I have a presentation for the Corporate Accountability Network at Essex Univesity yesterday. I did not use slides, although I had prepared some. These were my notes, in that case:
Bad business and corporate responsibility
- Professor Richard Murphy
- Professor of Practice in International Political Economy, City University, London
- Director, Corporate Accountability Network
- University of Essex, 30 October 2019
Bad business and corporate responsibility
- The issues for this talk
- What is:
- Business?
- Good and bad?
- The corporation?
- Responsibility?
- And how can we manage in accordance with the resulting insights
Business
- At its most basic:
- The exchange of goods and services between willing parties for mutual advantage
- We all do it
- Inherently there is nothing wrong with it
- No one but a hermit can avoid it
- And even they might abuse the planet
- I’d suggest business is not our problem
Good or bad?
- Let’s stick to the business context
- And I’m going to be horribly ‘positive’ about this and to an extent exclude normative considerations
- I draw out two issues:
- Willing parties
- Mutual advantage
- Economists assume perfect information to overcome these issues - suggesting everyone knows what they’re taking part in
- The reality is that this is not true
- God or bad depends, I suggest, upon the asymmetry of information in the deal
The corporation - 1
- Many right-wing thinkers would suggest there is no such thing as a corporation
- It’s an agent
- A mere bundle of contracts
- The representative of its owners
- Without objectives or existence of its own
- Very politely, these people need to get a life in the real world
The corporation - 2
- The corporation has become an exercise in excepting some from what they think might otherwise be their responsibility
- Shareholders say the managers of a company are responsible for it - so don’t blame then
- Managers claim shareholders demand that they pursue profit, come what may
- Society affords limited liability - allowing shareholders and those who represent them with at least partial immunity for their actions
- And no one demands the quid pro quo for this very obvious abuse of our human rights - to have our property appropriated by others against our will contrary to UN Declaration of Human Rights 17 - which is accountability for the privilege granted by society
Responsibility - 1
- Corporate responsibility is about managing a company taking into consideration the asymmetries of power between the parties who contract with it
- What are those asymmetries?
- Of command of resources
- Of the cost of capital
- Of status, and so of
- Political power
- Influence
- Of information over an enormous range of issues
- What the organisations does
- About its products
- Who it engages
- What it pays
- Its lobbying
- Its taxes
- Its own ability to survive
Responsibility - 2
- The current system exaggerates these asymmetries
- Limited liability is the best example of this
- Limited accounting disclosure helps
- So do trade union laws
- And limited requirements on product disclosure
- The absence of compulsory environmental disclosure
- No country-by-country reporting for tax
- And tax havens help
So what is responsibility?
- It is managing the enormous, unanticipated and unearned benefit limited liability has provided in a way that benefits all in society, who are the people who have granted that privilege
Can there be a good business that exercises corporate responsibility?
- Yes
- But, only if it has all its cards face-up on the table all the time
- Accounting is nowhere near this standard at present
- This is why I have established the Corporate Accountability Network
- Working to integrate corporate responsibility into the mainstream of accounting by bringing it back from being the externality it’s become