Public sector contracts should no longer be given to the lowest bidder but awarded to “social business” companies that agree to share profits with staff and employ local workers, a leading businessman has said.
Phillip Ullmann of Cordant Group, one of the country’s biggest recruitment firms, said that British business needs to fundamentally change its approach in response to growing public distrust.
In a paper published by the Social Market Foundation think-tank, Ullmann said that the law should be changed so that public service contracts are awarded on the basis of “social value” and not just financial cost.
Company rules should also be overhauled to put executives under a legal duty to consider the interests of workers and local communities alongside those of shareholders.
Ullmann, who has capped his own pay and is setting up a “profit pool” to share with his staff, said that only radical changes in the rules for companies and public procurement can address populist arguments that the market economy is “rigged”.
Highlighting the collapse of Carillion Group, which is likely to cost taxpayers hundreds of millions of pounds, Ullmann said that public sector contracts that appear to favour companies must be ditched.
He said:
“Flawed public procurement deals that leave taxpayers bearing all the risk are the best way anyone has yet devised to persuade voters that the modern economy really is a rigged game. New rules are overdue.
“Public services should be delivered by accountable social business that employ locally, share profits, and cap pay and dividends.”
In his paper, he set out how the Public Services (Social Value) Act, which covers government contracts, can be reformed to favour sustainable businesses over those who simply promise to deliver most cheaply.
He also proposed reform of the Companies Act to put new duties on executives to look after the interests of people and groups affected by their firm’s actions, including workers. Companies should be required to draw up a Social Mission Statement and then face statutory audits to assess how well they are doing in reflecting stakeholders’ interests.
Ullmann insisted that a new approach to business and society is the best way for firms to protect their long-term profits.
He said:
“Profit is and must remain one of the key driving forces of business, but who receives that profit? If it is only a remote few, the cost in public trust will become unsustainably high and our licence will be withdrawn.
“The days of companies driven by “shareholder value” and nothing else are over. We must start to share our profits more fairly, or there will be no profit for anyone.”
Ullmann’s paper comes as growing numbers of business leaders acknowledge the need for major change to win back public trust. Larry Fink of BlackRock, one of the world’s biggest investors, this year wrote to CEOs telling them: “Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders.”
According to the 2018 Edelman Trust Barometer, trust in business has fallen to 43% and 60% of people expect business leaders to take action to make their companies more responsible, instead of being forced to change by politicians or regulators.
James Kirkup, SMF Director said:
“Phillip Ullmann isn’t a commentator or a politician. He’s a business leader running a major company. So when he says that business needs to do things differently, focussing on social impact and sharing its profits, people should listen.
“Making companies and their leaders more mindful of its duties to society is essential to rebuilding trust in business and a market-based economy. Any politician or leader who wants to defend Britain’s open economy from populist anger should read this paper carefully.”
Notes to Editors
The report can be accessed https://www.smf.co.uk/publications/from-mission-to-impact/
The paper will be formally launched at an event in central Westminster on the evening of Wednesday 9 May 2018. For more information please contact Laura Webb, SMF Head of External Affairs and Partnerships on laura@smf.co.uk
Phillip Ullmann has written an oped in the Telegraph about his paper here
Interviews/media enquiries: Please contact Laura Webb on 07502048969 or laura@smf.co.uk, or Tom Batchelar, TAB Communications on 07814964287 and Lizzie Woolley, Weston Partnership on 07881923530.
About Cordant Group:
Cordant Group is the UK’s second largest recruitment and services firm with revenues of £850 million employing 125,000 people. Cordant offers integrated services including recruitment, security, cleaning and technical electrical services. Founded in 1959, Cordant remains a leader in recruitment and integrated facility services and in September 2017 became the largest social enterprise in the UK.
About the SMF:
The Social Market Foundation (SMF) is a non-partisan think tank. We believe that fair markets, complemented by open public services, increase prosperity and help people to live well. We conduct research and run events looking at a wide range of economic and social policy areas, focusing on economic prosperity, public services and consumer markets. The SMF is resolutely independent, and the range of backgrounds and opinions among our staff, trustees and advisory board reflects this. The SMF is publishing Phillip Ullmann’s paper to stimulate political and public debate about the role of business in a fair economy. Views expressed in the paper are those of the author.
