How And Why Companies Rule Our Lives

Vernon Coleman

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 first.

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.

In an 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 consultants.

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.

If 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 employment.

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 work.

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 works.

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 society.

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.

It is 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.

The politicians of Labour and the bureaucrats of Brussels simply don't understand this.

And it is why their project is failing.

Taken from 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 libraries everywhere.

Copyright Vernon Coleman January 2007