COMMENT: by Bob BrowningNews Weekly
Humane economy v. the bottom line
, March 24, 2001
Maximising shareholder value seems the one inviolable rule of business ethics.
Bob Browning explains what this means in practice.
Rarely a week goes by without another sharp reminder that disproportionate political as well as market power is being transferred to the big corporations - and that many are failing to exercise their expanding power with an acceptable degree of social responsibility or human concern.
In Australia, for example, we have the unseemly spectacle of a corporation, TransUrban, suing the Victorian people for over $30 million. Why? Because the State Government made improvements to the public road system. TransUrban claims this reduced the bottom-line profits from its tollway, and so it deserves to be compensated.
Overseas, more seriously, the giant pharmaceutical companies are acting ruthlessly to prevent the governments of poorer nations from obtaining the affordable generic drugs they need to relieve AIDS and other sufferers dying pitifully in their millions.
The drug corporations' concern is to protect their intellectual property. They claim they need to make huge profits to maintain expensive research and development in the public interest. Yet reportedly they spend twice as much on marketing as they spend on research and development.
Research projects are mostly aimed at developing products that will sell well in rich countries - at prices the corporate moneymen want to set. Marketing campaigns target recommending doctors and government subsidisers, as well as consumers directly. Under the corporate market system, there is no guarantee that the medicines that most people around the world urgently need, and at affordable prices, will be forthcoming.
More people are becoming sceptical of neo-liberal arguments that corporations are part of civil society, and that the more freedom exercised in this area by business organisations, free of government "interference" , the better. The current ideological wisdom is that people gain a more effective say through exercising freedom of choice in the marketplace than through voting for governments to regulate in the public interest.
Many will take a lot of convincing that a system leading to do-as-you-like mega-corporations is the best and fairest way man can devise to produce and distribute life-saving products like medicines effectively to all the world's peoples.
Yet, the powerful special interests pushing neo-liberal ideology continue to induce governments to unleash the "crouching tiger, hidden dragon" potential that lurks in the dynamics of the modern corporation.
Whatever their faults, the processes of accountable democratic governments exercising national sovereignty afford citizens and consumers better protection than do the giant corporations. Only declining state regulation and the duty of maximising profits for their shareholders restrain corporate executives legally and morally.
Corporate exercise of power is far more furtive than that of most democratic governments. Corporate strategy and decision-making is protected by so-called "commercial-in-confidence" privilege against public transparency - other than whatever transparency the big shareholders demand to make financial decisions.
Many of the biggest performers listed on Wall Street have their dark side. Revelations are on-going about the shadowy but real link between some giant textile, clothing, footwear, fashion, and sporting goods corporations and child and slave labour in the Third World. Pockets of virtual slave labour exist even in the sweatshop ghettos of rich countries, some of which are exploited by manufacturing and service corporations to improve their bottom lines.
Little we hear these days persuades us to rely on neo-liberal promises that the invisible hand of the market alone will ensure that corporate executives will act ethically and with social responsibility. All's fair, apparently, in the cut-throat race for maximum profits - especially with the big fund managers breathing down CEOs necks over short-term profits.
Lesser but still significant examples of the trend to corporate power are occurring daily in Australia. Consider the purging of this country's pharmaceutical advisory and food regulatory committees.
Hot on the heels of the Howard Government's spill of the Pharmaceutical Benefits Advisory Committee (PBAC), comes its effort to do the same to the Australian and New Zealand Food Authority (ANZFA) board.
The PBAC decides which of the giant drug companies' products will be taxpayer-subsidised. The ANZFA regulates the marketing of processed foods. This includes whether and how ingredients must be labelled when they incorporate genetically modified crops and chemical additives.
Pharmaceutical corporations lobbied intensively, complaining that the PBAC was forcing them to reduce their prices for the Australian market. Giant companies dominate the Australian and world supply of pharmaceutical drugs. Changes to the PBAC included the appointment to it of a former drug industry lobbyist and multinational drug corporation executive.
The Federal Government's purge of the PBAC, if not initiated by the multinational drug corporations' attacks on that body, certainly followed both such attacks, and expensive promotion of the Howard Government and its Health Minister Michael Wooldridge through advertisements in The Economist.
As for the Australian and New Zealand Food Authority (ANZFA), the Howard Government proposes to replace it with a new body. The existing board has one mandated industry representative.
The proposed new body will be empowered to draw five of its ten board members from industry interests. Opponents argue that food standards are a matter for health and safety authorities to monitor, not the manufacturers, marketers and distributors.
The giant food corporations that dominate Australia's food supply operate energetic lobbies in Australia. They also make various types of contribution to political parties and think-tanks.
The big food corporations are represented mainly by the Australian Food and Grocery Council located in Canberra. It lobbies persistently for less state regulation and more "voluntary codes".
One of the Liberal Party's donors is a company innocuously named Food Investments Pty Ltd. The Age (March 3, 2001) revealed it has the same registered address in Sydney as the overseas-controlled multinational food giant Weston Foods. The two share a number of directors.
Both conservative and social democratic governments of the world's seven most powerful trading nations (the G7), led by the US superpower, are giving priority to economic policy that liberates corporate power from democratic political interference. The effects of economic policy are measured in abstract statistical terms, based on money exchange rather than on their social and cultural impact.
It is difficult not to agree with the Italian Marxist Antonio Gramsci's comment three quarters of a century ago in The Modern Prince:
"It must be made clear that laissez-faire too is a form of State 'regulation', introduced and maintained by legislative and coercive means. It is a deliberate policy, conscious of its own ends, and not the spontaneous, automatic expression of economic facts [i.e., the market].
"Consequently, laissez-faire liberalism is a political program, designed to change - insofar as it is victorious - a State's leading personnel, and to change the economic program of the State itself - in other words the distribution of the national income."
The rise of state-sponsored corporate power prompts urgent calls for greater public understanding of the sort of influence that the globalising corporations wield, and what the effects are.
Corporations wield more than industrial and market power. Increasingly these giant organisations wield powers that elected and accountable governments formerly exercised.
Their powers do not stop at the industrial, market and political level. They exercise enormous social and cultural influence, not least in making the traditional family an increasingly fragile institution. Corporations are revolutionising the nature of work and the workplace. And they market lifestyles and values calculated principally to increase the consumption of corporate goods.