Since Lehmans collapsed spectacularly 10 years ago, we have experienced social, political and economic turmoil. Many believe that this event began the collapse in faith in our market driven model which was then reinforced by the following revelations of the corruption in this system: Libor rate rigging, RBS treatment of SMEs, BHS and Carillion collapses, and most disgracefully, Grenfell Tower. While the vast majority were hit by swinging austerity, we clearly weren’t in it altogether and inequality continued to increase.
A core element of the market driven economy was that demands of shareholders were supreme. Now even many of the elite are beginning to accept that this experiment in running the economy for the benefit of shareholders has failed:
“To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.”
Larry Fink, CEO BlackRock, January 2018
For 40 years the Friedman doctrine that companies should only consider shareholder value had reigned supreme. Now there is no credible academic that will stand up and defend Friedman’s doctrine, according to Professor Andre Spicer of Cass Business School. Indeed the British Academy, maybe not normally seen as the home of radical thinking, has a project on the future of the corporation led by Prof Colin Mayer, one of our panel members.
So where do we go from here? Should we be relying on corporate enlightment to pursue social and environmental goals and benefit all stakeholders? Even if they wanted to, could they even really do this given the financial system they operate within? Short term financial demands are not going to go away are they?
But would it be right to have corporate leaders determine what the right social and environmental purposes are or what benefits their stakeholders? No-one elected them after all. If the elite remain in charge, won’t they shape these objectives from their perspective?
Do we then need to look to other models? Can we find examples of how these might work? How could corporations be accountable and to whom while being innovative and dynamic?
And last but not least what would be the wider impacts on the political democratic system if we also had corporations which had some form of democratic legitimacy?
Come and join us to discuss redesigning the fundamental unit of capitalism: The Corporation.
We will confirm the venue in early September and inform those who have booked.
Colin Mayer is the Peter Moores Professor of Management Studies at the Saïd Business School at the University of Oxford. He is a Professorial Fellow … Read more
Henrietta L. Moore is the Director of the Institute for Global Prosperity at UCL, where she also currently holds the Chair in Culture, Philosophy and … Read more
Prem Sikka is professor of accounting at the University of Sheffield and emeritus professor of accounting at the University of Essex. Sikka qualified as ACCA … Read more
Henry Leveson Gower
Henry is Founder and Chief Executive of Promoting Economic Pluralism and editor of The Mint. He has been a practicing pluralist economist and policy analyst … Read more