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Theresa May’s Vision of Radical Conservatism Theresa May’s Vision of a Radical British Conservatism
(about 2 hours later)
Britain’s new prime minister, Theresa May, is the leader of the Conservative Party there. Yet when it comes to the corporate world, she can sound more like Bernie Sanders than Margaret Thatcher.Britain’s new prime minister, Theresa May, is the leader of the Conservative Party there. Yet when it comes to the corporate world, she can sound more like Bernie Sanders than Margaret Thatcher.
In a speech made just before she became prime minister, Ms. May outlined a vision for corporate Britain, calling for more protectionism, a greater say for workers, more vigorous antitrust enforcement and limitations on pay for chief executives.In a speech made just before she became prime minister, Ms. May outlined a vision for corporate Britain, calling for more protectionism, a greater say for workers, more vigorous antitrust enforcement and limitations on pay for chief executives.
Her comments may not have received a great deal of attention in the United States, but her vision could inspire a new way of thinking about the role of the corporation in Britain and elsewhere.Her comments may not have received a great deal of attention in the United States, but her vision could inspire a new way of thinking about the role of the corporation in Britain and elsewhere.
Speaking in Birmingham in central England on July 11, Ms. May struck a theme similar to many stump statements on campaign trails in countries around the world. She spoke of a vision of a country that “works not for a privileged few but for every one of us.” The common worker has not seen the gains that executives have, she said.Speaking in Birmingham in central England on July 11, Ms. May struck a theme similar to many stump statements on campaign trails in countries around the world. She spoke of a vision of a country that “works not for a privileged few but for every one of us.” The common worker has not seen the gains that executives have, she said.
In Britain, wages have grown since the 2008 financial crisis, but only slowly, while low interest rates have helped “those on the property ladder at the expense of those who can’t afford to own their own home,” Ms. May said.In Britain, wages have grown since the 2008 financial crisis, but only slowly, while low interest rates have helped “those on the property ladder at the expense of those who can’t afford to own their own home,” Ms. May said.
Citing widespread unease and frustration over inequality, she said the June 23 vote by Britons to leave the European Union “was also a vote for serious change.”Citing widespread unease and frustration over inequality, she said the June 23 vote by Britons to leave the European Union “was also a vote for serious change.”
And the changes she proposed in response could have come from the mouths of leaders of the opposition Labour Party, or indeed Mr. Sanders.And the changes she proposed in response could have come from the mouths of leaders of the opposition Labour Party, or indeed Mr. Sanders.
Asserting that she was not “anti-business,” Ms. May said that nonetheless more regulation of corporations was needed.Asserting that she was not “anti-business,” Ms. May said that nonetheless more regulation of corporations was needed.
“Better governance will help these companies to take better decisions, for their own long-term benefit and that of the economy over all,” she said.“Better governance will help these companies to take better decisions, for their own long-term benefit and that of the economy over all,” she said.
To wit, she criticized companies that are run by directors drawn from too “narrow” social classes. Graduates of Eton, Harrow, Oxford and Cambridge should not dominate corporate boards.To wit, she criticized companies that are run by directors drawn from too “narrow” social classes. Graduates of Eton, Harrow, Oxford and Cambridge should not dominate corporate boards.
Instead, she called on corporations to cater more to their stakeholders. This means not just adding consumers to the board but employees, too, as is done in Continental Europe.Instead, she called on corporations to cater more to their stakeholders. This means not just adding consumers to the board but employees, too, as is done in Continental Europe.
This is indeed radical. In the United States, directors run boards for the benefit of shareholders. Ms. May, however, is calling for companies to be run by their communities.This is indeed radical. In the United States, directors run boards for the benefit of shareholders. Ms. May, however, is calling for companies to be run by their communities.
As part of this view, she was very critical of previous government decisions that had allowed foreign takeovers.As part of this view, she was very critical of previous government decisions that had allowed foreign takeovers.
