Allen Lane Foundation
|
|
|
ALLEN LANE LECTURE 2003 ANDREW PHILLIPS given at the Ismaili Centre on 11 February 2003 “The Charity/Business duet : harmony or discord?” It is by now commonplace for charities to be warned against being coopted, if not corrupted, by a State anxious to shed publicly funded social services on to a compliant third sector. That process has been called nationalisation of the voluntary sector. Today I
want to contemplate a related but different danger, namely inappropriate
commercialisation, or professionalisation, of the charity sector. It touches sensitive issues, not least the fact
that charities are usually cast in the role of supplicants to the private sector. In discussing the charity/ business
relationship, I am unable to quite share the converts’ zeal which pervaded Gordon
Brown’s keynote speech this month to the Social Market Foundation – A Modern
Agenda for Prosperity and Social Reform – where besides unexceptionally supporting
market forces he seemed to outbid traditional capitalists in his belief in the
transforming and cleansing role of competition. As
he put, “we should normally tackle the market failure not by abolishing markets but
by strengthening markets” by means of
State intervention to “enable markets to work better” and “to tackle market
failure”. Some of us think that that approach has been tested to destruction and
found wanting; that capitalist fundamentalism is going the way of all ‘isms’,
and that the problem is bred in the bone. Indeed, my long and close observation
suggests that the very complexity of financial market regulation has contributed to the
death of any lingering sense of fair play on the part of most marketeers. You now just call up the lawyer. The evidence from the USA, for example, with its
uniquely fierce regulation via the SEC, points that way, with the latest “laddering
claims” scandal involving fraudulent rigging of the new technology stock markets and
initial 1.435 billion dollar fines levied on 10 investment banks, mostly household names. It is in this general context that I would hope
that, long term, the values of third sector could have a revitalising influence on the
state/market duopoly. But what are the signs that charities
may be becoming too business-like? Against stagnating personal generosity
and, as CAF has estimated, a major downturn in corporate giving since 1998/9 (the total
cash figure for 2000/01 was under £300 million), charities are understandably turning
ever more to trading as a means of generating their own income. The No. 10 Strategy Unit Review of
charities published before Christmas, which is likely to be legislated, goes as far as to
propose – under the heading ‘Encouraging Entrepreneurialism’ - that
charities should in future be allowed to trade tax free themselves, rather than through
arms length trading companies; that there should be no limit to that trade either in
amount or the type of trade (which could therefore be completely unrelated to the
charity’s objects); and that the only constraint would
be a statutory duty of care. If such a reform occurs it would only
take a few well publicised disasters to undermine the magic of charity, which is still
very real, and with it the priceless public trust integral to it. It would also wholly cut across the altruism which
is still the essential legal and moral characteristic of charity. It would distract Trustee boards from focusing on
their charitable purposes. It would expose
the assets of the charity – most of them publicly donated – to unlimited trading
losses. It would tilt the composition of
trustee boards even more towards dominance by business people, which may already be
becoming a problem. And finally it would
stoke the resentment of private sector competitors (alias potential donors) who would see
charities using tax exempt assets to support tax exempt
unrelated trade, as well as receiving rate exemption for the premises from
which they were conducted. The fact that this proposal made it
through to become a Review recommendation is evidence of the extent to which influential
parts of the sector, certainly at its larger end, are now influenced by those who may not
fully understand the fundamental difference of the sector they are in. Or perhaps it was all down to the crusading Mr.
Brown again. It is the same pressure which
has led to the Association of Chief Executives of Voluntary Organisations (ACEVO) to lobby
for remuneration for their members comparable with public sector rewards, and to
significant elements in the sector pushing for remuneration for charity trustees. The commercialisation is also occurring
in the escalation of marketing and PR budgets of charities, and the growth in expensive
television advertising, which sets charities alongside the great multinationals. There has also been a fairly rapid increase in
deployment of professional fundraisers, whether on the streets or via telephone
canvassing, as well as in commercial events which use charity goodwill to push sales in
exchange for payment. Similarly, there has
been a great growth in sponsorship and affinity deals.
