Irish business: restoring its image

Lew Glucksman, former Chairman of Lehman Brothers and one of the towering figures of international business, who died recently in Ireland, spoke of the merits of a healthy tension between government and business that results in an effective legal and regulatory framework.  Too much regulation stifles enterprise, too little fosters friction, scandal and corruption.  Ireland could strengthen its international competitive position and the environment for enterprise by replacing outdated and redundant accretions of regulation and legislation within revised structures based on international best practice. A robust but simple framework that supports good business practice, while regulating unfair competition and penalising malpractice, could benefit both business and society.

The standing of Irish business has suffered during recent years as a result of tribunal revelations, reports of unfair treatment of foreign workers and business malpractice, especially in the banking sector. As a result public pressure grows for greater regulation of enterprise.

It is becoming clear to many business leaders that it is far better for enterprise to take the lead in championing ethics and social responsibility that struggle within a stifling cocoon of government regulation. The concept of ‘corporate social responsibility’ has been well developed in the years since the Nobel Laureate Milton Friedman proclaimed that ‘an ethical company is an oxymoron: a corporation’s principal purpose is to maximise returns to its shareholders, while obeying the laws of the countries within which it works’.

Research has since shown that in the longer term corporate virtue pays off and the slogan has emerged ‘doing well while doing good’.  A strong business case is made to support such an idea and demonstrate that expenditure on certain social and environmental initiatives can contribute to maximising profits.

A company that has a good reputation for social responsibility finds it easier to recruit and retain high calibre people and a beneficial ‘feel good’ atmosphere develops among staff. Building a genuine culture of ‘doing the right thing’ within a company can offset the risk of the organisation’s reputation being damaged by someone creating a corruption scandal. A company held in high regard has easier access to capital and its economic value is boosted. Building a public reputation for commitment to ethical values can separate a company from the competition in the minds of consumers. Substantial voluntary steps towards high ethical, social and environmental standards reinforce the public view that further regulation is unnecessary.

The challenge for business and indeed for government is to demonstrate good reason for rolling back some of the layers of regulation that have been introduced gradually and are now acting as a deterrent to investment in Ireland.

John Horgan, former Chairman of the Labour Court, recently highlighted the extraordinary extent to which labour regulation has encroached in Ireland.  “In this country we now have perhaps the most regulated system in Europe with 25 separate pieces of legislation and 7 enforcement bodies.” Horgan states:  “We now have a system of labour laws which not only provides a minimum floor below which no workers will fall but, unique in the Western world, we have a mechanism which provides that if an employer does not recognise a trade union it can be forced by the state to pay wages and provide conditions of employment which would be granted to trade unions if they did recognise them. Most employers still find this literally incredible and so don’t believe it.  Yet it is true.”

Acquiring such a reputation is not good for Ireland.  Positive attitudes towards enterprise and the lack of intrusive regulation have played important roles in attracting overseas investment. Ireland’s economic success has been created as a result of the large number of overseas high-tech and service organisations that have chosen to locate here. Over 80 percent of Irish exports are produced by multinationals.  This investment is highly mobile and the regulatory situation outlined by Horgan is unlikely to be helpful in corporate boardrooms as escalating costs in Ireland make relocating to some other country increasingly attractive.

Before the current drift abroad of overseas corporations becomes a flood it would be wise for government to take a fresh look at the web of regulation and wise for business, at the same time, to sort out its own affairs so that public pressure for regulation is reduced.

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