How And Why
Companies Rule Our Lives
I have for many years argued that companies are amoral and
have agenda and requirements of their own.
My thesis, first put forward
in my book Toxic Stress in 1991 and extended in the original version of
Animal Rights Human Wrongs in 1999 has now been widely adopted (it was
used as a starting point for the film 'The Corporation'). The argument is that
the directors and executives of big companies have no control over the companies
for which they work because it is the company's needs which must always come
The Company needs to make quarterly profits to satisfy corporate
analysts. The Company needs to produce rising dividends in order to satisfy
shareholders. The employees, however elevated and well rewarded they may be, are
there simply to ensure that the company's needs are met. The modern company is a
bit like the man-eating plant in the spoof version of `The Little Shop of
Horrors'. It is never satisfied, can never be satisfied, and is unconcerned with
the well-being of the humans who work for it or tend to its needs.
utterly misguided attempt to deal with this problem. the rather simple-minded
bureaucrats who run the European Union (and, therefore, our lives) have spent
several decades attempting to control modern companies and turn them into
socially responsible entities.
In this fruitless and destructive
endeavour they have been supported by successive European governments who have
spotted the financial advantages of heaping many of the State's responsibilities
onto corporate structures.
Because very few (if any) bureaucrats or
politicians have any real commercial experience (or, indeed, any experience of
what life is like in the real world) they have done some pretty staggering (and
probably irreversible) damage to the competitiveness of European companies.
Today, in rather pathetic attempts to keep the EU happy, even modestly
sized companies employ Corporate Social Responsibility Officers, maintain CSR
Departments, promote their CSR initiatives and spend fortunes on hiring CSR
Vast amounts of time, energy and money are wasted on
pointless exercises in corporate political correctness.
In England the
Government forces companies to use their payrolls to perform 23 jobs which
should be done by the Government. (When Labour came to power in 1997 the figure
was 15). These delegated jobs include doling out maternity pay and tax credits
and collecting fines and student loan repayments.
It is hardly surprising
that the incidence of bankruptcy among small businesses (particularly those
which are labour intensive) has reached record levels.
I don't think
there is much doubt that one of the reasons for the success of companies in
China and India (and for the decline of European industries) is the enthusiasm
of EU bureaucrats for interfering with the way companies are run, for forcing
companies to take on numerous responsibilities which should be managed by the
State (arranging pensions and organising social security payments are among the
relatively few responsibilities of the State) and insisting that companies
become `socially responsible'.
The small tragedy is that by forcing
companies to take on inappropriate and pointless responsibilities the EU
bureaucrats have simply provided the slaves of the corporation (from the
directors and the executives downwards) with a neat cop-out.
corporations pay lip service to the bureaucratic requirements of the EU then the
EU will leave them alone.
The big tragedy is that by forcing corporations
to take on responsibilities for which they are not designed or well-suited the
EU bureaucrats have done lasting and severe damage to the efficiency and
effectiveness of European companies and to the employment prospects of millions
of European workers who must rely for their livelihoods on corporate
It is largely thanks to the EU that many European companies
are now closing local plants, sacking their workers and moving their production,
or their services, to another continent. China and India are gobbling up the
It is largely thanks to the EU, a series of incompetent governments
and the witless greed of Labour stealing £5 billion a year from English pension
funds, that many large companies are now so burdened with their pension
responsibilities that they can no longer function as companies operating in
their area of expertise but are effectively no more than investment funds
managing the company pension scheme.
The truth which EU bureaucrats have
failed to spot (because of their ignorance of the way things move in the real
world) is that corporations have no social responsibility other than making the
maximum possible profits for their shareholders. That is why companies exist. It
is all they exist for.
It was Adam Smith, the author of The Wealth of
Nations, who first pointed out that: `It is not from the benevolence of the
butcher, the brewer, or the baker, that we expect our dinner but from their
regard to their own interest.'
(I doubt if Smith was the first to realise
this truth, but he was the first to express it so neatly and so he is entitled
to the credit for it.)
Self-interest is the reason why capitalism
Investors put their money into companies not out of a sense of
public service but so that they will receive a return. Employees go to work not
through altruism but so that they will be able to feed, clothe, house and
entertain themselves and their families. Self-interest is the very basis of our
And what is true for bakers and shoemakers is equally true for
companies making bread and companies making shoes.
The company which
makes a profit will serve its shareholders and its employees well.
the role of Government to prevent corporate excess and corporate crime. It is
the role of Government to introduce legislation which will effectively control
companies and make sure that they earn their money without damaging individuals
or society. And it is the role of Government to introduce penalties and
sanctions which ensure that just laws are obeyed and, most important of all,
that it is in the interests of the company that the laws are obeyed.
politicians of Labour and the bureaucrats of Brussels simply don't understand
And it is why their project is failing.
The Truth They Won't Tell You (And Don't Want You To Know) About The EU
by Vernon Coleman
All Vernon Coleman's books (including this one) are
available from the bookshop on this website and from all good bookshops and
Copyright Vernon Coleman January 2007