A New Test for Responsible Business: Show Us the Money

It’s one of the most famous lines in the movies: “Follow the money … Just … follow the money.” These days, with a third of the world living on $2 a day, a third learning what zero growth or thereabouts looks like and the other third rattling along at 8-percent to 10-percent growth with massive resource depletion and rising inequality, the emerging call to big business and wealth-holders generally is becoming louder: Show us the money. How did you make it, what are you doing with it and who benefits from all this wealth you create?

Here in the UK, I’m seeing three main issues where this is taking hold: company taxes, philanthropy and the size and nature of banking fees. It’s the return of the economic part of the triple bottom line, with a serious public and political push for change.

In the past three years, governments in G20 countries have spent an estimated $8 trillion in financial sector rescues, stimulus packages and unemployment support. In the UK, it’s an estimated $1.5 trillion, and the resulting public debt has led to personal tax increases and severe public sector spending cuts.

Not coincidentally, Action Aid’s Tax Justice campaign is focusing on corporate use of tax havens and complex tax minimisation procedures. In parallel, UK UnCut, which started as a Twitter hashtag three months ago, has spawned sit-in protests at several big companies’ stores and offices across the UK. Between them, the campaigns claim to have mobilised hundreds of thousands of supporters. The Government has noticed too: as I wrote last month, the Prime Minister has called on big business to start doing and spending more on CSR and community philanthropy if it wants to retain a low business tax regime.

The Government has also suggested that reporting of corporate philanthropy could need to become mandatory, particularly for banks. And it wants UK banks to help fund the non-profit “Big Society Bank” which will open in April 2011 to give loans to charities and voluntary organizations to help them deliver public services. Last year, according to the UK Charities Commission, a quarter of all UK charities saw donations fall, more than half were affected by cost increases, and one in five experienced increased demand for their services.

So far there doesn’t seem to be a rush to help fund this gap, although the former head of Lloyds Bank (which was bailed out by the UK taxpayers in 2008), Sir Victor Blank, said last week that business needs to recognize that philanthropy is “not an optional extra but a core part of their responsibility.” He pointed to the FTSE 100 listed companies which currently donate 0.2 percent of their profits to charity, saying “The figure should be a multiple of that,” and called for a change in attitude from shareholders and corporate management.

Then there’s the bonus system in the banking sector. This year, it isn’t just the size of the bonus pools that’s attracted public anger, it’s the slide in the sector’s philanthropy as well. For example, Goldman Sachs’ 2010 global bonus pool was down 5 percent on 2009, but its global philanthropy was down 36 percent, and the amount — $320 million — equates to around a third of 2010 compensation for the company’s top 200 earners.

More broadly, the focus is also turning to the size and scale of the fees that drive the profits that generate the bonuses, and the near-complete lack of transparency on this. It’s starting to be called “rent-taking,” “skimming” and a structural barrier to having a balanced and well-functioning economy. And that’s just in the business media.

So, interesting times here about where the boundary should be between regulation and voluntary responsibility on some key business-in-the-economy issues. So far, it seems to be regarded as an argument business already won years ago. But, as another famous line from the movies goes, “I’ll bet my badge right now we haven’t seen the last of this.”