Another week and yet more examples of corporate greed and wrong-doing emerge. Big for-profit corporations are using JobKeeper funds as DividendKeeper and BonusKeeper. Facebook is making bullying threats over the Australian Government’s reasonable move to make it pay for content. Big business is urging the Government to scrap superannuation rises for wage and salary earners so it can pocket the money for profits, bonuses and dividends.
It does not seem to stop. Wage theft, water theft, theft from bank customers, tax dodging, and dodging responsibility for dangerous goods and environmental clean-up have been rife in corporate Australia for decades.
Bad behaviour is in big corporations’ DNA. It goes hand-in-hand with a corporation’s reason for existence: to maximise profit.
Selfish corporate lobbying of government is part of the trouble, but only part. Over the past few decades corporations have done a masterful job of convincing government that policies that favour big business are good for all: deregulation; self-regulation; privatisation; contracting out; user-pays; tax cuts for corporations and high-income earners, high migration of cheaper labour, and cuts to government services.
Further, corporations have engaged so-called independent consultants to craft tendentious reports to make these policies seem respectable and mainstream so they would be accepted by enough gullible voters to keep the main political parties either in government or as the government-in-waiting.
The corporations have sprinkled a bit of money at the political parties making those parties beholden to the corporate world’s most-favoured policies.
Many have rightly called for a ban on corporate political donations as a solution. It would certainly help. But it would not stop their endogenous malfeasance. Their bad behaviour towards workers, customers and the environment would continue. It is in their DNA.
The original idea of a corporation had some merit. The corporate structure enabled large amounts of capital to be raised that would have been beyond individuals or even partnerships. They enabled management to be separated from ownership so the capital raised could be more efficiently used. They enabled perpetual succession, unlike partnerships or sole traders whose businesses risked falling apart upon the death of a partner or sole trader.
But most importantly, the corporation was offered limited liability. It meant that, when a corporate business went broke, the owners of shares in the corporate business could only lose the value of their shares and nothing more. They would not carry any individual liability for the corporation’s debts, the non-payment of which had sent the corporation broke.
Limited liability is a great gift from society to investors in corporations. But over recent decades society as a whole has not been getting a whole lot back for its gift. To the contrary, the gift has often yielded a metaphorical slap in the face.
Too often, corporations go broke without enough put away to meet debts owed to employees in the form of holiday and sick leave and superannuation. Too often, corporations go broke leaving unrehabilitated mine sites or public-health crises such as that caused by asbestos, chemicals and drug side effects.
Too often corporations take from the environment or pollute it without paying the true cost. The taxpayer is left to pick up the damage. All this has become unsustainable.
This week’s cases are classic examples of the corporate mindset. The shadow assistant treasurer, Andrew Leigh, exposed the way corporations are abusing JobSeeker. Surely, corporations should use all their own available resources, including forgoing executive bonuses, before putting their hand out for government help (while at the same time urging government to reduce spending on the ill, aged, homeless or jobless).
But no, too many corporations seek out ways to attract and extract as many free governmental and planetary resources as possible to increase profit and executive bonuses.
Facebook’s threat against a sovereign government’s plan to put a bit of fairness back in the media business is a classic example of corporations having too much power.
No amount of public shaming seems to make any difference. Nor does any amount of regulatory threat. It is all in the corporate DNA. So the solution must be to impose a bit of gene splicing to change that DNA.
In particular, the corporate structure and the boards of directors need an overhaul because the continued poor conduct of so many corporations in the face of dwindling planetary capacity demand nothing less.
A couple of possibilities come to mind. Once a corporation gets to a size beyond a small family concern, corporations law should demand a bit of gender equity, say a minimum 40% female and a minimum 40% male directors, and some representation for employees.
Secondly, corporations law should demand the appointment of one or two independent directors, once a corporation gets to a certain size.
The German model is a good one. Shareholders and employees each elect half the members of a supervisory board of directors which approves the dividend, sets executive pay, approves changes in company strategy and can fire executives. Its chair is not permitted to be chief executive. Under that supervisory board is an executive board which manages day-to-day operations and proposes strategy and dividends to the supervisory board.
My guess is that corporations using this model would keep all the societal benefits of incorporation but would not be so rapacious in putting profits and dividends over duties to employees, society and the environment. And they would be less inclined to give money to political parties (unless these donations had been banned by then).
Moreover, it would put a dent in the system of directorships based on the old-school-tie and who, rather than what, you know, as outlined by former NRMA director Richard Talbot this week.
In the past Australia has been a pioneer in many areas of law: the Torrens land system; voting rights; testator’s family maintenance; child support ,among many. We should have a crack at corporations law as well. It is almost totally a Commonwealth power.
It would be like imposing a healthy-living regime upon the corporate world instead of having to endlessly clean up the mess created by the present system’s corporate gluttony.
This article first appeared in The Canberra Times and other Australian media on 5 September 2020.