Getting the Voice of Business Heard in the EU Referendum and Beyond

The UK Referendum on EU Membership currently dominates politics, business and the markets in the UK and beyond. The sense of macro-economic and geo-political risk is palpable. Beyond business disruption, the Referendum presents a second major challenge to companies and Boards – how best to communicate with the audiences that matter. Fidelio is a Board Development and Executive Search firm clearly focussed on roles critical for stakeholders and shareholders at Board and Executive level. The Referendum underscores the imperative for strong communication skills and intelligence in the Boardroom and Executive Committee. The absence of these skills creates vulnerability and business risk.

In this Overture, a founder of Fidelio sets out her personal view on the EU Referendum, as well as Fidelio’s analysis of why corporates need stronger communications skills, particularly in the Boardroom. 

Gillian Karran-Cumberlege: A Personal View

My personal views on the UK’s forthcoming EU Referendum are unambiguous. I think the UK, politically and economically, would suffer from leaving the EU and, as a citizen, I have a vote. The Referendum very obviously also has major implications for business in the UK. Business, however, does not have a vote.

Like it or not, the court of public opinion is determining the future of British business. Boards ignore this at their peril. The Referendum has exposed how tough most Boards find it to engage with public opinion. Whatever the outcome, successful Boards need to acquire this skill.

The European Union doesn’t moderate British influence – it magnifies it.

President Barack Obama, The Telegraph, 21st April 2016

Like the President of the United States, I think it would be folly for the UK to leave the EU. As a senior businesswoman and director who has built a successful career in both the UK and Germany in two of Europe’s most important sectors, automotive and Financial Services, I am more than alert to the downside of leaving. To my mind, however, the most compelling argument for remaining is the upside of prosperity and peace.

Without a doubt my career has predisposed me to a conviction that Britain is stronger and can be stronger still in Europe. Having lived in Germany for almost a decade and commuted to Germany working for German companies for a further decade, I choose to see Germany and the UK as natural partners in Europe.

In the mid 2000’s, I vividly recall the EU representative of the newly elected German government addressing the Board of the major DAX company for which I ran global capital market communications and setting out a strategy for Europe. It was remarkably acceptable to English ears and it is a cause of regret to me that successive UK governments have not been able to build a firmer relationship with Berlin.

And so, on 23^rd June, the UK will hold a Referendum on our membership of the EU.

Reasons to Stay

Much of  the business and investment community is in favour of staying in Europe. Reasons to remain are plentiful – access to the EU market; the City’s position as a global financial hub and clearing house for the Euro; the UK’s ability to attract investment from companies looking to operate Europe-wide.

And, while the popular anxiety created by immigration can be understood, business also benefits from a vibrant, qualified workforce. London would be infinitely poorer without its international and ethnic diversity. UK universities and industry will suffer if we cut off the stream of students looking to the UK for an education, frequently in engineering or technology.

But business has struggled to communicate such arguments to the broader populace.

Fidelio Board Breakfasts – Ahead of the Brexit Curve

In 2015, well before many pundits had woken up to the enormity of referendum risk, Fidelio hosted two breakfasts to explore how leading companies were positioning themselves vis-à-vis the Referendum: EU Survival and the Role of the Board in July and Stakeholder Engagement: Brexit in September 2015.

With David Thomas MBE, Executive Chairman of COBCOE, we looked at the implications of the referendum for Boards. David’s message from the international Chambers of Commerce, which were certainly alarmed by the prospect of Brexit, was clear: avoid emotion and adopt a fact-based approach. But our breakfast also highlighted that Boards across the UK were still reeling from the Scottish Referendum and few had clear plans in place to engage on the EU Referendum.

Fidelio also hosted a second breakfast on Stakeholder Engagement in September 2015 for Corporate Affairs Directors which was well attended by the FTSE 100. Here the frustration was palpable. These communications professionals recognised that business did not have an easy relationship with the general public.  Trust had not been restored since the financial crisis and Boards lacked a means of communicating with a broader audience on macro-economic or political topics that were of major importance to business.

Business Speaks. But is the Message Heard? 

