Society increasingly distrusts capitalism

Last week the Legatum Institute published its report on public opinion in the post-Brexit era with a particular focus on attitudes towards the economy and different economic systems. The report, co-written by Populus head of analytics James Kanagasooriam and based on Populus survey data, underlined the growing reputational challenge faced by corporates.

Put simply, people don’t much like capitalism. Regardless of age or, more strikingly, political affiliation, people tend to associate capitalism with greed, selfishness and corruption. It is no surprise, therefore, that people are also likely to believe that regulation is necessary, again regardless of age or political affiliation.

What should worry corporates is how far people seem prepared to go in policy terms. The survey found widespread support for capping the pay of senior executives and more Government regulation for corporate behaviour, and people were also more likely than not to believe that companies have a responsibility to ensure worker representation at board level. Regardless of the practicability or desirability of such policies, they send out a clear message: people do not feel that big business has got its priorities right.

The events of the last two weeks further evidence the point. Ryanair has been accused of seeking to avoid its legal obligations to thousands of passengers whose flights have been cancelled due to the company’s mismanagement of a change in its holiday system, while Uber has seen its London licence revoked due to criticism of its working practices and allegations it has failed to protect passengers. For those who think that capitalism means businesses putting profit before doing the right thing by customers, employees, and society more broadly, these case studies could hardly be more compelling.

These views have, of course, been recognised by political parties. The Labour party is determined to emphasise negative public opinion towards big business in order to justify its policy agenda, especially when it comes to industries it would like to take back into public ownership. Meanwhile the Conservatives, after their chastening general election performance, are caught between attempting to make the positive case for capitalism while pursuing punitive policies against, for example, energy companies.

The stage seems set, then, for an extremely difficult period for big business. But the picture is not all doom and gloom. When Populus looks beyond broad attitudes towards capitalism and analyses the reputations of individual companies, it becomes clear that the capitalist model doesn’t inevitably lead to negative opinion. Strong brands known for their commitment to good customer care and excellent working practices (for example John Lewis) or for consistently innovating to provide an excellent service (like Google) are able to enjoy excellent reputations regardless of their profit margins. And there are newer companies such as Ovo in the much-maligned energy sector that are making corporate responsibility a point of differentiation rather than a box to be ticked.

The lesson here is that while making money is a must for any business, it seems that consumers are becoming increasingly sensitive to the manner in which those profits are made and the quality of the service being offered. What is more, the public appetite is there to respond to any failure to meet these demands with regulatory intervention. It is therefore more imperative than ever that companies seek to proactively understand and manage their reputations; failure to do so could be very costly indeed.