Corporate Australia Has Failed to Defend Itself

Don't weep for corporate Australia;  it has brought the current political heat upon itself through inaction and silence.

After taking the high moral ground and spearheading the reform process in the 1980s.  corporate Australia has largely vacated the public debate on a range of crucial issues.  Moreover, in recent times, their participation has focused more on pleading for more government largess than improving general interest.  Importantly, corporate Australia has failed to defend itself against the concerted assault by the "stakeholder" lobby.

As a result, the social consensus for reform -- which was always weak -- is waning.  Corporations are on the nose with the public and therefore are viewed as fair game by populist politicians.  More importantly, the fundamental role that corporations play in creating wealth, jobs and new services and in building a truly civil society is being undermined.

The corporate sector, along with farmers, have led the long march for a more flexible labour market.  Although less has been achieved in this area than in others, progress has been made.  There is widespread -- but incorrect -- belief in the community that the reform process has resulted in job insecurity, longer working hours, greater inequality of earnings and conditions and higher levels of industrial conflict.  The corporate sector is rightly seen as a main beneficiaries of this process.  These beliefs lie at the heart of public discontent about reform and the corporate sector.  Although corporate Australia has continued to lobby for IR reform -- though the BCA has now decided to stopping doing even this -- it has largely avoided the general debate about the effects of this reform.  The fact is that, in a democratic society, you cannot get reform for long without providing supporting arguments on outcomes.

Corporate Australia, through its associations and individual leaders, has been the spearhead of tax reform and the GST.  They pushed for Option C in the mid 1980s.  They pushed Hewsons's into the GST in Fightback!.  They led the campaign to convince Mr Howard of the GST and they have been intimately involved in the development of the A New Tax System.  But they may have been active behind closed doors negotiating the detail, they have been silent in defence of tax reform.  Most pointedly, they have said nothing about the benefits that have flowed to them from the exemption of exports under the GST.

Corporate Australia -- specifically the Business Council of Australia -- was the originator and main proponent of the National Competition Policy.  Yet again, except for a few submission to inquiries, they have sat by reaping the benefits of reform but saying little.  Moreover their submissions to various inquiries have focused more on procuring commercial advantage and getting cheap energy rather than achieving a regulatory system based on respect for risk-taking and property rights, minimal interference and neutral outcomes.

Concerns about globalisation underlie much of the public angst about economic reform and the corporate sector.  Economic reform is seen as accommodating globalisation -- which it is -- and stripping away protective arrangements and accentuating the pace of change.  Corporations are also rightly seen as the main vehicle and beneficiaries of globalisation and change.  And, the mistrust of corporate sector lies predominantly with its increased global nature .  Yet again, the corporate sector has played a reactionary and reluctant role in the debate about globalisation.  If the corporate sector -- which has the most intricate knowledge of the process -- is quiet, then who will speak?

Over the last decade, the corporation -- particularly the Anglo-American variety -- has been subject to a sustained attack by the stakeholder lobby.  This movement's aim is not to destroy corporations but to regulate and guide them in direction they wish and away from the wishes of shareholders.  This movement acts not through the marketplace or necessarily through the formal regulatory process, but rather through public opinion and threat to corporate reputations.  The movement vigorously promotes a vision of systemic corporate failure -- on accountability, on governance, on performance, on contribution to society, on treatment of workers, and on impacts on the environment.

Rather then stand-up to this assault, corporations, here and abroad, have largely sought appeasement.  The appeasement has taken two forms:  intellectual and financial.  They have failed to defend the crucial value of capitalism and corporations to democracy, wealth creation, environmental preservation, and an open society.  And they have poured shareholder money into the pockets of those seeking to undermine the corporation and shareholders wealth.  As the American commentator Michael Novak recently said, "Such executives no longer sell their enemies the rope by which they are hanged;  they give it to them as a grant".

Public advocacy by business leaders is a necessary part of the political cover politicians need to keep economic reform going.  It was central to reform push by politicians in the 1980s and its absence has been central to return to populism during the 1990s.

Of course business leaders are under the hammer like never before, struggling to beat the world's best.  Moreover, any CEO that does stand-up and defend the capitalist system will receive the wrath of the stakeholder lobby and endanger the reputation of her firm.  Nonetheless, public support for the process of economic reform and the corporation is essential to success.  If the CEO's can do it, get someone else to do so.  But just do it.

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