Clean up your act, Egan tells business

Companies face the risk of greater political interference, higher taxes and increased regulation unless business restores its battered reputation, the president of the CBI warned yesterday. Sir John Egan told delegates that improving the standing of the corporate sector had to become the "overriding cause" of business and that rewards for failure had to be stamped out.

The warning follows a series of high-profile corporate scandals in the United States and a renewed furore over boardroom pay excesses, fuelled by the £18m pay deal offered to the chief executive of GlaxoSmithKline, Jean-Paul Garnier.

Delivering his opening address to the conference, Sir John said that business was too often misunderstood and undervalued but this was partly its own fault because of the "cynical and uncaring" image it had projected in the past. "Too often we declined to identify with the needs and values of our own stakeholders, let alone the wider community," he said.

Sir John said that business now had to ask itself some difficult questions. "Why is it that the public are so willing to trust pressure groups or the media when they attack us rather than to believe what we say? Why is it that so many of our brightest graduates choose careers outside business?"

"Without public trust we'll be vulnerable to even more heavy-handed regulation, to even greater political interference and to even higher taxation."

On pay, Sir John said that business should be unapologetic about incentivising and rewarding good performance. "If we want world-class leadership and world-class performance we must expect to pay for it," he said. But business should understand the concern caused among the wider community by "reward for failure". "We need to show... that no matter how deserved pay rises are, we in business must understand the example we need to set."