The Open Sector: A Proposal for a new approach to positive social impact and transparency in the private sector - Simon Willis

7/29/2019 The Open Sector: A Proposal for a new approach to positive social impact and transparency in the private sector -…

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The Open Sector: A Proposal for a new approach to positive socialimpact and transparency in the private sector.

By Simon Willis

Legislation to permit limited liability companies was widespread in France,

UK and many US states by the early 1860s and is often credited with

unleashing huge increases in entrepreneurialism and consequent economic

growth. The quid-pro-quo was full and open accounting. The growth of the

Eurobond market and the increasing dominance of the offshore/secrecyjurisdiction sector which is now touching more than half of all global GDP,

has critically vitiated the effectiveness and balance of this trade-off.

Attempts to define full sustainability accounting frameworks are worthy

but fractured and politically impractical.

One excellent response has seen the growth of “social enterprise.” Despite

the many strengths of this approach, it may sometimes undermines a more

general move to recognize the hugely positive social impact that all well

managed companies can achieve through innovation and employment andthrough improving our lives. Most successful companies start by

understanding this but various distorting competitive pressures and

market failures undermine this original focus. On the other hand triple

bottom line reporting and other CSR inspired attempts to drive more

responsibility into the Corporate sector while well motivated have had only

marginal impact at best and are rightly largely discredited as peripheral

low-cost marketing efforts.

Continuing trends to systemically threatening levels of income andresource inequality and a complete failure to make progress on a number

of market failures such as climate change, water scarcity and other global

boundaries or planetary carrying capacity issues, customer-appropriate

financial services, the relationship between food processing and rapidly

increasing chronic illnesses and many other failures have made the current

approach unsustainable.

The clear contract under which the state offers guarantees of property

rights, educated, secure and healthy workforces and critical economic



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infrastructure like transport and communications in return for the right to

gather taxes has almost completely broken down.

A rising awareness in the global south that developed countries have been

extracting through transfer pricing, fraudulent invoicing, corruption, debt servicing and resource theft more than ten times what they have been

supplying in ill-directed and sometimes corrupting aid is leading to a

potentially negative geo-political outcome.

But vested interests and corruption of political decision-making combined

with associated popular political disengagement have made wholesale

political reform close to impossible. Complete reform of the transparency

requirements to be placed on corporates is likely to prove far too slow and

potentially burdensome, particularly at a time of fragile economic growth.

We need to unlock the potential for a huge boost to economic growth and

entrepreneurialism based on a new understanding of the real sources of

innovation (not excluding labour and public investment) and consequently

a new theory of value by providing sufficient transparency to unlock

massive new sources of consumer power.

Proposal

What we propose is that the private sector be split into two parts – a

private sector and an open sector. Choice will be entirely voluntary

although it is likely that the more onerous reporting requirements of the

Open Sector will be balanced with a slightly lower rate of corporation tax

and, over time, may be invited to enjoy advantages in public sector

tendering, depending on uptake. Those not wishing to be fully transparent

will not be required to be so. Full and effective operation of markets

requires transparency and therefore it is unlikely that those interested in

seeing capitalism survive its current crisis will be able to muster argumentsagainst a voluntary transparent sector. On the other hand, the availabitly of

a more transparent sector could unleash powerful and positive market

forces.

The purpose of this initiative is to avoid second guessing or agreeing a vast

array of standards that are likely to be beyond consensus or are likely to

change over time (eg; levels of minimum tax, pay differentials, etc.)

Therefore it is proposed that NO regulatory requirements be placed in this

legislation and no political judgements made except those that bear upontransparency.



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It is also critical that absolutely no attempt be made to make introduction

of this optional sector dependent on international agreement of any kind.

Arguments that various requirements here would be too onerous unless

foreign competition were to be put onto the same playing field would bealmost entirely spurious and likely motivated by a desire to indefinitely

delay implementation. (It will nonetheless be illuminating to see what will

effectively be attempts to prove that being open puts one at a competitive

disadvantage.)

Open sector companies will be required to meet certain standards of

transparency such as the following:

1. Complete transparency about economic activity, employment activity, manufacturing activity and resource extraction activity on a

jurisdiction by jurisdiction basis. Value created and level of

compensation at each step of the supply chain might also be

captured. (ie; what is the farmer paid?)

2. Complete transparency about pay at every decile of the company and

throughout its supply chain including accounting for performance

related pay and all bonuses in relation to actual company

performance. Gender and ethnicity will also be reported as well as

other employment conditions, leave entitlements, etc, throughout thecompany’s supply chain.

3. Complete transparency about all energy use and the use of renewable

energy throughout the supply chain of the company.

4. Complete transparency about beneficial ownership of every single

aspect of the company and any vehicle over which it has fiduciary

control, majority ownership, controlling ownership or interlocking

ownership.

5. Complete transparency about all transfer pricing.

6.

Complete transparency about any and all environmental externalitiesof the company’s activities and those of its complete supply chain, as

defined by secondary legislation from time to time.

7. Complete transparency about all tax paid by the company both direct,

indirect and employee in every jurisdiction in the world in which it is

economically active, broken down by jurisdiction.

8. A Complete ban on the use of accounts, trusts, foundations,

companies, banks and any other legal vehicle at all based in any

jurisdiction which is engaged in unfair tax competition or any form of

secrecy legislation ( see definitions below)



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9. A complete ban on own-company share purchase or indeed any

investment activity which would under ordinary definitions

constitute insider dealing or market manipulation.

10.Complete real time reporting of any political donation, lobbying

expenditure and the like, whether directly to politicians or parties orindirectly to unaccountable lobbying organisations such as the

Corporation of London.

11.Complete transparency about all whole or partial property and land

holdings both domestically and internationally.

In due course open professional services to audit these requirements are

likely to be needed. Transitional arrangements, particularly with some of

the more onerous requirements may be pragmatic. Much further analysis

of the correct tax and VAT differentials and their take-up and net revenueeffects will be required. These are some initial thoughts and we would love

the opportunity to work with you in developing an implementation plan for

this initiative.

This proposal interlocks with a number of other proposals that we and

those we are working with will be advocating over the coming year.

Simon Willis worked in the civil service (DWP and Treasury) for a

decade and ran a large charity for several years before joining theprivate sector. For ten years he ran the global social innovation group

at Cisco Systems before recently co-founding social movement

incubator, Purpose Europe, an offspring of the fast growing New York

based start-up, Purpose.com

Political notes are published by One Nation Register. They are a monthly

contribution to the debates shaping Labour’s political renewal. The articles

published do not represent Labour’s policy positions.

To contact political notes, email [email protected]

mailto:[email protected]




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The Open Sector: A Proposal for a new approach to positive social impact and transparency in the private sector - Simon Willis