Democratising the corporate world

The great corporations which we have grown to speak of rather loosely as trusts are creatures of the State, and the State not only has the right to control them, but it is in duty bound to control them wherever need of such control is shown.

An interesting quote from a speech in 1902, not from a socialist, not from a radical Marxist, but by the then President of the United States of America, Theodore Roosevelt.

A sentiment that has been lost in the western world. Corporations are not naturally occurring bodies, they are created by the state to enable collective capital to be invested in economic ventures beyond the scope of an individual.

Let us look at the recent events with BrisConnect where proxy votes for a shareholders’ meeting were purchased by a party with a commercial interest in the outcome of the ballot. That this situation was at all possible is an indictment on the lack of corporate democracy in Australia. Where else in our society is it legal to purchase votes.

In Queensland accepting or offering a bribe for a vote in elections can attract a criminal sentence of seven years imprisonment. Why is it that in the corporate world proxy votes for shareholder votes can be brazenly bought and no one seems to care?

What sort of democracy allows genuine investors to potentially have an outcome influenced by another party with potentially conflicting interests?

We need to rid the corporate world of the worst traits of a Tammany Hall system. The idea that progress of shareholders votes can be known by the board before the vote is complete is an anathema to transparent democratic process. The ability of boards to manipulate votes by encouraging institutional investors to vote - if a result is going against the wishes of the controlling elites - is typical of the Tammany Hall system that underpins the corporate world.

The recent conduct of the James Hardie board raises significant questions about how we create a system which leads to higher ethical standards.

When a board is guilty of deliberately misleading conduct why should the individuals on the board be able to continue to hide behind the corporate veil? Maybe if the consequence of deliberate misleading conduct was that board members would individually be liable for the cost of rectifying the damages we may have seen the James Hardie board act in a more responsible manner.

If the board members of Visy could be held individually responsible for the damages to their customers from their price fixing it may have forced the company to operate within the spirit of the law.

Corporate Australia spends millions of dollars to seek legal advice on how their operations remain technically legal even if the spirit of the law is broken. We need to fundamentally shift the balance, not to deter legitimate risk taking but to deter shady activities.

Our Corporations laws need to expose those individual board members not protect them. Individuals who serve on boards which are guilty of price manipulations and cartel behaviour deserve to face the full cost of civil torts and to be individually responsible. Maybe then we may see some more ethical behaviour.