The long standing fixation with creating shareholder value still persists just below the surface despite the current crisis. ‘The Rise and Fall of Management’ flags up the much broader responsibilities that directors have legally shouldered for the past 150 years, but if the City and top directors have their way, when the current crisis is over, it’ll be ‘back to business as usual’. Those directors will still be aligned with shareholders rather than customers and employees, and paying themselves extreme amounts of money irrespective of either short or long term performance. The bonus culture is regaining momentum and no matter how much the media and politicians berate the greed of City martinets, until action is taken to restrict or tax unwarranted bonuses, they will continue to be taken.
The Rise and Fall of Management takes a longer term perspective in which it can be seen the bonus culture is the aberration. Past practice as well as company law, including the 2006 Companies Act, take a much more enlightened approach to governance than current City practitioners want to admit. Contrary to common assumptions, shareholders do not own companies – how could they and benefit from limited liability at the same time? And directors owing their duty to the company can’t be solely the “agents” of shareholders. The law charges them with acting fairly as between all company members and having due regard to the long term and the interests of all stakeholders. All directors, including those who have gained substantial equity holdings as a result of bonus payments and therefore consider themselves primarily as shareholders, have these legal obligations. But delivering shareholder value has become so engrained in custom and practice that the law is simply ignored.
Under successive governments over the past three decades, corporate governance has been encouraged to degenerate into an unregulated free for all where the few exploit the majority and the substance of industry itself is hi-jacked.