Capitalism needs more heroes

Published by UnHerd (23rd August, 2019)

There is a rumour doing the rounds on social media that Rupert Hogg, Rwho resigned as chief executive of Cathay Pacific airline last week, was ordered by the Chinese authorities to submit a list of his employees who had taken part in the extraordinary Hong Kong protests. He provided the list they demanded but it had only one name on it: his own.

Who knows if this superb story — which appeared in a Taiwanese newspaper  — is true? Certainly, the British executive was performing well in his job before being suddenly forced from it after just two years. And his resignation, which followed Beijing pressure that airline staff be stopped from joining protests after the high-profile arrest of a pilot, was first announced by China’s state-run television station before the company itself made a statement.

The claim has led to Hogg being hailed as a hero by pro-democracy activists in the region. It would be nice to think this is a true tale, a businessman’s defiant stance reflecting the bravery of the protesters I have seen out on the streets demanding freedom and democracy in the face of Chinese autocracy. For we need corporate icons at this time of immense change. And it would also make a welcome contrast with all the grubby kowtowing seen by other Western business leaders before the Chinese authorities, toeing the Beijing line to preserve their flow of profits.

Their tawdry behaviour has been highly depressing, a reminder that capitalism and morality are not always natural bedfellows. Now we hear of a climate of fear among staff at Cathay Pacific, warned they could be fired if they ‘support or participate in illegal protests’ in a disgusting betrayal by their bosses, who are, admittedly, under fierce assault from Beijing. Unions are urging the company to end ‘white terror’ (acts that create a climate of fear) after the dismissal of the head of a flight attendants’ association. Staff must also endure Chinese searches of electronic devices for evidence of joining demonstrations.

This is an alarming capitulation to political pressure from an autocratic regime. Yet the Cathay Pacific firm is far from alone. Jardine Matheson is a British-listed company run by a billionaire British dynasty that enjoys the fruits of our freedoms, yet it rushed out a statement echoing the Beijing line  of condemning violence while praising the police whose brutal response inflamed unruly events on the streets. PwC issued a contrite statement after employees of large accounting firms publicly backed protests, while luxury fashion houses Coach and Versace prostrated themselves in apology before China’s communist rulers after implying Hong Kong is a country.

These firms might say their duty to shareholders and staff is to make money — and that China is a vital and fast-growing market. As Milton Friedman argued, the social responsibility of corporations is to increase profits since, as the Nobel-winning economist argued, free-market capitalism ultimately made the world a better place. As he wrote in his 1970 New York Times  essay: ‘There is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.’

Even half a century ago, this was a controversial theory; it has since sparked ceaseless debate and rebuttal. I have sympathy for his view of capitalism as an inherently progressive force. Yet now Friedman’s stance — echoed by all those panicked firms doing Beijing’s bidding — is being challenged from within the world of commerce. For the chief executives of 181 major companies, including many of the world’s best-known brands, are seeking to redefine the role of a corporation.

Their pitch, made in a statement through a group called Business Roundtable, is that business must seek to serve not just shareholders but the wider community, arguing that it should improve society as well as maximise profits. So they talk of fair pay for staff, fostering diversity, dealing ethically with suppliers, protecting the planet and supporting local communities.

Great stuff. Few would quibble with these firms doing more to hire black and disabled workers, improve staff pay among lower ranks or soften the environmental impacts of their massive global operations. Yet we should judge them by their deeds, not their smooth words. The average chief executive in America takes home 280 times more than their workers, a grotesque imbalance that seems unlikely to change fast. In reality, the statement looks like a fearful response to rising concerns over capitalism — with one billionaire financier saying inequality poses an ‘existential threat’ to the United States — as well as the issue playing a key role in the fight for the Democratic presidential nomination.

In Britain too, we have seen loss of trust in capitalism. But when you look at many signatories on this document, it is hard to see it as more than a glib public relations effort designed to diffuse public anger. After all, is the head of aircraft maker Boeing really the man to lecture the rest of us on protecting the environment? Are the bosses of banks the best people to talk about ethics after their greed caused global fiscal meltdown, and they have shown so little contrition? How can the chief of Walmart boast of supporting communities when his firm — recently described as ‘the largest retailer of firearms in the world’ — refuses to stop selling guns despite the plague of mass shootings tormenting the United States? Should the chief executive of Lockheed Martin pose as a moral paragon when her firm is selling missiles to barbaric nations such as Saudi Arabia?

Then there is tax. For if the likes of Jeff Bezos want to show they care about communities, there is a simple way to do this by starting to pay fair taxes. This is, after all, how our society collectively funds public services such as schools and hospitals, care homes and police forces. Instead, Bezos has become the world’s richest man, able to build his vast business and indulge his ideas for space travel, by using sophisticated financial trickery to flip Amazon’s digital profits and evade traditional tax collection methods. The same goes for the companies such as Apple and Oracle.

The more you delve into the list, the more it reeks of hypocrisy. It includes pimps in pin-stripes fostering tax-avoiding practices at accountancy firms and financial houses. There are two airline and one oil company chiefs claiming to protect the environment, the boss of a fizzy drink and crisp firm ignoring the obesity crisis to pontificate about respecting communities, another major weapons-maker talking about letting people lead lives of “dignity and meaning”.

This is a shame. Capitalism does need to clean up its act and there is much to admire in the sentiments set out by these corporate titans and multi-billionaire tycoons. But this smacks of all those bogus mission statements, the thin veneers of greenwashing, the tiny nods towards corporate social responsibility proclaimed as transformational. The truth is that until such people start showing genuine desire to practise what they preach, even if it impacts on their bottom lines, then the clamour to control capitalism, check its dynamism and stifle competition will only grow.

Capitalism has transformed our world and the experience of humanity for the better, and business can be a highly progressive force, whether by accident or design. Just looks at the numbers being lifted from poverty around the planet, the pace of innovation in medicine, the advances in communication and connectivity. But we live in a time of incredible technological change that is disrupting work and societies with unprecedented speed, while leaving politicians paralysed in the face of its strength — and this is shaking faith in the invisible hand identified by Adam Smith.

Businesses transform society by being dynamic and open. Yet they need to start displaying social responsibility and stop undermining wider well-being before they are shackled by their foes and we all suffer the consequences. Unfortunately we have seen a glimpse of the prevailing corporate ethics exposed by the submissive behaviour of Western firms towards China’s communist rulers, not in this week’s shallow stunt from a bunch of over-paid corporate panjandrums in the US. Whether the Hogg story is true or a flight of fancy, we most definitely need corporate heroes prepared to place morality before money.

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