“I hope to reward your bravery by finding a better path forward” was Rain Newton-Smith’s message today to women at the centre of the sex scandal engulfing the Confederation of British Industry, as she took over as its new director-general.
Newton-Smith expressed “how profoundly sorry” she was to those let down by the scandal-ridden trade lobbying group, which is now desperately fighting for survival.
The new CBI boss assumes her role after an extraordinary wave of alleged sexual misconduct and rape at the organisation resulted in a public exodus of many of its leading members. The mass exodus has raised fear of a pending cash flow crisis and prompted the the CBI board to suspend its day-to-day operations until June when it will hold a meeting to decide on its highly uncertain future.
While 47 year-old Newton-Smith insists she is “determined to rebuild” the organisation she now heads, might the CBI be beyond repair?
For starters, there is scepticism as to whether Newton-Smith is the right person to deliver the “far reaching change” demanded by the organisation’s board. As the Hound reported previously, several CBI members are privately astonished that the group has brought back in an insider to sort out the mess, when a fresh face – and someone with no prior connection to its employees – is desperately needed. Newton-Smith, the CBI’s former chief economist, worked at the organisation for eight and a half years, leaving to take up a new role at Barclays for just a month before returning to sort out the CBI’s giant mess.
Then again, with others insisting that rapid change is needed if the body is to have any hope of surviving, the fact that she already understands the organisation may well make it easier for her to implement changes swiftly.
Yet the debate over the suitability of the CBI’s new director-general in many ways overlooks a more fundamental issue.
Even if the CBI successfully dealt with what female employees describe as a deeply “toxic and macho culture,” the sex scandal has prompted wider scrutiny on the purpose – or, rather, lack thereof – of an organisation claiming to be the voice of British industry.
It has heightened sentiment – which pre-dated the scandal – that the CBI is both outdated and ineffectual.
The reason the CBI sprang into existence in 1965 no longer exists. The trade organisation was formed by businessmen as a counterweight to the power of the private sector unions, during a time when it was the private sector unions which had the power to close down companies. This time has passed. Power has since shifted to the public sector, with only a couple of million people now belonging to private sector unions. Thus the CBI’s purpose as a hard-core bargaining block has disappeared.
Since then, the body has struggled to find a new voice.
In its defence, two of the CBI’s main requests – on childcare provision and capital allowances to boost investment – were embraced by Chancellor Jeremy Hunt in his March budget. But on the whole, other than its loud – and ultimately unsuccessful – campaigning against Brexit, most of its work has been tangental (for instance arguing that companies should toe the line on net zero targets and encouraging more diversity on their boards.)
Some have also expressed concern that the fact the CBI’s membership is heavily skewed towards banks and the City of London means it is compromised and ineffectual when the interests of financiers and the rest of the economy collide. For instance, after the 2007-09 crisis when the lack of bank lending was a major issue.
Membership is also not cheap. For larger organisations, an annual membership fee is in the region of £90,000. Even prior to the sex scandal, a growing number of businesses were deciding that it simply wasn’t worth the price tag: The number of members has fallen from around 250,000 to 190,000 over the last decade.
It is also striking that there doesn’t appear to be a single businessman or woman who has truly stuck their neck out to defend the lobbying group. Industrialists representing big, medium and small companies to commentators on the left, centre and right all appear to be coming to the same conclusion: the CBI is toast.
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