It is a rare thing to hear a Conservative prime minister call for more responsible capitalism. Theresa May’s remarks at the recent party conference of the UK’s Conservativeare party are a sign that large corporations are breaking the unwritten contract they have with society.
Corporate scandals that regularly hit the headlines (most recently Sports Direct and BHS, but there’s a long list stretching back centuries) are just the tip of the iceberg. It’s the routine, day-to-day greedy and destructive behaviour that is most alarming; the tax dodging; the excessive executive salaries; the steadfast resistance to regulations designed to improve societal or environmental well-being. Most of all, it’s the remorseless urge for growth that drives a never-ending cycle of consume and throw away, leading to widespread societal and environmental damage.
We can’t eliminate greed and selfishness from human behaviour. What we can do is design human systems to encourage people to behave more in line with the dictates of their conscience and less likely to strive to please their corporate masters or satisfy their own egoistic desires. And company law, which governs every company in the UK, has a big role to play.
Company law has changed very little in its essentials since the 1850s, when the Limited Liability Act was passed. That was a very different age. English society was even more stratified by class and only a minority of men (and no women) could vote. The slave trade had only recently been abolished. Places in Europe and Russia were still structured on a system of feudal serfdom. Since then, we’ve seen the evolution of global capitalism, the invention of fast travel and instant communication. We’ve split the split the atom and decoded the genome. Yet despite the enormous overhaul of how we conduct much of our daily lives, the fundamental legal structure of a business hasn’t changed.
A company still comprises members with ‘limited liability’, meaning no personal liability for the actions of the company. Every company also has a board with responsibility for the day-to-day activities of the company. Such a structure would have been familiar to the powerful men of that age, many of whom owned vast tracts of land. Often living far from their estates, they relied on local managers who were incentivised to pursue profit for their masters. In essence, it was a feudal system.
[The above is from an article written by Patrick Andrews for the “New Economy” section of the website opendemocracy. To read more, follow this link.]