The C-Suite must verse itself in Corporate Affairs
When thinking about how to describe the rise in importance of Corporate Affairs, I was reminded of the iconic Ernest Hemingway answer on how people go bankrupt: gradually, then suddenly. The gradual rise of Corporate Affairs has been happening for much of the past decade – it is always tempting to pinpoint Brexit/Trump year of 2016 – but it feels like we are now entering a period where we are poised to see a sudden burst into the top of business agenda.
For many decades there was what you might describe a cosy relationship between businesses, politicians, regulators and investors. Businesses made their money, politicians stuck to party politics and governing, regulators regulated within their narrow confines and investors got their returns. Yet all that has started to break down, with arguably the first crack being the Global Financial Crisis in 2008.
This crack happened at a time when social media use taking off, empowering the public to move from being solely ‘consumers’ to actors who are often activists or quasi-citizen journalists. Social media also accelerated news cycles and changed the way journalists operated, as well as creating new challenges for the businesses, politicians, regulators and investors.
Today we have a landscape where the old ways of working have broken down. Politicians increasingly use their ‘bully pulpit’ to challenge businesses. Businesses take stances on political and social issues. Regulators seek demonstrate their value by taking an increasingly eager approach to enforcement and by leveraging their ‘soft power’. Investors take stances on issues like climate change and look to influence the businesses they own. And this all plays out in a non-stop media and social media news cycle.
A recent example comes from the Cost of Living crisis. In an inflationary environment, supermarkets have seen themselves come under increased pressure around their price increases. Senior executives have been hauled before Parliament, The CMA has launched reviews and the media has shone a light of ‘profiteering’. At the same time, investors are decrying the poor performance of UK supermarkets. We’ve also seen supermarkets challenging government in return, with Iceland announcing it is breaking the law by discounting baby milk formula and campaigning for legal changes.
While I’ve used supermarkets and the cost of living as an example, you could apply this to issues in virtually any sector whether that’s financial services and saving rates, technology and privacy laws or energy and consent for renewables infrastructure. We are already living this new reality and with UK, US and EU elections ahead in 2024, it is very difficult to see how this landscape won’t potentially become even more complex to navigate.
This is an environment where understanding of the political, media, regulatory and investor landscape matters – but it’s also crucial that this understanding doesn’t exist in silos. A business cannot truly understand the political challenges and opportunities it may face, without also understanding the media challenges and opportunities – and vice versa. In businesses where communications, government relations, regulatory affairs and investor relations sit in different departments that can be a challenge.
It also can’t just be an issue that is delegated down from the C-Suite. Senior executives must verse themselves in understanding the world of Corporate Affairs. Corporate Affairs is not just a department in an org plan, it is a discipline that has the potential to fundamentally impact the performance and direction of a business (AB InBev estimate the Bud Light controversy has cost them over £300m) and as such it demands the attention of CEO, CFOs and others with seats at the top table.
What practical action can the C-Suite take to better equip themselves to tackle the new world of corporate affairs? I’d argue it comes down to three things – investment, integration and focus.
The issues in the Corporate Affairs sphere are often wide-ranging and complex. A global ecommerce business for example will have interest in a huge swathe of topics from internet regulation, to tax, to labour market relations and much more. It is impossible for a business to understand this environment adequately without sufficient resource. That requires investment in smart people who can grasp the detail, form overarching strategies and work into the C-Suite.
The second matter is integration. As discussed earlier, it is crucial to drive synergies between the different disciplines with Corporate Affairs. Different companies will do this in different ways – it may be that some companies consolidate departments under a Corporate Affairs Director, while others may simple find ways of closer working within existing arrangements. The right outcome is more important than having a one-size-fits-all approach.
The final step is focus. Too often C-Suite executives have neglected involving themselves Corporate Affairs until a moment of crisis. This is an approach that will increasingly look out of step with modern management. Those at the top of the business should make it their purpose to ensure the organisation is equipped to navigate their environment and take proactive measures to get ahead of issues coming down the track.
Change in Corporate Affairs will only continue apace but by getting on the front foot the C-Suite can make sure it is prepared for sudden changes that may be ahead – protecting their licence to operate and putting them in a position to create advantage for their business.
Jack Storry is the Deputy Head of Corporate at Grayling. He can be reached at email@example.com.