Economics

Michael Schluter, with colleagues from Relationships Global, has just presented an excellent downloadable document on transforming capitalism from within, particularly concerning company law (see www.relationshipsglobal.net).

"...if our relationships are so fundamental to our well-being, why do we keep forgetting to take account of them in our strivings? Wouldn't we be better off if we got into the habit of viewing all our endeavours through a lens that focused on their implications for our relationships?"  Ross Gittins, Sydney Morning Herald economics editor, writing about Transforming Capitalism from Within.

"Transforming Capitalism" is a fresh approach to the purpose, performance and assessment of companies based on the idea that stakeholder relationships lie at the heart of companies. 

The report is based on several years of research into the concept of 'relational companies', culminating in the creation of a Relational Business Charter. 

The ten points of the Charter are below; for more detail, read the executive summary or download the full 72-page report by Jonathan Rushworth and Michael Schluter. 

On the basis of this Relational Business Charter, a framework for assessing the social impact of corporates is being developed in South Africa, in response to the King III corporate governance requirements. 

The Relational Business Charter and proposed Relational Ratings Agency will permit companies to be scored on their "relational rating".  Their relational scorecard will complement financial and environmental indicators to act as a guide for investors, customers and potential employees.

Those interested in discussing the Transforming Capitalism from Within report, can visit the www.relationshipsglobal.net blog

The Ten Points of the Relational Business Charter:
A company will be recognised for the purposes of the Charter as having a relational ethos and operating in a relational manner if it has the following characteristics:
1. Set relational goals. The company includes a Relational business objective in its constitution, and demonstrates commitment to implement it, providing appropriate training to investors, directors and employees.
2. Create stakeholder dialogue. Dialogue is promoted among all significant stakeholder groups, through regular face-to-face meetings and, where that is not possible, through regular on-line communication.
3. Demand shareholder transparency. There is direct and transparent (named) ownership of a significant proportion (perhaps 25%) of the shares by individuals (or family trusts).
4. Encourage long-term ownership. A high proportion of the shares are owned on a long-term basis (which may be incentivised by issuing additional shares to long-term shareholders).
5. Safeguard work-life balance. There is evidence of management having respect for the interests of employees (e.g. with regard to length of working hours, atypical hours, and other employment conditions).
6. Lower pay differentials. The dignity of all employees is respected by minimising remuneration differentials within the business (taking, for example, a 20:1 ratio between top and bottom as a benchmark)
7. Build supplier partnerships. Suppliers are treated fairly and with respect, paid promptly, and given support to develop their businesses.
8. Respect customers & communities. Customers and the local community are treated fairly and their concerns are respected (e.g. with regard to service provided and payment terms).
9. Promote financial stability. The risk of company financial instability is minimised to protect the company and its stakeholders (assessed with reference to debt:equity ratios and/or levels of interest cover).
10. Fulfil social obligations. Obligations to wider society are fulfilled, assessed with reference to the percentage of profits paid in tax in the country where those profits are earned and also the percentage of profits spent on corporate social responsibility.