Private Business, Public Battleground by John Egan and Des Wilson (Palgrave 2002)

This book is another stage in the campaign to reposition British companies for the 21st Century. The campaign started in 1973 with Charles Handy's challenge to the Royal Society of Arts to rethink the role of business into the future, which led to the "Tomorrow's Company" Report in 1995 and the creation of the Centre for Tomorrow's Company (CTC). Sir John Egan was Chairman of CTC until he became President of the CBI.

The key finding of the "Tomorrow's Company" Report was the need to make British business more inclusive, by reaching out into society and engaging with the various "stakeholders" who might influence its performance. It challenges the exclusive focus of company law on shareholders, and the concept of shareholder value which was then the new orthodoxy. It came near to dethroning the shareholder as primary stakeholder, certainly in early drafts of the Report, but settled for a new focus on "inclusiveness", whereby companies recognised the need to work with external groups which had the means to influence long term success.

Since 1995 CTC has campaigned to increase awareness of the findings of the Report. Their work has been supported by others; in 1999 a consortium of businesses and advocacy groups published "A New Vision for Business", aiming to end the shareholder v stakeholder debate definitively. It concluded that inclusive companies were "more competitive in the short term and more sustainable in the long term than those which focus exclusively on the financial bottom line".

This debate has been supplemented by more vigorous attacks on the current model of capitalism, particularly in the USA . Marjorie Kelly's book "The Divine Right of Capital - Dethroning the Corporate Aristocracy" (Berrett-Koehler 2002) states: "We have democritized only government - not economics". The polemical attack on business targets company directors and the financial structure which supports them. "Employees are in essence a colonized people", rather as New Englanders were oppressed by King George III. Shareholder primacy is seen as a relic of the joint financing of sea voyages from the sixteenth century onwards.

John Egan and Des Wilson worked together at BAA following its privatisation in order to change internal culture and develop the business in a growing and competitive market. John Egan had used scenario planning, with support from St Andrews Management Institute, in order to widen the horizon of BAA's strategic thinking. This study underlined the crucial importance of obtaining planning permission for Terminal Five at Heathrow (both Amsterdam and Paris were expanding fast) but showed starkly the need to overcome multiple opposition to expanding air travel, and Heathrow in particular. "Private Business, Public Battleground" is a detailed account of the work done to engage all constituencies involved in sanctioning any expansion of air travel. It is also a voyage of discovery and experiment, showing the difficulties of changing mindsets internally and of turning external opposition into a series of deals with shared benefits. More importantly the voyage changed the ship. At the start BAA was inward-looking and technocratic; by the end it had become part of a much wider social structure, increasing support for its mission and releasing human energies to support its technical competence.

The key thesis of the book is that social responsibility builds profits. Working with other stakeholders can create value for all, as emphasised by a Timberland executive quoted by Egan and Wilson: "We perceive and deal with social issues in a non-traditional manner. We don't give money to charity. Instead we try to create a return". Timberland works with its stakeholders to integrate social activities into its strategies, reinforcing those social activities and making its own business sustainable. This approach links well with current thinking on building and sustaining corporate reputation.

Out of the detailed analysis of BAA's experience and some supporting evidence, emerges the conclusion that stakeholders are the ultimate arbiters of company fortune. Companies, therefore, exist for stakeholders, not only for shareholders.

It would seem that "stakeholder theory" may move closer to stakeholder practice with the new Companies Act. Shareholders will remain the legal owners of the company and be entitled to the residue of revenue after operating and other costs (in recognition of their risk-bearing role). The book illustrates dramatically the shift in thinking about company law which has occurred in the last ten years; it also signals the possibility of a seismic shift in the philosophy of capitalism in the near future.

"Private Business, Public Battleground" is well researched and written. It focusses exhaustively on the experience of one company and makes a well-argued case for an inclusive approach to business direction. The case would be strengthened by a wider pool of evidence; could this book be the first of a series, written by the lead actor in each case? A key part of the compulsion of this book is the fact that it is written by those who directed events, and with a frankness and modesty lacking in most CEO autobiographies.

Key pointers from the book include John Egan's use of the mission statement as a working benchmark. This requires a better and more robust mission statement than that used in most companies - in his case it obviously worked. Another key pointer is the use of company codes of conduct. These need to be widely accepted in the company, and reflected in the conduct of top managers, if they are to have value. Too many codes of conduct become a hostage to fortune. Naomi Klein's "No Logo" (Flamingo 2000) is quoted (referring to Saul Alinsky's theory of political jujitsu): "No organisation can live up to the letter of its own book. You can club them to death with their book of rules and regulations". Wiser companies focus on principles; many are following Shell in making these part of the contract of employment, with failure of observance a cause for dismissal. Another key pointer from the book is the need to ensure that public relations activity builds on company values and does not hide failures to observe them (Sir Robert Wilson of Rio Tinto is quoted tellingly in this respect: "We should not try to sway public opinion but rather to accept we have made mistakes ….. engage with our critics ….. to define priority areas to try to improve performance").

More emphasis should have been given to the trade-off between the long and short terms. Reputation takes years to build and can be lost in an instant (Gerald Ratner). More examination of the impact of networking would have been interesting, not least in the case of the Internet. The world wide web makes it harder to hide poor performance or bad intentions - President Suharto of Indonesia was unable to move stolen funds due to crowds summoned by mobile 'phone and the Internet.

John Egan and Des Wilson have written a book which is a milestone in the process of developing corporate citizenship. They have shown how a company can take the initiative in building links with society, ensuring that its agenda is not swamped by conflicting external pressures but placing itself at the centre of a process which produces value for all who participate. This book is sensible and useful. I hope that other business leaders will produce supporting testament to the value of inclusive capitalism.

Adrian Davies