Business leaders split on effect of Brexit on ethical governance

By Brian Collett — The ways in which Brexit will change the ethical conduct of businesses in the UK are as uncertain as the issues that will affect their trading. 

 

The future remains vague even though politicians frequently make predictions and public opinion is constantly canvassed. 

 

Experts at the highly regarded Henley Business School decided to conduct their own study of things to come by asking 300 senior managers how they view their prospects when Britain stands outside the EU. 

 

The researchers, who concentrated on larger businesses in the manufacturing, retail and banking sectors, found, unsurprisingly, that opinion was split. 

 

Some bosses felt Brexit would make little or no change. These are the hopeful ones. 

 

Professor Nada Kakabadse, Henley’s head of marketing and reputation, who led the study with Dr Nadeem Khan, said: “Early results from the research show that businesses where income has not been impacted tend to believe that this status quo will continue in the longer term.” 

 

Others feared they would be worse off and that an exodus of talent and other unforeseen circumstances would damage the UK. 

 

The executives who were worried shared the common fear that tariffs would make purchases from EU countries dearer.

 

However, they then saw their export trade would be hit too. Although the falling value of the pound would in theory make UK goods easier to sell to buyers in the EU, many of the exported items would have used materials sourced from EU companies in the first place, thus wiping out the advantages. 

 

Some in the banking and financial services sector, says the report, expect bad times ahead but the survey figures appear optimistic. Altogether 50 per cent do not expect to suffer but 27 per cent are pessimistic. Among the traders the retailers are less optimistic. 

 

Medium-sized to large-sized organisations – those with 1,000 to 10,000 employees – are more concerned than smaller businesses and large corporates. 

 

Nevertheless, in all sectors overall 46 per cent of the survey respondents do not think they will suffer.

 

Professor Kakabadse said: “They tell us they don’t expect to be badly affected.”

 

She agreed that many businesses could, of course, be shortsighted about a future outside the EU because they have not made plans. “So many factors are unpredictable,” she said. 

 

Professor Kakabadse and her team intend now to conduct more research on post-Brexit business in Britain. 

 

The researchers will survey several industries to see what strategies they have in place, and here a radical innovation is predicted. “The whole model of industry will have to change,” said Professor Kakabadse. 

 

She believes that small and medium-sized businesses will come together. They will not become merged entities but they will work in unison without surrendering their independence. 

 

One advantage of the smaller organisations, she says, is that they are “more agile and innovative”. She observes: “They offer a more interesting environment for millennials.” 

 

The scenario featuring such change and versatility poses a challenge for ethically minded businesses. Professor Kakabadse says: “There will be new governance mechanisms for the new companies. We’ll have to look at this.” 

 

There is a challenge too for the large corporates. Professor Kakabadse forecasts: “A sentiment of anti-globalisation is coming in.” 

 

Yet this, she says, will not be the anti-globalisation that has given rise to street demonstrations in Britain, inspired mainly by left-wing political feelings. By contrast, the business executives’ anti-globalisation stand will take the form of an attitude that smaller is better. This concept may have no political origins at all, or it may be motivated by right-wing convictions. 

 

In the new scenario the socially responsible could ask whether a business will compromise on ethics if it is troubled by a climate of uncertainty generated by Brexit. 

 

For example, will it be amenable to trade union approaches and will it stand by its commitment to the local community? Will it still treat customers sympathetically and will it check suppliers for good practice? Or will it be too preoccupied with unpredictable bottom lines and unfavourable exchange rates to observe ethical principles? 

 

One of the Henley study participants, looking even further ahead, had a prophetic message for British businesses. 

 

He warned: “As a nation we have still not comprehended the Brexit impact. By the time we start taming this Leviathan it will have morphed into yet another complex beast.” 

 

And that, whatever the nature of the beast, could carry more ethical challenges.