Responsible capitalism LORD DAHRENDORF KBE, Chairman of the Judging Panel, gave an overview of the International award for Responsible Capitalism in this interview conducted by Peter Riddell. The interview originally appeared in FIRST Magazine, Volume 13, Issue 3. Capitalism is under fire from both left and right. The victory of the Anglo-American free market model after the end of the Cold War and its spread throughout the world has been challenged. The financial turmoil that started in Thailand and spread throughout South and East Asia, before striking Russia and then Brazil, has created doubts about the benefits of capitalism. That has produced a series of critical books and articles, both from the left, such as Will Hutton, arguing for tighter controls and regulations, and from the right, such as Edward Luttwak, worried about the threat to social cohesion from unfettered capitalism. And George Soros has weighed in with his worries over some of the risks of 1990s’ capitalism. There have always, of course, been widely different models of capitalism. As Lord Dahrendorf points out, ‘there are many capitalisms’. The Anglo-American model with its emphasis on the interests of shareholders is far from the only one. The Continental model has always laid more emphasis on a range of other interests, and the Chinese and Japanese approaches are different again. He acknowledges that the upheavals of 1989-99 have done "a bit of damage" - with soul-searching in Japan about the role of the all-embracing corporation with its ‘cradle to grave’ relationship with workers. In Continental Europe, Lord Dahrendorf notes, there is still an anti-capitalist mood, mainly but not solely in Catholic countries with their longstanding views of social solidarity between employers and workers. Admittedly, several Continental countries, notably France and Germany, have shifted more towards the shareholder model of capitalism. But the parallels cannot be taken too far. Mergers have not been classically capitalist since the aim has often been not to reduce the number of workers, but to increase market power. These changes in the nature of capitalism present an intriguing challenge to Lord Dahrendorf and his panel of judges for the new international award for Responsible Capitalism promoted by FIRST Magazine. While not giving the game away by giving examples of companies or individuals who might qualify for the award, he has a clear idea of the criteria. High profile businessmen who spend money on charitable causes like, say, George Soros would not necessarily qualify. It is not how dividends are spent, but how the money is made. Lord Dahrendorf has taken a close look at what "responsible capitalists are actually doing". This involves "an element of best practice, not just profitability and shareholder values. It takes more to create sustained success than just two to three years of fat dividends". In particular, the judging panel will be looking at how companies become involved with local communities and at wider social issues. Responsible capitalism can be described as having "a moral as well as an economic quality". This is why it means "not just doing good in spending lots of goodies but specifically doing good in making money". Lord Dahrendorf sees "quite a significant change of practice especially in businesses with major operations internationally. These are faced with a whole series of new pressures and interests - not as strongly in Britain as elsewhere". These pressures and interests are legitimate factors for companies to consider and have been dubbed ‘stakeholder capitalism’. Lord Dahrendorf regrets that Tony Blair quickly abandoned the term after he had floated it in a speech as Leader of the Opposition. He retreated and dropped the ‘stakeholder’ term after criticisms from business about the dangers of introducing additional regulations and constraints on boards of directors. But, Lord Dahrendorf argues, it is important to "take into account not just shareholders but others for whom it is important what a company is doing". He refers to the indigenous population, local hospitals and colleges. He acknowledges the dangers of company towns over-dependent on just big employer dominating everything but believes this is less likely with a different pattern of manufacturing and company structures. The judging panel will also be looking at companies’ relations with their suppliers and customers. This, he sees, as an essential part of the trust relationship which is crucial for big businesses to ensure "sustainability of success". This involves maintaining relations in bad as well as good times. He is struck by the contrast between a British and a German company he knows in attitudes towards suppliers and the greater willingness in Germany to work closely with them when conditions are unfavourable. Overall, there has to be a respect for these stakeholders as well as for shareholders. Lord Dahrendorf accepts that it will be difficult to measure responsibility. That obviously involves an element of judgement by the judges - a distinguished group including Lord Howe of Aberavon, the former Conservative Chancellor and Foreign Secretary; Lord Plant of Highfield, the leading academic and Labour life peer; Her Excellency Eva Nowotny, the Austrian Ambassador; Raymond Seitz, the former American Ambassador in London and vice chairman of Lehman Brothers; His Excellency Chief Emeka Anyaoku, the Commonwealth Secretary-General and Sir Patrick Cormack MP, International President of FIRST Magazine. This will come from their contacts within the business world. Though the award will be to an individual, a key factor will be how far the company as a whole is committed to a ‘responsible’ approach. It will not be enough to have a corporate or public affairs director handling relations with local communities and charitable donations. The panel will be looking at how companies are organised and whether a broader social approach is reflected in the whole organisation, in its policies and promotions. In short, is the chief executive or equivalent fully personally committed to these policies in everyday decisions? Or, is it just left to a charity committee or the like? The award will go to an outstanding leader in a company where this wider view is accepted by all executives and is not just an optional extra.
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