Lastly, I think one can begin to detect
a lack of enthusiasm amongst the paid staff of some charities to maximise volunteer input,
other than as menials. Apart from anything
else, volunteers may put jobs at risk, and they have the disturbing freedom to vote with
their feet, as well as invulnerability in speaking their minds. That charities are a unique species is
a fact of law and history. I have already
mentioned the core characteristic of altruism. I
think it is widely realised that that essence can inadvertently but irreversibly be
undermined by inappropriate commercialisation, especially where it impacts on the norm of
volunteering, the dilution or even displacement of which calls into question the very
appellation - “voluntary sector.” To be true to its nature the charity
sector should always find an honoured place for those untutored human gifts of care,
compassion and attentiveness which are at its heart and indispensable to its public
magnetism. Importantly, those gifts are not
dependent upon qualifications or training. Indeed
I sometimes think that the latter can impinge on the former. I do have concerns about the extent to which the
reasonable wish to ‘improve standards’ may be devaluing those heartland
qualities, and frightening off volunteering by those with few if any formal attainments. Criticism from within and without the
sector of its amateurishness is mighty ironical given that the word derives from
‘amo’, to love, and ‘charity’
itself from ‘caritas’ – Latin for love itself. The traditional values of the charity
sector are after all increasingly different from those of modern ‘big business’,
though it is no monolith. I say ‘big business’, thinking particularly of quoted
and multi-national companies, because they are legal constructs answerable to very
attenuated constituencies and demands. As the
Chairman of a large family business put it when they finally went public, “once we
became a quoted company, we were answerable to our shareholders in the same way as any
other company and subject to the same external disciplines. We are, therefore, not in a position to make any
special claims about the way in which the business is run and the values which lie behind
its management, nor would it be right for us to do so.” How sad, and how diminishing for our society. The fact of the matter is that the only
stakeholders of the modern limited company recognised by law, beyond a sideglance at
employees, are the shareholders. Indeed, the
government report last month by a business luminary, Derek Higgs, on the role of
non-executive directors, re-enforces that narrow focus.
In over 100 pages there is scarcely a nod in the direction of the wider
public interest, or of corporate citizenship. He
repeatedly asserts that the required attributes of such directors are those of
“skills, knowledge and experience” without reference to their character,
judgement and wisdom. This reflects the
reality, namely that most such businesses operate within exceedingly introspective, two
dimensional parameters. Whilst charities have a bias to the
poor; companies are interested in those with money to spend. Charities usually have a constitutionally explicit
mission. Few companies do. Furthermore, for charities to engage and hold
volunteers and donors (and less than 5% of our third of a million charities have
employees), and to relate to beneficiaries in a way that maximises the impact of the
charity, calls for different priorities and values as compared with the corporation. Altogether, the relationship between a
charity and its various constituencies – donors, beneficiaries, staff, the community - is
much more complex and multi-faceted. If the
charity serves an interest group, for example a disabled class, its functioning will
generally need to exemplify its altruistic purposes if it is to thrive. Beneficiaries will need to be psychologically
empowered as well as financially or materially assisted.
In this context means and ends can become indistinguishable. That is why MENCAP pioneered in the 90’s
direct involvement of handicapped members in its governance, reserving them places up to
main Board level. That was controversial. But it has worked brilliantly in all sorts of
transforming ways, none of which show up in its accounts, of course. Business, on the other hand, has to
concentrate inexorably on financial measurables, which is about all that markets, traders
and analysts bother with. Indeed, the vital
but painfully slow – growing ethical investment movement may – I hope does
– represent a long term Trojan Horse in this regard.
