21 March 2015

CapX Reviews: Responsible Leadership. Lessons from the Front Line of Sustainability and Ethics


The standard go-to source for explaining what makes business tick is Adam Smith’s Wealth of Nations, but the subtext of Mark Moody-Stuart’s Responsible Leadership is that Smith’s companion piece Theory of Moral Sentiments my be a better manual for designing frameworks for business. In the long run, what matters for sustainable business success, argues Moody-Stuart, what matters more even than regulations or tax breaks, is for business to operate in a civil society that values integrity. This is not the mantra one might expect to hear from a veteran oilman who struck deals with African and Arab potentates. But it is precisely because of his time “dining with devils” (his term) that Moody-Stuart speaks out on behalf of NGOs to provide checks and balances both on business and on government.

The message is timely. Post-2008 policy fixes have consisted of tightening screws of regulation plus loosening reins of monetary control. A crisis in public finance ignited by excessive debt has been doused by issuing more debt, and corporate incentive schemes have become more rather than less lopsided. What at the time were billed as emergency measures are still in place six years later and a return to pre-crisis normalcy is not on the cards. Since governmental and regulatory activism alone has a demonstrably patchy record it makes sense to listen to the case for revitalising civil society and what contribution can be made by NGOs.

Moody-Stuart was head of Shell who moved into the HQ executive suite after twenty-five years of front line work in postings from Nigeria to Indonesia. His job spec included negotiating face-to-face with heads of state, in countries that were rich in resources but in every other respect destitute, and he came away with a rich store of case studies showing a “market economy can operate in the absence of regulation, if there is trust.” Intermediaries independent of government and business are instrumental in weaving informal networks and from this process there emerges, slowly but durably, uncensored public dialogue and a trusting relationship between the public and the business sector. Moody-Stuart offers numerous examples of public/private partnerships that created frameworks for businesses at the cutting edge of globalisation, e.g. forests, seas, and mines. Time and again, NGOs first spotted market and government failures and owing to their insistence multilaterals at last were prodded into drafting codes of conduct.

Moody-Stuart praises a concrete example of an organisation that promotes trust in civil society, Transparency International, the NGO with a remit to fight corruption by disclosing payments made to governments. The long-term damage inflicted by corruption (“the biggest market failure of all”) consists not in loss of money but in corroding trust. There are lessons for codes of business conduct at home. Demonstrable integrity at the top of a company matters more for motivating staff and for corporate success, says Moody-Stuart, than bonuses, and his advice that “transparency is the best disinfectant” might serve as a motto for corporate governance.

Moody-Stuart sings from a different hymn sheet than the chorus of today’s management literature when rather than invoking Adam Smith he quotes Smith’s contemporary, the Quaker George Fox, to the effect that honesty and a humble manner foster trust in business. He might have mentioned that avowed Quakers were the founders of many great financial institutions, including Britain’s banking giants Lloyds and Barclays. Shame that today the values of their founders no longer seem to shine through.

Responsible Leadership. Lessons from the Front Line of Sustainability and Ethics. Mark Moody-Stuart, Greenleaf Publishing, RRP £25.

Dr. Benedikt Koehler is a historian and former banker, specialising in early Islamic economics. Koehler delivered the inaugural lecture for the Legatum Institute’s “History of Capitalism” course.