The rush to regulation and the illusion of progress

Sometimes, legislation is not the best solution

by Clive Memmott, Chief Executive, Greater Manchester Chamber of Commerce

Clive Memmott gives his views on the Prime Minister’s declared intention to address poor behaviour in some companies by legislating to make it mandatory to have employees and customers on company boards.

On her first day in her new job, Theresa May gave a clear indication that she was determined not to be Prime Minister of a single-issue administration. Social mobility, more than Brexit, was going to be the theme for the years ahead, under a banner of ‘a Country that Works for Everyone’.

Since then, the Government’s policy on selective schools, and all that goes with that, has grabbed the headlines, as it would, since it raises quite emotive issues. However, there was another policy within that overall theme that she mentioned both on day 1 and at the recent Conservative Party Conference that has received much less media attention – her intention to bring forward legislation to require companies to have both employees and customers represented on their boards of directors. No more detail has emerged so far, and I await the proposals and consultation with great interest. They should be published before too long.

What we do know is that the measures will be intended to address some of the less acceptable examples of behaviour by private sector employers that take place – what in a previous era was once dubbed ‘the unacceptable face of capitalism.’

I urge great caution, not because I disagree with the overall objective or because I deny that a problem exists – it always has to some extent, and recently there have been a small number of high profile examples of really poor behaviour by some businesses that have, rightly, made the headlines. However, there are already perfectly adequate ways of dealing with this, if the will is there to address specific problems. It’s right that Government should talk about these issues and the need to address them but it should avoid making sweeping generalisations that exaggerate the scale of the problem. 

Even more important is the need to resist the temptation – something which politicians of all persuasions find difficult to do -  to address complex problems with knee jerk legislative or regulatory solutions that give the illusion of action and progress but are usually not the answer. Such measures have three negative consequences – they fail to tackle the problem while simultaneously creating a clumsy and costly infrastructure that distracts organisations from what they should be focusing on and further embedding a tick-box, quota mentality in society.

In reality, tackling what are isolated but deep-rooted cultural issues will best be achieved by intelligent persuasion, discussion and incentive - and our business leaders must take the lead in doing this.