Tax avoidance replaces bosses’ pay at top of concerns over ethics

Worries about tax avoidance have shot to the top of public concerns about business behaviour, replacing executive remuneration by a wide margin, a study has found.

The annual survey, conducted for the Institute of Business Ethics by Ipsos Mori, shows an improvement in the proportion of people who think business is behaving ethically, suggesting there may have been some recovery of trust lost after the financial crisis.

However, the picture remains mixed because there has also been a rise in the proportion saying businesses are behaving less ethically now than a decade ago.

Business ethics continue to dominate the news agenda, amid allegations that Royal Bank of Scotland defrauded companies by putting them out of business, of profiteering by energy companies and corporate governance failures at the Co-operative Bank.

Asked whether business generally behaves ethically, 59 per cent of respondents said it did, compared with only 48 per cent in last year’s survey – bringing it back to a similar level to the 58 per cent recorded in 2011.

However, there was an increase of seven percentage points to 35 per cent in the numbers of those who believe that business behaves less ethically now than it did 10 years ago.

The findings show that people aged 55 and above are more likely to think that business is not behaving ethically than younger people.

The study found that 37 per cent of respondents thought tax avoidance was the main concern that businesses need to address, compared with 30 per cent citing remuneration. This pushed remuneration out of the top slot for the first time in six years.

The findings follow controversy over low tax bills paid by companies such as Amazon, Google and Starbucks. Executive pay has been less prominent in the media since 2012’s “shareholder spring”.

The ability of employees to speak out about company wrongdoing was rated the third most significant concern at 22 per cent, with business attitudes to the environment and human rights coming in lower at 16 per cent and 15 per cent respectively.

Philippa Foster Back, the IBE’s director, said: “These results could indicate that business has clawed back some of the public trust lost in the wake of the financial crisis. But confidence remains fragile with a year-on-year increase in those saying that business is less ethical than it was 10 years ago.”

She added: “Tax is also now clearly a reputational issue and has risen very rapidly up the scale. Trust cannot be taken for granted.”

The IBE was established in 1986 to encourage high standards of business behaviour based on ethical values.

Six years on from the financial crisis, trust remains a leading issue for businesses. Sir Mike Rake, president of the CBI employers’ group, told the Financial Times in September that companies with enough cash on their balance sheets should start investing to help restore business’s bruised reputation.

A group of well-known companies this week called for a greater diversity of business ownership structures to win back public trust, motivate employees and achieve sustainable growth.