People are angry about corporate abuses: tax avoidance, asset stripping, fat cat salaries and bonuses and much else. Corporate capitalism has lost its moral compass and its social values. It has plunged the world into recession and austerity and contributed to growing social inequality. The prevailing focus on shareholder value has placed short term profit ahead of constructive investment. The current structures of corporate law and practice are clearly in need of radical reform.
And yet the underlying principles of corporate law – providing for external investment in enterprises which combine the labour of workers to produce goods and services – are not inherently wrong. They have worked over the years to increase prosperity and living standards in many countries. What is needed is a realistic and pragmatic programme to eliminate abuses and promote fairer and more productive alternative corporate structures.
Fighting Corporate Abuse: Beyond Predatory Capitalism is the title of a new book (See http://www.plutobooks.com/display.asp?K=9780745335162) which explains in detail how abuses have been carried out through complex corporate structures and how they can be controlled. It is written by the Corporate Reform Collective which was formed to highlight and promote essential reforms in corporate law and practice, as outlined in the Corporate Reform Manifesto.
The Manifesto calls on the major parties and pressure groups to commit to a set of action points in advance of the 2015 election, for the incoming British government to implement here in the UK and to press for in international bodies. Details are included on the separate Corporate Manifesto page where supporters are invited to reply on that page.
National action on company law
· replacement of the neoclassical theory of maximising shareholder value as the primary duty of company boards by prioritising the duty to promote the long-term interests of the company and all its stakeholders
· a legal duty to comply with codes of governance and corporate social responsibility rather than the current ‘comply or explain’ approach
· legislation to facilitate conversion of major companies to shared decision-making with two-tier supervisory and executive boards with employee representatives on the supervisory board on the German model
· a cap on executive bonuses and legislation to permit revocation of past and future contractual bonuses unjustified by performance
· a ban on voting on takeovers and mergers by recently-acquired shares
· reform of audit and accounting law to require auditors to maintain strict independence, to engage with all stakeholders and to carry out special audits on issues of immediate concern
· legislation to promote and facilitate alternative co-operative and profit-sharing corporate structures and not-for-profit spin-offs as an alternative to privatisation.
National action on financial markets
· action to require a full formal split between traditional and investment banking
· introduction of a Tobin tax to reduce incentives for speculative share trading
· restrictions on the limited liability of LLPs and of investment banks, hedge funds and others engaged in trading derivatives and other risky financial instruments
· regulation of the over-the-counter markets in financial instruments
· rigorous enforcement of legal and regulatory rules.
International action on taxation and the control of multinational corporations
· critical engagement with G20 and OECD initiatives to ensure that they produce effective measures to end tax avoidance by multinationals by ensuring that they are taxed as unitary firms and their profits apportioned to countries according to where business activity is actually carried out
· action to end the use by multinationals of the tax haven and the offshore secrecy system
· an obligation on multinationals to publish country-by-country reports showing their consolidated worldwide profits, as well as employees, sales to customers, and taxes paid and payable in each country
· the development of international listing rules for major multinational corporations requiring the simplification of group structures and the creation of effective decision-making powers in each country of operation
· joint legal responsibility for holding and subsidiary companies in multinational groups
· an end to the dominance of the ‘big four’ and other accounting professionals in the development of international accounting standards and the creation of a democratically accountable system for their approval and enforcement
This manifesto has been drafted by the Corporate Reform Collective whose members are: Tom Hadden (Emeritus Professor, Queens University Belfast), Paddy Ireland (Professor of Law at the University of Bristol Law School), Glenn Morgan (Professor of International Management at Cardiff Business School), Martin Parker (Professor of Organisation and Culture at the School of Management, University of Leicester), Gordon Pearson (author of Strategic Thinking, Integrity in Organizations, The Rise and Fall of Management and The Road to Co-operation), Sol Picciotto (Senior Adviser to the Tax Justice Network), Prem Sikka (Professor of Accounting at the Essex Business School) and Hugh Willmott (Research Professor in Organisational Studies at Cardiff University).