Rethinking Business in a Post Trump World
Donald Trump's shock US election victory is another reason why big business needs to take a long hard look at itself.
Not because of the direct economic implications of Trump's policies, which may not be as bad for markets as initially feared, but because it confirms the rise of populist politics and a backlash against big institutions which is not good for the so-called corporate "elite".
This revolt is also manifesting itself in the wave of protest votes against executive salaries during the current annual general meeting season.
This means big business has to rethink its relationship with politics and how it is viewed by the wider community.
This has been clear in Australia since the big end of town failed to influence the outcome of the July election in an environment of increasing hostility and mistrust towards companies, particularly the banks.
The Business Council of Australia's (BCA) efforts to influence the political mood has come under a lot of scrutiny and corporate Australia complaints policy is being dictated by politicians who do not understand business, threatening economic progression.
Steve Johnston – the finance chief at financial services group Suncorp – has taken a different approach on the issue.
In a timely speech to a business lunch on Thursday, he argued that the business community does not properly understand politics or public policy and needs to do something about it.
"I think you can't argue with the notion that big business and governments of both major parties have taken our eyes off the ball," he told the Trans-Tasman Business Circle on Thursday.
"We have lost sight of our core responsibilities."
Johnston says the Australian and US election outcomes highlight the fact that business must expand its horizon from the elected government and engage across the broad spectrum of parties and individuals.
"We must understand them and their agenda, not disregard them as we may have done in the past."
The other challenge for companies is getting the message across that they are acting in the best interests of customers and the community, not just shareholders. He calls parliament the new "unpredictable corporate regulator".
"Gone are the days when the interests of government and business were so aligned that it was in neither's interest to rock the boat.
The spectacle of the CEOs of our four largest financial institutions being summonsed to Parliament to explain themselves is just a precursor of what can be expected into the future."
Johnston suggests five things business should do.
This includes doing a better job of looking after customers and recognising some of the disenfranchisement which feeds populist politics is created by business itself. It should also speak up more and defend good public policy.
"We have left a gaping hole, a vacuum, for the reactive policy development that we see today.
We have not been active enough in ensuring that the facts are clearly articulated to balance the argument being perpetrated by sections of the community that big business is bad."
He also said that business should look at the big picture and stop using political uncertainty as an excuse to delay investment.
He correctly says that CEOs who wait for the political air to clear could be sitting on their hands for a long time. Finally, he says there needs to be a better transfer of skills between the public and the private sector which the United States is better at doing.
Elsewhere, economists are now trying to make sense of what a Trump victory means in the long-term. While markets recovered on Thursday some believe there are still longer-term negative forces to play out further down the track.
Colonial First State chief economist Stephen Halmarick says there are three phases when assessing the impact of Trump's victory.
The first was an initial sell-off in markets on Wednesday because investors hate uncertainty. Phase two is the realisation that some of Trump's politics may be good for inflation and the economy.
However, phase three, which will kick in later next year and in 2018, is concern that the US central bank will have to raise interest rates more aggressively than the market has priced in and the impact of protectionist policies. Not to mention the potential "black swans" lurking in a Trump presidency.