Public sector contracts should no longer be given to the lowest bidder but awarded to “social business” companies that agree to share profits with staff and employ local workers, says Phillip Ullmann of Cordant Group, the family-owned services contractor and recruitment firm, said that British business needs to fundamentally change its approach in response to growing public distrust.
In a paper published by the Social Market Foundation (SMF) think-tank, Ullmann said that the law should be changed so that public service contracts are awarded on the basis of “social value” and not just financial cost. Company rules should also be overhauled to put executives under a legal duty to consider the interests of workers and local communities alongside those of shareholders.
Ullmann, pictured, has capped his own and executive pay at the limit of 20 times the lowest paid workers in the business, effectively the National Minimum Wage; likewise capped dividends paid to shareholders; and is setting up a “profit pool” to share with his staff. In September 2017 Cordant became a social enterprise. He said that only radical changes in the rules for companies and public procurement can address populist arguments that the market economy is “rigged”. Highlighting the collapse of the engineering contractor Carillion Group, Ullmann said that public sector contracts that appear to favour companies must be ditched.
He said: “Flawed public procurement deals that leave taxpayers bearing all the risk are the best way anyone has yet devised to persuade voters that the modern economy really is a rigged game. New rules are overdue. Public services should be delivered by accountable social business that employ locally, share profits, and cap pay and dividends.”
In his 18-page paper, he set out how the Public Services (Social Value) Act, which covers government contracts, can be reformed to favour sustainable businesses over those who simply promise to deliver most cheaply. He also proposed reform of the Companies Act to put new duties on executives to look after the interests of people and groups affected by their firm’s actions, including workers. Companies should be required to draw up a Social Mission Statement and then face statutory audits to assess how well they are doing in reflecting stakeholders’ interests. Ullmann insisted that a new approach to business and society is the best way for firms to protect their long-term profits.
He said: “Profit is and must remain one of the key driving forces of business, but who receives that profit? If it is only a remote few, the cost in public trust will become unsustainably high and our licence will be withdrawn. The days of companies driven by “shareholder value” and nothing else are over. We must start to share our profits more fairly, or there will be no profit for anyone.”
James Kirkup, SMF Director said: “Phillip Ullmann isn’t a commentator or a politician. He’s a business leader running a major company. So when he says that business needs to do things differently, focussing on social impact and sharing its profits, people should listen. Making companies and their leaders more mindful of its duties to society is essential to rebuilding trust in business and a market-based economy. Any politician or leader who wants to defend Britain’s open economy from populist anger should read this paper carefully.”
Meanwhile the first full annual strategy was published by Sir David Metcalf, the Director of Labour Market Enforcement. It sets outs his recommendations to improve state-led enforcement of employment rights including measures to be taken by the three labour market enforcement bodies: the Gangmasters and Labour Abuse Authority (GLAA), the Employment Agency Standards Inspectorate (EAS) and the HMRC National Minimum Wage and National Living Wage team (HMRC NMW).
