Corporate Responsibility for Libertarians

There's been a lot of comment about corporate pay and other anti-social corporate behaviour in the press over the last few years.

There has been precious little comment as to what to do about it. Here's an idea based on the following unashamedly libertarian principles.

1. Companies should be run in the interests of their shareholders.

If I buy an interest in a company with my money then it only seems fair that that company should work for me. It is no different to saying that if I buy a new phone then I should be able to use the phone as I please or that if I buy a house then I should be able to live in it.

I also think that companies should have due regard for the interests of their other stakeholders. Companies that ignore the interests of their customers, suppliers and employees aren't going to be very successful. But, and this leads on to point 2, that is what I happen to think.


2. It is not the business of government to tell shareholders what their interests are. 

Only shareholders know what their interests are. And this is the crucial bit. The interests of shareholders are not the same as the interests of the companies that they invest in. In fact, given that the beneficial owners of most of the big companies are normal people who are investing in pensions and ISA's and the like, the interests of the many companies' shareholders are aligned with the interests of society as a whole.

So why do companies seem to act primarily in their own interests and not in the interests of society as a whole?

My best guess is that, by law, they have to. In law companies have a duty to their shareholders which amounts to 'make as much money as you can while staying within the law and acting in accordance with some non-statutory codes of conduct'.

So the problems arise from government telling companies what their shareholders interests should be rather than getting companies to actually listen to their shareholders. Fortunately we are now in a position in which getting companies to listen is practical it works like this.

Change the law so that

a. Any company that wants to carry out investment business in the UK must allow each of its customers to register a proxy voter who can use the voting power associated with their portion of the investment fund to influence the companies in which their fund manager is invested.

b. Politicians and Political Parties (and anyone else for that matter) can put themselves forward as a proxy voter.

c. Customers can choose to have a 'super proxy' instead. A super-proxy is a proxy who can nominate another proxy.

Imagine a country in which ordinary investors could use their voting power to give, for example, the Labour party the power to appoint the Directors of large corporations. What would that do to excessive corporate pay, or other corporate anti-social behaviour.

It's time to get companies to act in their shareholders' interests and time to give shareholders their voice.