Ethical Performance
inside intelligence for responsible business


The state is redrawing its battle lines with business

September 2012

Everywhere, there are signs that ‘the state’ is tightening the screw on companies which, in its collective view, are acting unethically, or generally against its interests or that of wider society. The various parts of the state’s portfolio of tools are coming into play in an ever-widening agenda of social responsibility. We are very much at the start of this process, but all the signs are that this is a journey that will continue for many years, if not decades.  
The Indian parliament is considering introducing a 2% CSR levy though, for now, it looks likely any resulting law will be enforced, if at all, by shareholders. This is, however, just a start: it’s difficult to imagine such a thing happening 20 years ago and now the precedent has been set, expectations will change, which could in turn create momentum towards further action. 
The scandal over Libor and Euribor rate-fixing could be concluded with significant offenders ending up in court, or even jail, though I suspect the latter is an idle threat born of journalists’ speculation. There’s no mention of jail anywhere in the Pfizer or GlaxoSmithKline cases (see page 16), but both of those companies are counting the cost of persevering with ‘unacceptable practices’. However, in recognition of timid financial market regulation in the run-up to the crash four years ago, we now seem to be witnessing a concerted state-led backlash against perceived corporate misdemeanours. Emboldened by its recent successes, there seems a real desire in some quarters to push home the advantage. 
Which brings me to the Australian government’s action on the tobacco industry. Government interest in public health is not, of course, a new thing. What is new here is the state’s apparent wholesale appropriation of large corporations’ branding and intellectual property across an entire product category. And the fact that this Australian experiment is being seriously followed by a host of other countries is a warning to corporate executives around the world that the state is preparing a new kind of assault on their empires. Having your product progressively taxed into oblivion is one thing; having your brand and, consequently, your strategy on positioning, marketing, identity and the essence of what your business is about is quite another. 
Like the rest of us, though, the state’s apparatus can act in unusual ways. The now-famous superintendent of New York’s Department for Financial Services, Benjamin Lawsky, has branded Standard Chartered as it a ‘rogue institution’, a big claim, because of its Iran. By doing so, Lawsky seems to have almost provoked a little sympathy for a bank, something unimaginable just a few short months ago. But thhis does go to show that while the battle lines will shift unexpectedly at times, the overall direction of travel has been set.  

Peter Batt | Global | Regulation

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