Giving voice to a new, inclusive and transformational capitalism

“…just as any revolution eats its children, unchecked market fundamentalism can devour the social capital essential for the long-term dynamism of capitalism itself”, Mark Carney, 27 May 2014

This analysis from Mark Carney helped to shape the Inclusive Capitalism conference hosted by the Lord Mayor of London which I was privileged to attend. The Governor of the Bank of England and Chairman of the Financial Stability Board (FSB) spoke about the destructive effects of market fundamentalism – how, over the last few years, we have moved from a “market economy” to a “market society”. Carney argued that social capital has been destroyed in the process – the shared understanding by society of the values on which our system of economic decision-making and capital allocation is based. Carney has argued previously about the importance of relationships to building trust and a longer term approach to economic decision-making.

I could not agree more. The purpose of capitalism should be greater than the pursuit of short-term financial profit alone. In many ways, to view capitalism through the prism of financial capital alone is a distortion of the concept and a set of values that has transformed our economy and society many times over – from the industrial revolution to huge advances in transportation, technology and globalisation that have driven healthcare innovations, a reduction in poverty and advances in education.

As IMF Managing Director Christine Lagarde said at the same conference, changing behaviour is absolutely essential for rebuilding trust – “the lifeblood of the modern business economy”. Getting back on the right track “requires investors and financial leaders taking values as seriously as valuation, culture as seriously as capital”.

I do believe that corporate reporting, and <IR> specifically, is relevant to this discussion. <IR> creates a self-reinforcing ‘value loop’, enabling a business to remain focused on value creation, not just in a short-term financial sense, but by taking account of the external context, the people and relationships, intellectual, societal and environmental “capital” that the business uses and interacts with every day. In doing so it allows everyone’s talents to flourish, as M Lagarde put it, by unlocking innovation as the powerful accelerator of efficiency, productivity and growth – allied to development.

<IR> reinforces a business’s place in society where, in truth, it should always be – not as a cypher for government policy or social action, but to fulfil its core purpose of using resources and relationships to create value over the short, medium and long-term.

A modern, dynamic and successful economy needs corporate reporting to give voice to a new, inclusive capitalism, capable of building prosperity and trust, benefiting society and transforming lives. It is an ambition we should all work hard to fulfil.