Gordon Gekko naive – how to get back trust in business
I think there’s pretty much broad agreement that business has lost society’s trust, though that trust probably hasn’t taken such a big hit in New Zealand as say in the US.
Author and consultant Charles H Green points out in an article in BusinessWeek that this loss of business’ legitimacy is a shame, not just for business but for society at large.
I’ve posted before on one aspect of this – how the Government’s efforts to tilt the playing field in favour of business to boost economic growth is a bad piece of timing, coming as it does when trust in business is at a low ebb.
Green writes there is no such thing as a legitimacy index - “…any attempt at mapping something as ephemeral as legitimacy will be fraught with subjectivity”.
But he suggests legitimacy broadly tracks social phenomena such as trust and confidence, heroes vs. villains, and the popularity of going into business as a career choice. “By these indicia, the socially perceived legitimacy of business was low in the 1960s, high in the ’80s, and is at a nadir now.”
Green points to a couple of drivers of the ups and downs:
• “In the ’80s, there was a common viewpoint about business’ relationship to society. Milton Friedman spoke the economists’ version—companies owed no social debt beyond being profitable.”
• “[Michael] Porter’s major impact was describing business itself as an ongoing Hobbesian state of competition—not just between competitors, but between companies and their customers, suppliers, and social institutions. Corporate success is defined as gaining sustainable competitive advantage over all one’s competitors. Adversarial relationships in Porter’s worldview are simply the Way Things Are.”
• “One of Goldman Sachs’ defenses in its current litigation is caveat emptor.”
“These messages all converged. Business was the source of its own legitimacy. It needed no external endorsement. It would work best when left alone, allowing Darwinian forces to work their magic.”
Funnily enough Porter’s and Friedman’s ideas seen naïve now, post the Global Financial Crisis. (I like the idea of Gordon Gekko being naïve).
How do businesses get their legitimacy back?
Green says they need to recognise that social legitimacy comes from finding a role in society — “not from complaining about society’s intrusions, albeit in the form of government”.
“Business legitimacy won’t be regained as long as it remains all about competing successfully with other stakeholders rather than collaborating with them.
“And business is being rudely reminded that legitimacy derives from society, which occasionally makes its will known via the political system. The smart bet would be to collaborate, not compete.
“… legitimacy must come from within business itself, not from charity, corporate social responsibility — or community development. “
Hat tip – Stephen Lynch