But, as of now, Financial Markets hate the uncertainties and delays of
ethical intervention in their affairs. Not long ago I was in the company of a youngish fund manager who invested in first generation companies with prospects. When I said how fascinating it must be to be involved with the progress of the businesses, he quickly said his company made a point of only looking at the figures. To visit them, or get to know the people, would only obscure the relevant facts, he asserted. Which was the same point of view put to me by the CEO of a multi-national company I encountered who had a policy of never visiting overseas subsidiaries for fear of contamination of his objectivity. That attitude is widespread, I think, and deathly. Again, in absolute contrast, charities are in the people business first and last, and sometimes efficiency of a conventional kind will not be a useful yardstick of their effectiveness. I can vouch for this from my 30-year immersion in the charity world. Some of the most chaotic outfits have also been some of the most imaginative and creative, whilst others, which would win every Kitemark, have been lacklustre, with far fewer multiplier effects and ‘hits’. In my early days after setting up
Bates, Wells & Braithwaite in 1970, the difference between small charities and the
owner occupied businesses I acted for were not as great as people might suppose. Apart from having a self-selecting clientele,
charities and businesses more easily approximated when the ethos of the latter, in which I
include the professions, was broader and more liberal than it is today (though
owner-occupied business still have freedom as to ethos and goals.) I well remember dealing with the
remarkable inheritance of the remarkable Jackson Cole.
He, some will know, was a successful businessman who intentionally welded
his businesses and charities together with the intention that the disciplines of the
former would be at the service of the latter. Thus
it was that World in Need, Helping Hand and others of his charities enjoyed many common
directors and trustees with some of his businesses.
The experience the businessmen gained on the charity boards, and the fact
that the charities at least part owned the businesses, lent impetus and purpose to the
latter. I may say that this arrangement reminds
me of my upbringing in Sudbury, Suffolk. In
those days of local self Government with the great majority of shops and businesses
locally owned, there was an unavoidable intertwining of business, social and community
life. Self interest was rewarded by civic
engagement, which in turn created communal solidarity out of which naturally flowed good
works. Not just that, but the benefits were
invariably two way, so that givers in some roles became receivers in others, which gave
everyone a place and a purpose to the mutual esteem of all.
That reciprocity is, I believe, a crowning achievement where it is to be
found. I have also been fortunate enough to
act for Business in the Community since its early days, where some big company grandees of
the post war business world determined to reconnect their enterprises with the community
and civic life from which they were even then fast detaching. Much enlarged, BITC carries on the same broad
mission today, with considerable success, but within a context which, whilst more
attentive to corporate social responsibility and so on, is in truth having to compete in
ever more rootless and ruthless markets and financial centres. I recall two further telltale incidents
which have stayed with me down the years. One
was a lunch hosted by the then prestigious Morgan Grenfell to which came the crème de la
crème of the City. The occasion was to drum
up support for Full Employ, a charity seeking to persuade City houses to employ blacks. One speaker after another couched
tentative support for the idea in terms of the benefit to his bank, broking house or
whatever. Eventually one speaker rather
impatiently said that as far as he was concerned it was only right that the City should do
its bit in this way, and he really did not see why one had to beat about the bush in
saying so. It was like lancing a boil. The prisoners were unchained, and got down to some
lively, useful talk. Would it be any
different today I wonder? Perhaps it would,
though the public relations people might be doing much of the talking. Then I remember going to the Financial
Times at the invitation of Richard Lambert to discuss what was then thought of as a rather
radical report by the Church of England entitled “Faith in the City.” Again the room was full of big hitters from the
Square Mile, and the Chair of one of the clearing banks,
a revered City figure, started the proceedings. He opined that Christ's’ insights
should not be allowed to infect – that was his repeated word – the deliberations
of company boards. I think that that
sentiment would find a ready echo today, when lawyers, accountants and possessors of
M.B.A.’s are the new priesthood, the new Pharisees, with a dry-as-dust agenda and
outlook. Today, with communism dead and buried
and socialism almost as moribund, free market capitalism is the only ideology still on its
feet. Christianity is either in a very deep
trough akin to its plight in the mid 18th Century, which presupposes a
