Anti-capitalists winning as corporate cringe takes hold

You have to feel for Business Council of Australia chief executive Jennifer Westacott.

It must be frustrating running an organisation where representatives of Australia’s largest corporations are publicly shy when it comes to prosecuting the case for unfashionable economic reform.

If Westacott weren’t there, it seems likely that the business pile-on, which politicians from both sides are turning into a blood sport, would simply go unchallenged. You would think her sound policy prescriptions and spirited defence of corporate Australia would be a rallying cry for business leaders.

Yet few answer the call.

Westacott acknowledges business may have “done things that have frustrated and disappointed the community”.

“But,” she told The Australian Financial Review, “if a business had changed its leader every 18 months, changed the entire executive team, and completely changed the strategic direction, how much do you reckon its shares would be worth?”

In other words, political leaders’ stocks are so low that for them to lecture on behaviour and how business should run its operations is grossly hypocritical.

It should be seen for what it is: political opportunism.

Westacott says: “Politicians should stop business bashing and instead redress the shambolic state of politics that has been the cause of high power prices and an impediment to sorely needed economic reform.”

But while corporate leaders remain mute, not so anti-business propagandists. The long march down that well-worn path to de facto nationalisation has begun in earnest.

It’s the path adopted in 1933 by the National Socialists in Germany, where an elaborate prop­aganda machine was established to reinforce “social responsibility” as “the higher good”. German companies fell meekly into line.

Wooed by government incentives and spooked by social media and “ethical” investors, Australian business leaders, similarly, seem to have thrown in the towel. “Corporate social responsibility” is no longer a slogan but a section in financial reports. It embraces the notion of “social licence to operate”, a term intended to advance the goals of sustainability in business practices. This occupies the minds of boardrooms, and means amorphous social and environmental costs are considered when determining practices and investment. How often do incentives and “greater good” considerations result in capital misallocation and lower returns?

What is the cumulative effect on the economy? Recently on this page, Janet Albrechtsen wrote: “Truth be told, lots of directors, men and women, swan around at networking shindigs, more celebrity than director, jumping into all the fashionable causes … Ask these directors to venture a public word on economic matters that affect their company and they duck their heads.”

At times, the lines between fashionable causes and business interests seem obscure. For example, are Australia’s largest miners, BHP and Rio Tinto, being purely altruistic with their unqualified support for the Uluru Statement from the Heart, which seeks to constitutionally enshrine political privilege according to race?

Or are they primarily currying favour with Aboriginal communities with which they have ongoing commercial relationships? It’s an important question.

BHP chief executive Andrew Mackenzie says it’s a new path to reconciliation and that his company “cannot stand on the sidelines”. Altruistic or not, this initiative embraces dangerous left-wing identity politics and highlights the risks to the broader community of a new cohort of politicised boards, which enlist their companies’ goodwill to promote social agendas. For shareholders, this can be a dangerous game.

Seizing the moral high ground may play well at networking shindigs, but it is not without risks to the bottom line. A now notorious Gillette advertisement, scolding men for toxic masculinity, has had a spectacularly negative effect on its brand. According to a YouGov survey, the ad took Gillette from seventh to bottom in a list of 45 health and beauty brands.

The growing soft-left bias of corporate leaders makes middle management easy prey for left-wing bullies such as Sleeping Gia­nts who use spurious customer complaints to demand companies pull advertising from black-listed media outlets.

The end result of this corporate vacillation and unwillingness to prosecute a coherent case for competitive capitalism has left Australian business with few friends. The Coalition, once considered the pro-business party, has all but abandoned it. Having joined the ranks of bank-bashers with a new bank tax and a royal commission, it couldn’t wait to dump big business tax cuts.

Whatever anti-business sentiment existed before the royal commission, the daily theatre and hostile commentary reinforced it. Most bankers went to ground.

Thanks to the intensity of hostility, government’s role in facilitating a hubristic banking culture is overlooked. High barriers to entry, limited competition, loose monetary policy across an extended period and incompetent and captured regulators were always going to create conditions conducive to corporate misconduct. And business must pay.

So the Australian Securities & Investments Commission, seeking public and political redemption after the royal commission’s findings, is investigating remun­eration disclosures in several non-bank corporations. Directors and managers are being individually interviewed and having their email traffic interrogated. In a sinister development, ASIC will bring psychologists to some meetings. Where is the outcry? Well, as former National Australia Bank chairman Ken Henry found, tone can be enough to threaten an inquisitor’s authority. It’s safer to acquiesce.

Corporate social responsibility is the latest weapon of the anti-capitalists. It thrives on anti-business sentiment and corporate cringe. It paints greed and profit as synonymous. It pushes for endless new reporting requirements, which dominate management time and effort and leads to risk-averse, shortsighted decisions.

Add damaging government policies to the mix and over time industries close or relocate. That is Australia today. Governments may scramble to compensate for the harmful effects of their policies, but they simply make conditions costlier and more sclerotic. Even still, business leaders are seen and not heard.

Time is running out. Corporations desperately need champions with courage because Westacott cannot do it alone.