She referred to Kraft’s acquisition of Cadbury, “that great Birmingham company,” and the aborted merger of AstraZeneca and Pfizer, as sales to companies with “transient” shareholders. She castigated Pfizer as “the U.S. company with a track record of asset-stripping and whose self-confessed attraction to the deal was to avoid tax.”She referred to Kraft’s acquisition of Cadbury, “that great Birmingham company,” and the aborted merger of AstraZeneca and Pfizer, as sales to companies with “transient” shareholders. She castigated Pfizer as “the U.S. company with a track record of asset-stripping and whose self-confessed attraction to the deal was to avoid tax.”
As an alternative, she argued that communities, workers and other constituents should be taken into account. This would mean protecting important industries from foreign buyers, particularly pharmaceuticals.As an alternative, she argued that communities, workers and other constituents should be taken into account. This would mean protecting important industries from foreign buyers, particularly pharmaceuticals.
Deal makers may have already taken note of her concerns. In announcing its $32 billion deal for the British chip designer ARM Holdings on Monday, SoftBank of Japan was keen to demonstrate its commitment to such local constituents, promising to keep ARM’s headquarters in Cambridge and to double the number of British workers in five years.Deal makers may have already taken note of her concerns. In announcing its $32 billion deal for the British chip designer ARM Holdings on Monday, SoftBank of Japan was keen to demonstrate its commitment to such local constituents, promising to keep ARM’s headquarters in Cambridge and to double the number of British workers in five years.
As for executive compensation, Ms. May urged that Britain adopt the United States regulatory requirement that companies publish the ratio of pay between their chief executives and their employees’ median pay. And, more aggressively, she called for mandatory shareholder votes on chief executive pay.As for executive compensation, Ms. May urged that Britain adopt the United States regulatory requirement that companies publish the ratio of pay between their chief executives and their employees’ median pay. And, more aggressively, she called for mandatory shareholder votes on chief executive pay.
Britain has led the way in requiring shareholder votes, a stance that has been adopted by American securities regulators. But such votes, in Britain as in the United States, have been nonbinding. Ms. May’s proposal would make them binding, leaving the decision on executive pay in the hands of shareholders.Britain has led the way in requiring shareholder votes, a stance that has been adopted by American securities regulators. But such votes, in Britain as in the United States, have been nonbinding. Ms. May’s proposal would make them binding, leaving the decision on executive pay in the hands of shareholders.
Ms. May concluded by calling for a more rigorous antitrust regime in “highly consolidated markets” like banking and utilities. This is a hot-button issue. Senator Elizabeth Warren, for one, has argued that industries have become too concentrated. We live in a world where two or three big companies dominate a single industry such as wireless or media. And there are some signs, albeit disputed ones, that this trend is pushing up prices for consumers.Ms. May concluded by calling for a more rigorous antitrust regime in “highly consolidated markets” like banking and utilities. This is a hot-button issue. Senator Elizabeth Warren, for one, has argued that industries have become too concentrated. We live in a world where two or three big companies dominate a single industry such as wireless or media. And there are some signs, albeit disputed ones, that this trend is pushing up prices for consumers.
It may be tempting to dismiss Ms. May’s words as simply populist political talk. It was a campaign speech after all, as she was seeking the leadership of the Conservative Party. And whether she will press for such an overhaul now that she is prime minister remains to be seen.It may be tempting to dismiss Ms. May’s words as simply populist political talk. It was a campaign speech after all, as she was seeking the leadership of the Conservative Party. And whether she will press for such an overhaul now that she is prime minister remains to be seen.
Still, the changes she outlined, in tying corporations more closely to the state, represent a significant shift from the generally laissez-faire positions the Conservatives have held since the Thatcher revolution of the 1980s.Still, the changes she outlined, in tying corporations more closely to the state, represent a significant shift from the generally laissez-faire positions the Conservatives have held since the Thatcher revolution of the 1980s.
