Caring, Sharing Companies are Great, says Gill Cardy. But Where Should We Draw the Line?

Following on from Martin Wheatley’s speeches on ethics in financial services, I was interested to hear the theme of ‘inclusive capitalism’ being discussed by some very high-flying people at a recent Mansion House conference. 

Some people have wondered what exactly this phrase means? Well, I can tell you that, based on some of the speeches, it’s still not clear to me.  Given that the generally accepted purpose of a business is to make a profit and thus to generate a return for investors, as a reward for the application of capital to that business, how can that be ‘inclusive’?


The first irony was that the conference chairman was a member of the Rothschild family, a name not perhaps synonymous with inclusion.  The second irony was that this conference follows hot on the heels of the difficulties facing the Co-operative Group.

Good Deeds, Good Companies

Over the years a wide range of financial services and other businesses have attempted to take an ‘inclusive’ approach.  Mutuals and credit unions seek to apply capital for the benefit of their businesses and return profit to their stakeholders.  Companies like Cadbury and Pilkington have a strong history of ensuring that wealth generated in the business was shared with employees and their families, years before unions and the welfare state took on similar functions.  Companies’ charitable foundations return vast sums to society.

Both Marx and Jesus observed that it was not capitalism or money that were problematic, but rather the love of money and the excesses of capitalism that were destructive.


Local Limits

Speaking at the conference, former US Treasury Secretary Larry Summers suggested that businesses have traditionally felt a responsibility to their geographical locations, because they had a stake in the success of the areas where they were headquartered and where their workers lived.  But in a globally integrated world, the challenge now is for business to continue to feel that same stake in places and communities. 

The associated temptation for world leaders and policymakers is to avoid the pressure “to pit jurisdiction against jurisdiction seeking the best deal, the least restriction and the least call for responsibility”. 

But herein lies the conflict: rational businesses need to find the lowest tax environment, the most favourable employment regulations, and the cheapest yet most qualified labour.  And yes, there will always be cross-border differences which firms will exploit to advantage their shareholders.


We might berate Amazon or Starbucks for choosing a low-tax jurisdiction – but how does this decision differ from choosing where you locate your manufacturing facilities, or where you source your raw materials?

Ask the Investors

So if we really want ‘inclusive capitalism’, accepting that making money is a good thing as long as we avoid the excesses which do harm, then perhaps we have to rely on consumers and investors to demand that the businesses we own make the right choices?

The problem here is that only 11% of the UK stockmarket is owned by UK individuals. So, unless other non-UK, public sector, pension, life, church, charity, investment and unit trust investors influence management to make these ‘inclusively capitalist’ decisions, nothing will change.  And if those businesses do not practise inclusive capitalism themselves, then I can’t see them wielding their shareholder power to spread it wider. 



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