Procurement Activism – can we do anything about “corrosive salary levels”?

Thanks for the excellent comments around our launch last week of “Procurement Activism” .

We toyed with the idea of changing the term to “Proactive Procurement “ – a great idea from Gordon Murray - but I think there is something to be said for being a bit provoking here, and “Activism” seems to be just that.

Just to be clear – we’re not looking to get anyone fired for making unilateral decisions that their organisation doesn’t fully support. Giving that contract to a supplier who happens to be an unemployed, ethnic minority, female, SME, veteran, disabled person who runs their car on recycled teabags  – even though they can’t actually do the job – is not what we’re about.

But equally, we want to explore some ideas that go beyond what we’ve perhaps traditionally looked at in terms of corporate social responsibility, sustainable procurement and so on. That might mean doing things that take us a little out of our comfort zone. For example, I’m right behind David Smith with his CIPS Presidential theme on encouraging people into the profession and helping unemployed people get a taste of life in procurement perhaps. But when you get into the practicalities  - actually taking on an apprentice perhaps – it’s not that simple, worthwhile though it is. So we have to make an effort.

We also want to explore how government could use Procurement Activism.  Take out the constraint of EU procurement regulations – there’s a fair chance the whole thing won’t be here in a couple of years anyway – and what more could be done?

Here’s a thought. Could procurement actually contribute to stemming the rise in inequality and executive pay which was described as “corrosive” by the High Pay Commission  last week.  For instance.. Cable and Wireless bosses concocted a scheme  in 2006 that could have given them £216 million if they doubled the share price in four years. They have failed spectacularly. The two demerged companies together according to the Guardian are worth around half of the 2006 value. Yet top managers have made millions and millions anyway.

The UK Government is, I suspect, their largest single customer. What if government had said, back in 2006, “if you implement that scheme, we will stop buying from you”.  I suspect the shareholders would have thrown that scheme out pretty quickly!

Now I know this is fraught with problems, and we will discuss practical details at a later date. But maybe if procurement started looking harder at the remuneration of our suppliers’ top executives – might that at least make shareholders stop and think? And we could justify it by saying that abnormal salaries are a sign of a non-competitive market or cash being extracted from the business that should be re-invested for the benefit of staff, shareholders and us as customers. (And it is of course a good negotiation tactic anyway – if you can afford to pay your bosses that much, you can afford to give me a bigger discount).

Anyway, that’s just one aspect of Procurement Activism I’m keen to explore here - more to come!

Voices (2)

  1. Gordon Murray:

    If we thought about it hard enough there must be something that could be done which makes a link to evasion of legal responsibilities on payment of tax, which would be a useful first step. Having said that it’s a perilous journey and would need the purchasing firm to make a commitment to only deal with organisations who satisfy all legal obligations re tax. You would also need a risk assessment to ensure whatever you wanted to buy was still available in market. My experience is that it is sometimes enough to recognise relative buying power and announce a shift towards a new policy for suppliers to shift towards the policy. You change not only the supplier but also would-be suppliers.

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