By Michelle Meagher, a competition lawyer and author. Her forthcoming book, ‘Competition is Killing Us’, will be published by Penguin next year. Originally published at openDemocracy
It is almost as if we were not meant to notice. Last month the influential Business Roundtable released a letter, signed by 183 Chief Executives from some of the biggest companies in the world, redefining the role of corporations in society.
Breaking with almost 50 years of practice, the group announced that from now on they would commit to protecting the interests not just of shareholders, but of all stakeholders. Delivered at the height of the business vacation season, with corporate responsibility sitting low on the to-do list behind ice cream and afternoon naps, the timing was incongruous and the wording, like all compromises to consensus, promises almost nothing at all.
The global reader may stumble over some of the phrasing, such as the commitment to a “free market economy that serves allAmericans” – this from multinational companies with globe-spanning markets, outsourced operations and cross-border impact. We may also wonder how the announcement changes the workings of the free market in any discernible way. The weak pledges – to look after customers, to maintain good supplier relationships, to care for communities and the environment – could have been lifted from any one of the companies’ existing annual reports.
Employees at least get some specific assurances – fair compensation, benefits, training and education, diversity and inclusion – although of course the detail will be in the interpretation by individual companies. But communities and the environment, the most vulnerable of stakeholders, get the shortest, vaguest shrift in the statement . Communities will be “supported” and “respected” and the environment will be “protected” through sustainable practices.
Clicking through on the Business Roundtable’s website it is clear that the community and environmental investment that these companies have in mind is very much along the lines of the corporate-social-responsibility-as-charitable-giving that has proven extremely tax-efficient and brand-enhancing in past years, without jeopardising any core profit centres. There is no commitment to engage with the harder, messier, more painful work of changing business models to replenish currently abused and depleted communities and ecosystems.
Indeed the whole letter reads as a poor imitation of the “benefit corporation”, a corporate model designed to legally commit companies to having a “material positive impact on society and the environment”. But reading between the lines is where we get the strongest sense of what this letter is really about: it is a desperate, placatory promise by the leaders of a Ponzi scheme in fear that their pyramid of willing fools may be wising up. The cognitive dissonance of efficient, beneficent, and generous free market capitalism in a world showing increasing signs of social and ecological crisis is beginning to agitate the subjects. We are waking up from the Matrix, and this statement is meant to coax us back under.
The Business Roundtable, rather than offering an alternative to the free market logic that got them to their positions of power, instead doubles down. “America’s businesses”, we are told, “have been a critical engine to its success.” The implication is that American business will also be a critical engine to getting us out of the mess that American business got us into. Meanwhile, the state is nowhere to be seen in this proposed solution, which plays on the accepted view that government is in paralysis and disarray, that the much-needed changes will be too politically difficult, therefore business must step-in to fix the chronic problems which the state cannot fix itself.
But the question we must ask is: why is government in paralysis? And what have those 183 business leaders done to ensure that state of disarray? Are they in fact the ones making sure that the needed changes are politically difficult?
It is at this point that we may become aware, if we are listening closely enough, to two separate conversations. The Business Roundtable letter sits in the stream of “stakeholder capitalism” and corporate responsibility, although the statement notably eschews the word “responsibility” completely. But there is a separate conversation happening in policy circles about corporate power, about the mass consolidation of industry, the market and economic power of corporate titans and how this is leveraged into political power to undermine the government.
Looking at corporate responsibility in isolation has the effect of shielding corporate power from view. But power is exactly what the Ponzi scheme is for. Many of the companies involved in the Business Roundtable have benefited from the disempowerment of competition law – which is meant to prevent accumulations of corporate power and market distortions. Corporate behemoth Bayer is a signatory to the letter, having passed relatively unscathed through an antitrust review process that ultimately blessed its acquisition of rival Monsanto, concentrating the control of global agribusiness into just six hands.
Powerful companies are free to make pledges to which no one can hold them accountable. Think of the recent watering down of post-financial crisis banking regulations or the failed attempts to bring Big Tech to heel – big and powerful companies easily evade public control. Microsoft, Facebook and Google are notably not members of the Business Roundtable – why bother with the charade?
Why should we trust these companies to serve the public interest just because they say they will? We shouldn’t. The passivity encouraged by free market thinking has led to obscenely unequal and damaging results. The public must serve its own interests, either directly or through representation. This is a core principle of political democracy, and is necessary if we are to maintain any semblance of economic democracy.
The Business Roundtable announcement is an important step. Hamstrung by the perception that their primary duty is to shareholders, it is unlikely that many of these CEOs would have felt confident about acting first or acting alone, fearing punishment by the capital markets for sticking their heads above the parapet. The feeling of safety in numbers will have emboldened some of these self-styled leaders. And the letter was after all half right: business will be critical to solving the social, climate and technological challenges we face, although certainly not without the collaboration and guidance of government and society.
But we will not have a chance at influencing companies, and will not be immune to the lobbying counter-strength that corporations can muster, if the fundamental issue of power is not addressed. This means that we should step up global competition law enforcement with the aim of reducing market power, and we should also target the most powerful companies in our economies to give them real responsibilities, on pain of dissolution. Stakeholders do not need to have their interests taken care of by disingenuous corporations – stakeholders need voice, representation, influence and ultimately control so that they may protect themselves. Power and responsibility must finally be brought out of the shadows; the two parallel conversations must become one.