recovery, or in terminal collapse. Yet the
limited company – a 19th Century invention – was never designed to
exist in a moral vacuum, or be solely – and I think hopelessly – controlled by
purely legal constraints à la Gordon Brown. It is against this backdrop that, it
seems to me, the charity sector has a greater burden on its shoulders than ever before. For it clearly still stands apart from the State
and private enterprise, however closely and needfully it engages with both. It is still, despite commercialising threats,
genuinely diverse – anarchic even; truly organic; intrinsically cooperative; wholly
people centred; open hearted and generous spirited; trustful and widely trusted; often
informal and largely unbureaucratic; inclusive and non-discriminatory (apart from its
moral bias); mutual in method and communal in attitude; egalitarian in the profound sense
of valuing all equally; collaborative rather than competitive; selfless rather than
selfish; giving centred. One only has to recite that litany of
virtue to realise just how indispensable charity is to the common weal today, and how at
this strange juncture it is a unique repository of our cultural genes. One also has to
recognise that a similar critique of 21st Century big business would come up
with diametrically contrasting characteristics described in entirely different language
– a bit like juxtaposing the Sermon on the Mount with a company prospectus. In so saying I really am not condemning
business people (of whom I have always been one) so much as the system. My sense, indeed, is that modern business and
professional people are as decent and well intentioned as ever they were. Having worked in and around the City for nigh on
40 years, I think I hear the death rattle in modern capitalism so long as it is so utterly
dominated by insatiable money-making, and driven by obsessive selfishness mitigated (if at
all) only at the margins by wider civic concerns. Global
enterprise seems to me to be in a more vulnerable state than even the recent plummeting of
stock markets might indicate. Competitiveness and acquisitiveness
carried beyond a certain point place such demands upon their practitioners that their
lives become obsessive and unbalanced, and their private and personal needs displaced, let
alone any obligations to the public interest. That,
in turn, makes them less good business people as well as less good citizens. It is pure delusion to pretend that one
can unleash the dogs of competition and acquisitiveness and then control what follows. That myth, I have to say, is most believed by
those who have no direct experience of the markets they are theorising about. The only real constraint on acute
selfishness is character and a lively sense of right and wrong, best learnt by experience. To ramp up competition merely ramps up materialist
ambition (which used to be called greed) which Shakespeare correctly analysed 400 years
ago in Troilus and Cressida (so nothing is new), as “appetite, an universal wolf, so
doubly seconded with will and power, must make perforce an universal prey and, last, eat
up himself.” Despite the efforts of a few
companies, many individuals and such organisations as Business in the Community and the
Princes Trust, the world of business has largely vacated the public realm. Local communities thus deprived of business-led
leadership become additional victims of the slash and burn culture which grips the great
financial centres of the world and the companies which make them up. Is it any wonder that we suffer from such
intractable problems as a society whilst enjoying unprecedented wealth (albeit
differentially enjoyed.) So, much of modern business has much
to learn from the charity sector; from the refreshment and restoration to be gained from
taking on board a little of its magic formulae and from remembering that a single act of
unalloyed generosity can be transforming for life; that a single demonstration of
unmerited trust can be liberating for life; that companies are made up of people who need
people. In a recent article in the Harvard
Business Review Dr. Charles Handy, as acute an observer of all this as one can find, asks
“What’s a business for?” His
answer, and I quote, is that “enlightened companies exist not just to make a profit,
but to use profit to achieve a nobler end. … We should, as charitable organisations
do, measure success in terms of outcomes for others as well as for ourselves. … Companies achieve this purpose by gathering
a community of individuals who want to accomplish something collectively that they could
not do separately – people eager to make contributions to society.” I leave you with one fascinating
thought. The hundred, probably the thousand,
oldest institutions in this land are all charities. What
is the secret? I have hinted at the answers
in this talk. Certain it is, however, that
there can be no endurance without endearment. In
profound ways, dare I say it, business has considerably more to learn from charity than it
may realise. End. Andrew Phillips (Lord Phillips of Sudbury) Bates, Wells & Braithwaite Cheapside House 138 Cheapside London EC2V 6BB Tel : 020 7551 7702 Fax : 020 7551 7800 e-mail : a.phillips@bateswells.co.uk |