Ms. May’s proposal has the potential to be equally revolutionary: a call to rethink not just the supervision of the corporation but the state’s relationship to the corporation.Ms. May’s proposal has the potential to be equally revolutionary: a call to rethink not just the supervision of the corporation but the state’s relationship to the corporation.
In Britain, as well as in the United States, the company has historically been viewed as a for-profit entity that is responsible to shareholders. This does not mean companies ignore communities and other constituencies, but that the primary goal of a company under established law is profit.In Britain, as well as in the United States, the company has historically been viewed as a for-profit entity that is responsible to shareholders. This does not mean companies ignore communities and other constituencies, but that the primary goal of a company under established law is profit.
This means boards are elected and appointed by shareholders who have a right to that profit. It also means that in the name of a free market, protectionism is reduced, rather than enhanced, to produce greater returns for shareholders.This means boards are elected and appointed by shareholders who have a right to that profit. It also means that in the name of a free market, protectionism is reduced, rather than enhanced, to produce greater returns for shareholders.
Of course, there are departures from these principles. The United States has a national security review process, and at times Britain has tried to adopt “golden share” programs to stave off takeovers. (The European Union struck those down.) But generally speaking, in both countries, there is no scrutiny of who the owners are as long as there are no security, antitrust or other regulatory problems.Of course, there are departures from these principles. The United States has a national security review process, and at times Britain has tried to adopt “golden share” programs to stave off takeovers. (The European Union struck those down.) But generally speaking, in both countries, there is no scrutiny of who the owners are as long as there are no security, antitrust or other regulatory problems.
This is different from the approach taken elsewhere in Europe. There, employee representatives sit on boards, and governments have moved to protect national champions. The government of France designated the yogurt maker Danone as a “national champion” and thus safe from foreign takeovers.This is different from the approach taken elsewhere in Europe. There, employee representatives sit on boards, and governments have moved to protect national champions. The government of France designated the yogurt maker Danone as a “national champion” and thus safe from foreign takeovers.
Yet Ms. May is calling for companies to be more integrated with their stakeholders and the state itself.Yet Ms. May is calling for companies to be more integrated with their stakeholders and the state itself.
This is more akin to the socialism of Europe and Mr. Sanders than to the privatizing of British state enterprises under Mrs. Thatcher.This is more akin to the socialism of Europe and Mr. Sanders than to the privatizing of British state enterprises under Mrs. Thatcher.
In her speech, Ms. May acknowledged that her program marked “a break with the past.” She argued, however, that it was consistent with Conservative principles because conservatism was about “communities” and “society.”In her speech, Ms. May acknowledged that her program marked “a break with the past.” She argued, however, that it was consistent with Conservative principles because conservatism was about “communities” and “society.”
It’s unclear if Ms. May’s measures would work. For example, would a mandatory shareholder say on executive pay actually curb increases in compensation or make companies run better? In any case, that particular measure would very likely tie companies more closely to their shareholders and force more engagement, something we have already seen in the United States.It’s unclear if Ms. May’s measures would work. For example, would a mandatory shareholder say on executive pay actually curb increases in compensation or make companies run better? In any case, that particular measure would very likely tie companies more closely to their shareholders and force more engagement, something we have already seen in the United States.
There is a certain paradox in all of this. Just as Britons have voted to separate from Europe, her plan looks very European. It seeks greater engagement with workers and communities, as well as with shareholders — something that would not look out of place in, say, Germany.There is a certain paradox in all of this. Just as Britons have voted to separate from Europe, her plan looks very European. It seeks greater engagement with workers and communities, as well as with shareholders — something that would not look out of place in, say, Germany.
Given that the same issues are percolating, if not on the boil, in the United States, it may not be long before Ms. May’s ideas are picked up here. The only question is whether Democrats or Republicans will do so.Given that the same issues are percolating, if not on the boil, in the United States, it may not be long before Ms. May’s ideas are picked up here. The only question is whether Democrats or Republicans will do so.