The fears of our Corporate Affairs Director guests a year ago were in many ways proved right. The UK’s relationship with Europe is of profound importance to business within the UK. It is therefore striking how business has struggled to get its arguments across. Some businesses, including European companies with major investments in the UK,  have been very articulate:

• BMW wrote a letter to employees based in the UK advising that a Brexit vote could increase costs and, according to press coverage, the employment base could also be effected
• Airbus also issued a statement to employees that a UK departure from the EU could threaten future investment
• And the CEO of Siemens UK spoke openly at a German British Forum Conference on “Britain’s Future in Europe” about the implications of a Brexit vote for a business which invests heavily in the UK.

Some business leaders such as Roland Rudd, Chairman of the financial communications consultancy Finsbury, or Sir Mike Rake, former President of the CBI and Chairman of BT Group, have spoken out clearly about the risks of Brexit. Just three days after the date of the Referendum was announced on 20^thFebruary, a letter was signed by 198 UK business leaders warning of the risks of leaving the EU. Some 36 FTSE 100 Chairmen or CEOs were signatories, from companies including EasyJet, BAE Systems and Shell. This, of itself, raises the questions about the views of the remaining 63 FTSE 100 companies and their Boards.

Clearly, there are some business and investor voices in favour of Brexit. A number of Boards, however, have not taken a formal stance.They have determined that Brexit would not have a material impact on the business; or that international shareholders would not approve of the company endorsing  a “political” stance; or more prosaically were unable to reach agreement in the Boardroom. Some Chairman have been able to speak openly wearing one Board hat but not another.

The Responsibility of “A Seat at the Table”

In March, Fidelio hosted our second “A Seat at the Table” development programme for senior female executives – our contribution to the pipeline of tomorrow’s female CEOs and Chairmen. Over a lunch with guest speaker General Sir Richard Shirreff, former Deputy Supreme Allied Commander of NATO, we explored macro-economic and geo-political risks facing Boards. The women participating in the programme debated the responsibility of Boards to take a public stance on issues as critical to business as the threat of Brexit.

As senior executives from a range of leading UK and European companies, our participants were familiar with the dilemma. Clearly business has no role dictating to employees how they should vote. Business must obviously also respect the legal guidelines and rules laid down by the Electoral Commission. As of 15^th April, and the start of the official period of campaigning, restrictions have come into force governing the introduction of information into the public domain, in particular relating to forecasting models.

Fully recognising these restrictions,  several of the women on the “A Seat at the Table” Programme nonetheless argued that Boards do have a responsibility to be open about what they consider to be the implications of a Brexit vote for the business, its customers, suppliers and, of course, employees.

…Understanding the complexity of shareholder and stakeholder expectations…

One of the Five Key Attributes of Leadership, Fidelio’s “A Seat at the Table” development programme

Of course there is a risk that such a communication can backfire and there were some instances in the Scottish Referendum where employees voted to leave knowing full well that their jobs would be put at risk by a pro-independence vote. But employees equally have a right to know. As indeed do shareholders.

Major institutional investors have advised Fidelio over recent days that they are seeking answers from the companies that they invest in about (a) what the impact of Brexit would be on the business and (b) what plans the company has in place to deal with a Referendum outcome that could massively disrupt the status quo. But this should not just be the stuff of one-on-one conversations. Retail investors are also entitled to know the company’s position on Brexit. And they clearly need more than a “risks and uncertainties” update in the Annual Report.

And finally, Sir Richard Shirreff, drew our attention to the security implications of a vote for Brexit. Firstly, NATO works closely and well with the member states of the EU. A UK vote to leave would certainly not strengthen what is a critical relationship between NATO and the EU. Moreover, a Brexit vote would be welcomed by those who wish the UK ill and have designs against our security and peace.

Fidelio’s Conclusion

Yes, democracy is at work in the UK. And, as we established at the “A Seat at the Table” Programme, the arguments on both sides of the Referendum debate are plentiful and complex. There is a very real risk of greatly heightened uncertainty and economic instability which cannot be good for UK business or business with the UK. The voice of business is not greatly trusted by the broader population, so even if Boards do articulate the potential implications of Brexit, this can backfire or be misconstrued. But this is not a good reason for burying heads in the sand.

Fidelio argues that in order to fulfil their duties to the company and act in the best interest of shareholders and stakeholders, Boards need stronger stakeholder engagement skills. This will enable them to ensure that business makes its case and gets a fair hearing. As we have learned from the EU Referendum the court of public opinion is far too important for business to ignore.

FIDELIO HIGH NOTES – APRIL 2016