Is business changing for good?
On the eve of Responsible Business Week 2016, two events stand out, showing both how far business has come and how far it has yet to travel.
First, institutional investors voted against the £14 million remuneration package awarded to Bob Dudley, the chief executive of BP. It was the biggest ever revolt against excessive boardroom pay and evidence, perhaps, that City investors are at last waking up to public anger at executive greed.
Second, Mars Food admitted that some of its popular products, including Dolmio pasta sauces and Uncle Ben’s rice, contain so much sugar, salt and fat that they should only be eaten once a week.
Here we have institutional investors taking an apparently principled stand against excessive pay and a leading food manufacturer acknowledging responsibility for its contribution to the global obesity epidemic.
So far, so good. But dig deeper, and it becomes more complicated, and less encouraging. The BP vote is not legally binding, so Dudley’s pay package is not at risk. Shareholders knew this; they previously approved the arrangements that meant this vote didn’t count. And they still hold the shares, despite their misgivings about corporate governance. Meanwhile, Mars continues to sell products that, as the company acknowledges, are causing harm. It has set targets to reduce the sugar and salt content in its products, but these don’t kick in, for some products, for five years.
Once upon a time, it would have been inconceivable for investors to vote down a powerful chief executive’s remuneration scheme, or for a multinational food company to acknowledge that its products caused harm. Undoubtedly, there has been progress in the relationship between business and society. Chief executives are increasingly aware that doing the right thing for society often also is the right thing for business.
But there is still a significant gap between what the public expects and what business is prepared to do. Consumers vote with their wallets and as our Business to Society report demonstrates they have high expectations for business to become involved in societal issues. In fact, our report showed that consumers’ expectations often run ahead of the desire of business to play a meaningful role in addressing challenging issues, such as social inequality and the environment. The report also shows that consumers are increasingly savvy about the disconnect between a company’s promises and its actual conduct, a cynicism reinforced by revelations about well-regarded companies such as Volkswagen, which lied about vehicle emissions.