A BLUEPRINT FOR THE RESPONSIBLE COMPANY
ADAMANTINE PRESS LTD
This book raises a number of fundamental questions as to the role of a company in the modern world. Perhaps the most important question, however, is formulated most concisely in the foreword by Sir Peter Parker who asks :
Can it be just, for instance, that a lifelong employee is not a member of the company — that only as a shareholder with equity can he be that?
The argument of the author is that this position is unfair. In his view the company should be operating as :
… (not just) an instrument for maximising profit in the interest of shareholders, but as a wealth-creating organism in the service of the consumers, employees and the community as well as of the shareholders.
In Part One of his work George Goyder tells us what he sees as the problem. He looks closely at the development of company law, from the first enactment of limited liability in 1855 and its consolidation in the Companies Act of 1862 which allowed a company to grow indefinitely, to the present situation :
… when a small group of men exercise control over commercial empires that are richer than many sovereign states.
The author notes how little change has taken place in company law. He regards it as absurd :
… that a law designed for family business a century ago should continue to apply, without substantial change, to the whole of industry today regardless of the size and purpose of the company.
He points out that no obligation is placed on the directors to exercise care for the interests of its customers, nor that the company behave in a socially responsible manner.
He further believes that clause 46 of the 1980 Companies Act (repeated in Section 309 of the Consolidating Act of 1985) which extends the matters to which the directors of a company shall have regard to “the interests of the employees” in general should be given a wider interpretation. Such an interpretation would include the right to consultation and information.
A NEW KIND OF COMPANY
I am by no means an expert on economics, but the impression I gained from reading The Just Enterprise was that the new type of company envisioned by George Goyder would be responsible and accountable not just the shareholder, or even a combination of workers and shareholders, but to workers, shareholders and customers.
One of the values of this important work is that the author states how this could be done — it is indeed a blueprint! One of the most refreshing and radical ideas expressed in the work was the questioning of assumptions concerning share capital. Goyder states explicitly that the practice of a modern public company which entitles shareholders to a perpetual return during the company’s prosperity, and permanent control of the company :
… is usurious, whether we look at it practically philosophically or religiously.
He believes that :
… It is impossible to expect industrial relations to be normal while this disparity between the reward of capital and labour is allowed to persist.
Goyder’s solution to this problem is to argue that the law should make equity shares in public companies subject to eventual termination. He also argues that the employees should be made “members of the company” by setting up a trust fund on their behalf, and allowing them to exercise their individual right to vote according to the number of shares their interest in the trust fund represents.
The Third Way has been committed to widening employee participation in industry since its foundation. It has tended, however, to express this concept in support for co-operative ownership.
Where I believe that this book is very useful is that it actually provides a plan for transforming existing companies so that they become more accountable to their workers.
Many existing companies are involved in promoting employee participation to varying degrees. George Goyder makes mention of ICI, the John Lewis Partnership, the Scott Bader Company, Sears Roebuck and many others.
The example of Sears Roebuck is particularly interesting. In the USA it pioneered in 1916 a scheme whereby it :
… set aside annually ten per cent of gross profits before tax and placed it with an employee share trust to buy the company’s shares in the open market. The result over a period of years was to transfer some twenty per cent of the equity from shareholders to employees.
A WIDER AGM
Goyder also has a different view of what a company AGM should be like :
… there must be an opportunity for freely chosen representatives of the workers, consumers and the community to be present and to be allowed not only to ask questions but to speak about corporate policy and comment on the Chairman’s statement to the AGM.
He sees it as important that the interests of workers and shareholders are balanced by those representing the consumer interest. He explicitly rejects :
… the syndicalist path of agreement between shareholders and employees at the expense of the consumer.
Perhaps this is the path we in Third Way have tended to follow? I believe that in the past we have certainly neglected the need for consumer representation in industry. A reading of this book by Third Way supporters would help acquaint them with the arguments for changing this.
THE SOCIAL AUDIT
Another way in which the author argues that the modern economy can be made more responsible to the wider community is through the process of the Social Audit.The author cites a number of existing companies which already carry out a form of social audit. Hoogovens (a leading producer of steel) and Tata (the largest private company in India) are just two examples. The Social Audit envisioned by the author would be an independent appraisal of how far companies meet their stated social objectives.
The book contains a very interesting appendix on usury which traces both the classical and Christian view (but not the Islamic). Some might question the relevance of such a discussion — yet time and time again workers’ co-operatives and all other types of enterprise face the problem of how to raise capital for investment. In our present society all major sources of finance seem to be usurious, so the discussion of usury is really rather a central issue. Recent years have seen a number of co-ops forced to barter control for investment (Monktonhall, for instance).
I commend this excellent book to our readers; it is part of the Adamantine Classics for the 21st Century series, and does not disappoint.