By Colin Mayer
The corporation is the most important institution in the world – an institution that clothes, feeds and houses us; employs us and invests our savings; and is the source of economic prosperity and the growth of nations around the world. At the same time, it has been the cause of terrible poverty, deprivation and environmental degradation, and these problems are set to increase in the future.
Over the last few years alone we have endured:
- The accounting scandals in Enron and WorldCom
- The Libor scandals
- The underpayments of corporation tax
- The misselling of mortgages, payment protection insurance, and derivatives
- The financial crisis
- The environmental disasters in the Gulf of Mexico and Fukushima
Each of these is thought to have their own cause and to require their particular solution. This is fundamentally wrong: the problems are not specific and the solutions are not individual. There is a generic problem that requires a common solution. The problem is the corporation and the solution is to fix it and not everything around it.
Fixing the corporation involves addressing its failures of ownership, values, governance, regulation and taxation. This requires:
- Corporations taking responsibility for their actions and consequences, and having long-term committed shareholders;
- Corporations having clearly defined values and principles, and truly independent boards of directors responsible for their implementation;
- Tougher enforcement of public laws regarding bribery, corruption, environmental damage, fraud, insider dealing and market abuse;
- More stringent protection of our financial systems and ecosystems;
- Less intrusive regulation elsewhere and greater use of the corporate tax system to align interests of corporations with society at large.
Implementing these changes involves a reform of business education and a redefinition of the roles and responsibilities as well as rights and rewards of executives and investors.
This is not so much a reinvention as a rebirth of the corporation. Historically it was established by royal charter with a defined public purpose to undertake voyages of discovery and promote trade. The family firms that succeeded it were frequently established by founders with strong ethical principles and visions. Two corporations that illustrate that are Lehman Brothers and Barclays Bank, not today’s versions but those of the 19th and 17th centuries respectively. Mayer Lehman, the founder of Lehman Brothers, took his children every Sunday to the Mount Sinai hospital to see the plight of the less fortunate members of New York society. John Freame, the founder of Barclays Bank, wrote Scripture Instruction, a principle text used by the Quakers for more than a century. Over time those strong values have contracted into a single one of maximizing the short term earnings of shareholders.
That is not universally the case – some of the world’s most successful corporations and best performing economies have very different purposes and values. Bertlesmann one of the world’s largest media companies, Robert Bosch the automotive company, Carlsberg the brewing company, and Tata the conglomerate owner of Jaguar Land Rover are all structured as industrial foundations with boards that are responsible for the values and principles of their organizations. The Nordic and Scandinavian countries, which are currently being upheld as models for the rest of the world, emphasize a broader set of corporate principles encompassing a wider set of stakeholders than their shareholders.
This bears not only on the positive aspects of what corporations could do but also on the normative ones of what they should do. While notions of morality are well developed in relation to individuals, they are not in respect of corporations. Indeed, the idea of a moral corporation would generally be regarded as an oxymoron. It is not. What gives it substance is the ability of the corporation to establish levels of commitment to which we as individuals can only aspire. What makes it credible is the coincidence between the normative goals of doing good and the positive ones of making goods because ultimately the moral corporation is a commercially successful one and the competitiveness of nations depends on the moral fibre of its corporations.
Restoring trust in corporations is one of the most important policy issues of the 21st century. Without it economic policies will fail, environmental degradation will intensify and financial systems will collapse. With it, we can achieve levels of economic prosperity and well-being that far exceed what we have experienced to date.
Video: Colin Mayer on fixing the broken trust in corporations
Click here to view the embedded video.
See also: Why are we facing a crisis of trust in corporations?
And: What needs to be done to restore trust in corporations?
Colin Mayer is the author of Firm Commitment: Why the corporation is failing us and how to restore trust in it (OUP, 2013). He is the Peter Moores Professor of Management Studies at Oxford University’s Saïd Business School, an Honorary Fellow of Oriel and St Anne’s Colleges, Oxford, and a Professorial Fellow of Wadham College, Oxford. He is a member of the UK Competition Appeal Tribunal and the UK Government Natural Capital Committee, and a Fellow of the European Corporate Governance Institute.
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Elvin Lim is Assistant Professor of Government at Wesleyan University and author of The Anti-intellectual Presidency, which draws on interviews with more than 40 presidential speechwriters to investigate this relentless qualitative decline, over the course of 200 years, in our presidents’ ability to communicate with the public. He also blogs at www.elvinlim.com. In the article below he looks at regulation. Read his previous OUPblogs here.
