Thursday, August 26, 2010

Stephen Green on the sustainability of businesses

Asia Society has an interview with HSBC Bank Chairman Stephen Green, who is also an ordained minister of the Church of England, on the nature of doing business. Here is the transcript that I've done based on the 2 minutes snippet of the 72 minutes long program:

"I think, firstly, it is clear to me that businesses have that responsibility which we were just talking about: to think about how their activities contribute to the common good.

Now they got to be profitable, they are not charity. They job is to grow the business profitably. But they need to think about that on a sustainable basis.

Sustainability means not the next quarter, maximizing quarter by quarter. It means thinking about a sustainable business model that earns profit, that earns a return on the capital that are entrusted to them by their shareholders.

And if you think about that in a long term perspective, that takes you into think about the engagement of your people and on a long term commitment to the business. It also very importantly takes you into the question of the social responsibility of the company. And corporate social responsibility often actually becomes a buzzword which is a problem. And it certainly often been talked about as though it is an adjunct to the rule of business of the company: "That will keep the activist off my back." Well no, actually that's the raison d'être (reason for being) of the business.

So thinking about the social responsibility of the business is not at all inconsistent with long term profitable development of the business model. Not at all. On the contrary, these things are interdependent. So that's for the businesses, and it creates a board level and a senior management level to be thinking about the specific implication of that.

The onus to government. One of the characteristic of market fundamentalism in its extreme form anyway is the belief that the market is self-policing; the more it is left alone, the more better everybody will be. Well, I don't think that is ever true. And certainly the current crisis has told us that's not true.

The fact is that the market is not, and we know it and anybody who has a longer term perspective of history will know it, the markets are not self-policing. They are not self-stabilizing. You need governmental oversight. You need an appropriate regulation. There are all sorts of wrong way to do regulation of course. But there is no sense in my view that you can run complex modern economy in complex modern market without a fairly extensive and carefully calibrated governmental involvement. So absolutely governments have a role, so do businesses and so, of course, the individuals."

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