Playing Politics is a Game Companies Could Lose

Last Updated Apr 7, 2010 5:26 AM EDT

By taking such a public stance against the UK Labour government's plans to raise National Insurance payments, Britain's executives risk alienating customers or investors.

It was once assumed business and the Conservative party were natural allies - the philosophical and practical proponents of capitalism -- just as Labour and the trade unions were fundamentally linked. But that simple divide has been blurred, not least by 13 years of an enterprise-friendly Labour government. Corporate governance now frowns on companies making political donations and directorships for MPs are now rare. Business and politics have gradually separated.

It is thus a surprise to see so many captains of industry making such high-profile criticism of the government's plan to tax employers an extra 1 per cent of their wage bill from 2011. Their letters to the press not only attack the Labour administration's proposal but supported the Conservatives' alternative plans.

Top executives from Boots, Virgin or a Formula 1 team may think they can take a political position because they have no shareholders to upset, and Tullow Oil or mining group Xstrata may argue they have no consumer products, but the list includes many publicly-quoted high-street brands. Are the heads of GlaxoSmithKline, Whitbread, Sainsbury and the others ready to explain their partisanship to their investors and their customers â€" or their workers?
These firms may be criticising Labour policies now because they think the government is about to lose office, but whatever the outcome of the general election, a large proportion of the public will still vote Labour. Why would any company relying on public support risk upsetting a substantial section of its stakeholders?

The heads of Kingfisher and Diageo might think their corporate names are known only to shareholders, not to customers of their B&Q or Gordon's Gin brands, but it can no longer be assumed institutional investors are part of the City's capitalist culture and natural Conservatives.

Life company policyholders come from all political parties and pension funds frequently have union members as trustees. It is a risky policy for a company to ally itself to one party and thus alienate many shareholders or customers.

The business leaders may think a "tax on jobs" so important they must speak out whatever the consequences, but lobby groups like the CBI can make their case without the potential downside.

And when companies complain so vehemently against higher taxes they should not be surprised if people think they are more interested in protecting their profits rather than expanding the economy. Will Marks & Spencer or Next squeal so loudly if VAT is raised instead?

And having forced business secretary Lord Mandelson to respond with rhetoric to their provocative protest, where would be the relationship between government and commerce if Labour remained in power after the election? These leading executives have mixed business and politics to produce a potentially volatile compound that could explode in their own faces.

(Pic: Sainsbury's plc)