Government regulation of the market in American has always been either too invasive or too superficial, never just right. This tells us more about ourselves than the day-by-day report card of Obama’s fledgling administration.
The Obama adminstration’s firing of GM CEO Rick Wagoner seem to some to have been a power grab and an overkill; yet others feel that the administration’s plan to help to buy up some of the toxic assets owned by banks will be too easy on the banks.
We swing between the extremes of excessive regulation and unfettered laissez faire - indeed we have majority factions within both major parties staunchly defending both extremes - because our country has never properly worked out the tension between the two.
Consider the last time an economic crisis of even greater proportions rocked the country. The New Deal and in particular the National Industrial Recovery Act (NRA) represented an even greater power grab by the Roosevelt administration than the one Obama is being accused of today, including the right by the president to approve of a set of “codes of fair competition” for every industry regulating minimum wages and maximum weekly hours. The Supreme Court unanimously declared the NRA unconstitutional in 1936.
As a country born without the feudal baggage of the old world and one which has constructed the self-fulfilling myth of the American Dream, we have never had to fully confront the crisis of capitalism that industrialization provoked elsewhere. Even having experienced the Great Depression, we still have not found, and no politician has successfully articulated, a sustained national consensus about the relationship between the state and the economy. Our love-hate relationship with the federal government explains American exceptionalism, but it also the source of our current woes.
Because ours is a capitalist economy which concedes the value of government intervention and regulation, we must lived with mixed (and hence often botched) solutions to our current economic crisis. We can neither nationalize the banks - and hence control how they are run including how executive compensation is structured, nor can we leave the banks alone - no politician would dare risk a depression on the heels of his/her inaction. In trying to find a compromise between market liberalism and political control of the market, we often end up achieving neither. So the Obama administration will alternately be accused of sleeping with Wall Street or witch-hunting it; decades after we have weathered the current crisis, we will still be debating whether or not what Obama did helped or worsened the problem. This is America, where we have a right, nay, a duty, to earnestly debate - as our Founders did - the necessity of even having a federal government at all.
The word this week at sugarfrostedgoodness.com is "flash" (as in the DC Comics superhero)
What more can be said? Speed kills......
Thanks to this guy for the concept.
I don't really like drawing super heros. Comics yes, super heros, no.
This about as close as I come...
Read the rest of this post
Mark V. Tushnet is William Nelson Cromwell Professor of Law at Harvard Law School. He is the author of fifteen books, most recently Out Of Range: Why the Constitution Can’t End the Battle Over Guns. Out Of Range is an honest guide to both sides of the 2nd amendment debate and an insightful analysis of how our view of the 2nd amendment reflects our sense of ourselves as a people. Part of Oxford’s Inalienable Rights Series, Tushnet’s book challenges our views of one of our most controversial freedoms, the right to bear arms. In the article below Tushnet helps us understand this week’s oral arguments in the District of Columbia v. Heller case.
What should interested observers look for in this week’s oral argument in District of Columbia v. Heller? The issue in the case is whether the District’s complete ban on private ownership of handguns – coupled with a requirement that long guns (rifles and shotguns) in private homes have trigger-guards – violates the Second Amendment. The Amendment reads, “A well-regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.” (more…)
By: Bruce K. Hollingdrake,
The government thinks books are a danger to children and mandates destruction of millions of kids' books starting February 10th, 2009. It sounds like the plot form a science fiction novel, but new regulations are all too real.
This week's theme: The Flash.
This week's theme is a fun one, the DC comics character, The Flash! The silver age version, golden age version or the modern incarnation, whichever you feel compelled to tackle. I'll be interested to see what you all can come up with.
For you newcomers, the SFG Challenge runs Thursday to Thursday, and was created to offer every member an opportunity to stretch their creative muscles and post their interpretations on a specific theme. It's a lot of fun!
Be sure to label your illustrations with the appropriate labels as well. I prefer you label your entries with your name or screenname, and the challenge label, SFG: The Flash.
Remember, this is a completely voluntary challenge designed solely to stimulate creativity and promote participation. Please don't hesitate to post your other work as normal.
Be sure to check out the SFG Forum, some great stuff going on over there every day.
The Blank Book Project has now started, I'm looking forward to seeing how this one turns out! So exciting! A special thank you to all participants, this is going to be so much fun! Track the progress and view updates on the Blank Book's journey by logging on to the Blank Book website.
The next challenge begins Thursday, August 16th, 2007.
Challenge yourselves SFG'ers and have a great week!