Bad business and corporate responsibility

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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