29 Oct 2013
Capitalism in crisis - lessons from the voluntary sector
Charities have enjoyed measured success over the past twenty years by engaging in business-like practises. But has the recent recession provided reason for a move away from such activities? Stephen Lloyd considers.
Over the last 20 years charities and civil society organisations have been exhorted to become more businesslike, and they have responded well. After all more than 50 percent of charities’ revenues are now derived from earned income which is a testimony to their developing businesslike approaches.
Indeed at times these days it seems that businessmen and charity leaders are engaged in linguistic cross -dressing. Charities talk of the ‘bottom line’ and ‘profitability’ and business leaders talk about ‘social inclusion’ and ‘corporate social responsibility’. However, the debacles in the financial sector over the last two years with their knock-on tsunami effect throughout the wider economy demonstrate that many of the commercial sector’s claims are hollow – whether it is that they know how to run businesses in a way that the voluntary sector does not or that their corporate social responsibility is hardwired into their business model.
The extraordinary success the financial sector has had in still resisting the essential root-and-branch reform of its practices, is eloquent testimony to the fact that it does not understand a basic fundamental truth that public confidence and trust in an industry is gained by an appropriate and rigorous regulation. The contrast with the charity world is amazing. In 1996 the Deakin Report commissioned by the NCVO began the process which led to the Strategy Unit Report of 2002 and the Charities Act 2006. The Act was the direct result of the charity sector asking the government to improve and expand regulation so as to maintain public trust and confidence.
The colossal financial rewards that bankers and many private sector leaders have enjoyed over the last 20 years did not lead to a safer or better economic climate. In the financial sector the bonus culture has created a casino of risk-taking that has derailed the entire world economy. Again this should be compared with the voluntary sector where at least one million people serve as trustees in this country, unpaid, out of a sense of commitment and concern. That selfless approach based upon a sense of public duty is woefully lacking from too many leaders in the private sector, especially in the banking world, who seem to think that their jobs are purely an opportunity for personal enrichment.
There is a need to diversify who serves on the boards of British companies. It is deeply depressing that the board of UKFI, which holds the tax payers’ stakes in the nationalised banks, is completely dominated by civil servants and bankers – the people who got us into the mess in the first place. No one represents an alternative view to the prevailing delusion that we can soon get back to business as usual – big bonuses, big deals. One possible reform could be that all quoted companies should be required to have at least one non-executive director with extensive experience of the social/environmental sectors.
If we are to come out the other end of this financial and economic crisis and not just go back to business as usual, we have to create a new type of economy which is based upon sustainable principles of ensuring outcomes that are both financially reasonable; environmentally sustainable and are socially just. That triple-bottom-line approach is instinctive to charities, whereas it is not for business. Business needs to learn these lessons fast and therefore charities need to take the lead in teaching it some hard lessons about the importance of the values of public service, selflessness and genuine responsibility.
Stephen Lloyd is senior partner and head of the charity and social enterprise department at Bates Wells & Braithwaite
Attending our one day courses is a highly effective way of ensuring new and existing trustees fully understand their role, responsibilities and liabilities.