One of the lasting effects of the financial crisis was the reputational battering taken by the business community and a view that many companies had lost sight of some fairly fundamental values in the quest for higher profits (and bonuses).
Whether one views this as a deeply philosophical question or a matter for PR, events over the past few weeks have provided another reminder that there are still some fairly deep-rooted issues that need addressing. Look at VW’s ‘diesel-gate’ and the debate surrounding the introduction of the national living wage.
Let me start with the national living wage. Since George Osborne’s announcement, numerous large businesses have lined up to lament its likely impact and economists have flagged the risk it poses to inflation, even though everywhere else we seem to be more worried about deflation. No doubt similar arguments were made when the minimum wage was introduced 15 years ago. I am not an economist, but I would ask a more basic question: if your business model depends on paying lots of people as little as you can get away with, is it really sustainable?
I doubt there are many readers of Property Week for whom the introduction of the national living wage will represent a windfall and you may wonder what all of this has to do with property. However, if you’re an investor in the retail or healthcare sectors, where the effect of the national living wage will be greater and where it will have to be mitigated by higher prices, greater productivity or lower profits, there must be an impact on rental values. If you have VW as a tenant, or another business that suffers a huge reputational blow, there will be an impact.
My broader point, though, is that with rising income inequality such an issue, and public trust in business still fragile, there will be more reputational causes célèbres ahead. As such, businesses and investors need to be increasingly far-sighted to navigate them. The amount of tax paid (or not) by large corporations has not gone away as an issue in the public eye and just this week, the governor of the Bank of England warned about the lack of adequate response in the corporate world to the threat of climate change. Will one of these be the root of the next backlash against business?
What is clear is that it is no longer enough just to be employing people and providing returns to investors. Businesses need to think more deeply about, and be able to articulate, the value they add to the communities they are part of, and their priorities and actions need to reflect that. Companies that grasp this (and their underlying real estate) will build up a bank of goodwill in their brand and be the winners in the long term.
Mark Allan is chief executive officer of Unite Students