Dynamic Business: We must plan ahead for our communities (NZ Herald)

Tim McCready

Maintaining a balance between economic and social progress is a key part of investing in our country

Should businesses provide more opportunities for employees to share in their firm’s governance, and ensure communities benefit more from their profits? These ideas appeared briefly on the radar in Britain recently.

British Prime Minister Theresa May appeared to suggest employee representation on company boards may be mandated while campaigning for the Conservative leadership, and mooted the idea of lump sum payouts (thought to be up to 10,000 ($17,746) per household) to communities affected by fracking.

The commercial end of town might also reconsider hiring policies.

Much resentment arises from a sense that upward mobility is limited for the working class. A significant driver of this is the growing norm that a university degree is essential to gain a corporate job. In the past, aspirational individuals from low income backgrounds could pursue an apprenticeship at prestigious firms in financial, administrative, or legal areas. Now they cannot without taking on three years (or more) of university fees and foregone income.

EY have already removed their GPA-threshold for screening university graduates in the UK, stating their research had “found no evidence to conclude that previous success in higher education correlated with future success in subsequent professional qualifications undertaken.”

It would also be helpful — though, granted, high risk — for some businesses to enter the political sphere when it comes to issues that affect their bottom line and, in turn, their workers. Being willing to more staunchly defend out-sourcing and its benefits — both to foreign workers and domestic consumers — would be helpful. Radio silence on globalisation implies shame about globalisation, and allows its opponents to steal the narrative.

This isn’t limited to the Trans-Pacific Partnership (TPP) debate.

Before New Zealand signed the much lauded China free trade agreement in 2008, protests were held up and down New Zealand, with claims that “so-called free trade with China has cost tens of thousands of skilled jobs in New Zealand manufacturing industries” and “under such an FTA the negative impacts will be felt by working New Zealanders and their families while the profits of transnational corporations will soar”.

The outcome was benign.

New Zealand’s trade relationship with China has nearly tripled over the past decade. Two-way trade has risen from $8.2 billion in the year ended June 2007 (the year before the free trade agreement was signed), to $23 billion in the June 2016 year.

At Apec last month, New Zealand and China announced they will upgrade the historic agreement to ensure it remains one of the highest standard agreements ever negotiated — particularly now that e-commerce has become increasingly significant for bilateral trade.

Like the Trans-Pacific Partnership, this deal received much support within the business community. Yet most businesses remain silent on why they think it is good for New Zealand. Some will argue it is for selfish reasons — that it allows the rich to get richer — but these arguments will be levelled by opponents regardless.

And very few business leaders actually made the argument for why the TPP could benefit their workers, New Zealand consumers, and citizens overseas (who, yes, are deserving of our consideration).

This will become more important as the negotiation of the Regional Comprehensive Economic Partnership (an Asia-Pacific agreement that includes China instead of the US alongside a range of other countries), gathers momentum after the breakdown of TPP.

Opposition may become vehement, with widespread public scepticism of Chinese trade potentially dwarfing that of the US, making the political cost of New Zealand’s participation high. Unless the success story of the China free trade agreement is told — and not just by politicians — our participation in this key part of the region’s future trade architecture may be hindered.

It may also be prudent for businesses to bear the costs of retraining when jobs are displaced.

Maintaining a balance between economic and social progress is a key part of investing in the future. Building strategies to invest in society will create better, brighter and stronger communities. What’s more, an investment in social change is difficult to reverse — once it takes root, it can only grow.

It is more important now than ever that New Zealand’s top businesses take a serious role in this, and consider whether certain protection measures are necessary to minimise disruption. What these companies say and do could ultimately help — or hinder — New Zealand’s ability to solve those issues that will impact the future of the country.

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