Companies should start showing more national loyalty

The writer is a senior research fellow at Rusi, a think-tank

During the coronavirus crisis, democratic governments have discovered — again — that businesses act in their own interest, not in the interests of the country where they happen to be based.

Ryanair chief executive Michael O’Leary wants to relaunch 40 per cent of flights in July, whether or not it suits Ireland, the UK or any other government. Coffee chains closed during Britain’s lockdown, despite the government encouraging cafés to stay open for takeaways. The issue predates the pandemic: UK entrepreneur James Dyson, a vocal supporter of Brexit Britain’s economic potential, has moved his company’s headquarters to Singapore.

All this suggests that nationalities matter less than it once did. When McDonald’s opened its first restaurant in Moscow 30 years ago, it was seen as a symbol of US victory over the Soviet Union. McDonald’s remains a quintessentially American company, but today its leadership includes executives from Poland and the UK. The chain was until recently led by another Briton.

The picture is the same in most companies that operate globally. Executives hail from a wide range of countries, have lived in more countries still and consider themselves international creatures. In 2018, only about half of FTSE 100 CEOs were British; the rest hailed from 20 other countries. The trend extends beyond the UK. Indra Nooyi, former chief executive of PepsiCo, was born in India. Rajeev Suri, who runs Nokia of Finland, is a Singaporean citizen. Stefano Pessina, an Italian, is chief executive of the Anglo-American drugstore chain Walgreens Boots Alliance.

Companies have gone transnational along with their top executives: Volvo Cars, once closely identified with its home country of Sweden, is now owned by Geely of China. That’s how globalisation works. And, until now, it has largely worked well. Governments have not insisted that companies act in the national interest, despite complaints about tax avoidance and offshoring. As long as they create jobs, they have been allowed to go on their merry commercial way without consideration for obligations to their home countries.

Unsurprisingly, during Covid-19 and other recent crises, many companies have not prioritised the interests of their home countries. Governments certainly can’t expect their businesses and executives to act out of patriotism. And in a world of increasing foreign ownership and overseas operations, to which country should a company show allegiance?

But if we have learnt anything during this crisis, it is that governments would achieve a lot more with some goodwill from businesses. Amazon, which has prospered during the pandemic, could enhance conditions for its workers. Ryanair could accept governmental pleas for empty middle seats.

By contrast, during the cold war, the Swedish government made clear that it expected Volvo and other market pillars to do their part for the nation during a crisis. It designated them “K Companies”, involved them in war planning and underwrote their preparedness efforts. For the past several years, the Pentagon, the US Department of Energy and other American government departments have held regular meetings with senior executives to inform them about national security threats.

Such initiatives could be expanded. To be sure, no business leader likes commitments to causes that don’t generate revenues, and many companies are torn between their home base and their foreign owners. But the alternative would see countries further weakened during future crises. Liberal democracies face an unpalatable combination of threats from mother nature and hostile states.

Such deterioration is in no one’s interest. Governments could, of course, simply nationalise vital businesses. After all, a government-run coffee chain or airline would have to obey the rules around opening. Business leaders, unite! For national wellbeing, that is.

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