country whose government and civil service are more amenable to coercion and other means of persuasion (usually involving money).

An email request for a comment on this blog from Lord Jones was received but unanswered by him.

Related material:
>  blog:  Money makes the world go around (about Warren Buffett)
>  Pay ratios (external link)
>  Joel Bakan website (external link)

by Jeremy Marchant . last updated 2 november 2014