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Joe Zammit-Lucia
Joe Zammit-Lucia is a RADIX Co-Founder and board member. He is an entrepreneur and commentator on business and political issues writing in outlets in the UK, US, Germany and the Netherlands. His particular interest is the relationship between business and politics.
In 2023, Coutts, a British bank and part of the NatWest group, closed the bank account of Nigel Farage, a prominent UK political figure and now leader of Reform UK. While initially arguing that the closure was for commercial reasons, it subsequently emerged that Farage’s political views were an important factor in the bank wanting to remove him as a client.
The episode was possibly one of the most poorly handled corporate issues in the UK. It resulted in not one but two CEOs losing their jobs – justifiably in my view.
In 2019 Bank of America (BofA) and other US banks (including Wells Fargo and JP Morgan) decided that they would no longer provide banking services to companies that run private prisons due to concerns about the detention of immigrants under President Trump’s first term immigration policies and also in response to activist pressure. Six years later, BofA has changed tack and is now happy to provide banking services to the sector.
Citigroup had a policy of not providing banking services to gun manufacturers. It recently announced a reversal of that policy.
The re-election of President Trump has, for many, been a catalyst to declare that society has now passed ‘peak woke.’ That it had all gone too far – and way too far ahead of where the majority in society stand. That corporate actions on various social issues were never anything more than performative virtue signalling in the hope that would land well with some customers. Or, even worse, that they represented a total failure of leadership - CEOs and boards simply being led by the nose by the noisiest of activists.
Politics and Business
Inevitably, this has reignited the debate around whether corporations should become enmeshed in political issues. Those on the progressive side of the political spectrum have, predictably, decried what they describe as a corporate retreat from ‘doing the right thing.’ Superficial thinking at its best.
Maybe it’s time to parse some of the complex, overlapping issues that feed into this debate.
Let us start with banking. Is it reasonable to withhold banking services from individuals or corporations that have certain political views or engage in activities that some of us may disagree with?
The first point to consider is that banking is an essential service. It is difficult, to say the least, to run one’s life or run a company without access to banking services. In that sense banking is a public utility that is entrusted to private enterprises. Those private enterprises therefore have a responsibility and a duty of care that goes beyond what would apply to a less essential service. Debanking can therefore only be a last resort in extreme circumstances and for which banks need to be held to account.
Those arguing for debanking for political reasons should ask themselves some questions. In terms of essential services, how would you feel if, say, a healthcare system decided it wasn’t going to provide care for anyone with certain political views? If every time someone arrived in the emergency room they were asked to fill in a questionnaire on their political views or what job they held with that forming the basis of whether they would get the emergency treatment needed or be cast out on to the streets?
My suspicion is that most people would not be comfortable with that.
Political views or just my views?
Of course, those who argue that it is right for businesses to take political positions and act accordingly don’t really mean it. What they do mean is that corporations should support my specific political position because,what I happen to believe is, self-evidently, the only right thing to do.
For instance, how would ‘progressives’ react if, as a matter of moral principle, banks refused to provide services to abortion clinics?
We saw all this unfold during the debate about the role of ESG in investment management. When some US State legislators introduced requirements to consider ESG metrics when determining investment strategies for public funds, many on the progressive side of the political spectrum applauded. When other States decided to do the opposite – block from consideration any investment manager that considered ESG metrics as part of their investment strategy – those same people let out howls of protest that it is not the job of governments to dictate how money is invested.
It's hard to take any of it seriously.
‘Purpose’ transmogrified into activism
Much of this discussion was given a lease of life under the moniker of ‘corporate purpose.’ That, too, is a discussion that needs some more frank and honest debate.
As a starting point I would argue that the primary ‘purpose’ of, say, a bank is to improve people’s lives through the provision of banking services. Full stop.
Of course, there is much more to discuss around the how of providing those services. It should do so honestly, have the best financial interests of its clients as its guiding principles, follow the letter and the spirit of all laws and regulations, not engage in discriminatory practices either in how it runs its own business or with regards to clients, do little or no damage (socially, environmentally, etc). and so forth. Oh – and to do all that profitably so that it can remain in business.
May I humbly suggest that many companies might have a way to go before they can comfortably and credibly fulfil even those basic criteria without being expected also to change the world.
Initiatives such as the B-Corp movement are very valuable in helping companies with the ‘how’ of doing business. Yet, even that can be taken too far. For Coutts, shifting to B-Corp status was one of the frameworks that eventually led to an internal culture that de-banked Mr Farage.
As regards ‘purpose’ the reality is that the idea has been hijacked by some as a route to activism for their particular cause. It has become a tool to try to recruit companies to support their cause/s.
Of course, there is nothing to stop a company deciding that it wishes to be part of an activist cause. Yet doing so crosses a line. It expands a company’s role in society beyond that which I describe above into one of political activism. That line should be crossed with caution as it may have major implications over time.
A company such as Patagonia has made environmental activism part of its overall value proposition. It is an integral part of its brand meaning and it has created a community of interest around that brand positioning.
That process has taken decades. It is woven into the company’s DNA. It is powerful precisely because it is not easily replicated. That Patagonia consistently comes up as the example is the best evidence one can have of how vanishingly rare is this kind of approach. In the banking sector, Triodos Bank is trying to build something similar.
That is all very different from those who give a laughable nod to ‘purpose’ by flying the odd rainbow flags over their HQ or temporarily incorporating it into their logo. Or by jumping onto whatever political bandwagon happens to be fashionable at the time in the hope that it can shift a few more boxes of stuff this quarter. Or to bend the knee to single issue activist groups that have become too hot to handle. Or to mount internal programmes simply because it seems like ‘the thing to do’ this season only for it all to be unwound (and budgets saved) the moments the winds turn.
Where to from here?
There is little doubt that the debate of corporate positions on what can be considered political issues will continue to run. Businesses do not operate outside society. They need to operate within acceptable social mores. Yet what those may be, how they shift over time and the differences in outlook across customers and populations all generate challenges for business leaders.
We are all still learning how best to manage in a highly politicised environment. Those who pretend that the answers are ‘obvious’ do not deserve to be taken seriously. How do business leadership teams develop the skills to navigate what can easily become a somewhat chaotic, unstable, unpredictable and shark infested political environment?
This post was originally published in Joe's Random Thoughts newsletter on LinkedIn.