Sir James Wates, Chair of Family Business UK
The events of the past few months have shown clearly that groups representing British industry cannot take their influence and status at the top table for granted. Although the narrative surrounding the CBI’s struggles has focused on safeguarding of staff, I would argue that the cautionary tale is more about failure to deliver on organisational purpose.
Of course, the CBI is right to be addressing the past cases of misconduct, and judging from the membership support for its new plan, there is sufficient confidence in its ability to fix its people culture issues. This is a good start in its road to recovery.
However, even more fundamentally, the CBI is in danger of failing to deliver on its purpose. If the organisation doesn’t carry out its reforms successfully to deliver on its core mandate, others such as the Business Council proposed by the British Chambers of Commerce will look to plug the gap as the representative voice of business.
“Purpose and Leadership” features as the first of six principles in the Wates Corporate Governance Principles for Large Private Businesses, developed in 2018 as a tool for companies to use in guiding and reporting on how they are governed. It’s absolutely vital that companies are clear about the purpose of their existence, how their strategy serves to accomplish it, and how organisational culture supports it all.
The principle applies to trade bodies, as well as to individual companies. In my mind, the CBI’s purpose is to be a conduit of information between government and business – effectively representing the interests of the broader business community to government at the most senior levels. This must guide its strategy, and be the ultimate criteria on which the CBI’s success is measured.
While other trade associations will continue to represent their specific interests, sectors and models, the CBI must again find a constructive way to represent the macro – bringing together this plurality of voices in a coherent and effective manner.
In a broader sense, the business community needs to do better at communicating the value that the private sector generates for society, and the CBI needs to be leading this call. Generating wealth is not just for shareholders; the private sector generates taxes (either directly or indirectly) that account for three-quarters of HM Treasury’s revenue.
The fundamental role of business in society is something we’ve been reflecting on deeply at the organisation I chair, the recently re-branded Family Business UK. As Family Business UK Chief Executive Neil Davy told the Times, business groups need to make themselves relevant to the needs of everyday people, and properly articulate and prove why it is they deserve to have their voice heard in the wider conversation about how society is governed and structured.
From my many years working in the family business sector, I’ve seen first-hand the exemplary ways in which family firms have built long-lasting ties between business and community. Creating jobs for the long term; supporting local people through difficult times; and taking the necessary steps to make their businesses more sustainable and play an active role in creating a Net Zero economy. These are the basics on which long term trust and purpose are built.
The ethics and values of each family are baked into their business – in how they govern themselves, how they communicate with staff and other stakeholders, and how they invest for the future to create wealth benefiting all of society.
Family businesses are the bedrock of the UK economy – representing five million businesses, supporting around 14 million jobs, generating more than a quarter of GDP, and contributing almost £200 billion in tax.
Recent polling commissioned by Family Business UK found that the British public find family-run businesses to be the most trustworthy companies (25.4%) when compared to PLCs (14.7%), venture capital firms (7.6%), and private equity backed-companies (9.8%).
In addition, the polling showed that the public believes family businesses look after their employees equally as well as employee-owned organisations.
Family businesses want to continue to thrive and deliver on what the public trusts them to do – to treat stakeholders fairly and to generate value for society. Our objective at Family Business UK is to lead a movement of family businesses working to create a more prosperous and sustainable future for generations to come, positioning family businesses in the UK as an economic force that demands the respect of government and policy makers. We invite all family businesses to join us.