Revision as of 09:58, 7 May 2020

The company as property

Citing Ostrom as inspiration for a new public policy debate, the authors begin the process of introducing the differences between private property and commons.

They start with a discussion of the Gini coefficient (which measures inequalities in wealth, where 0 is equality, and 1 is all wealth held by small elites). Applying the Gini coefficient to companies, rather than nations, the authors argue we can reveal wealth inequality between investors, executives and staff. If above 0.4 in a company, there is a danger of social breakdown (loss of the 'social license to operate'). Using this argument, the authors show the idiocy of defending 300:1 (or even 500:1) pay ratios of senior executives and front line staff. The authors suggest 15:1 might be a the kind of gap needed for a respectable Gini coefficient.

Incorporation and apartheid

The authors frame existing approaches to membership and governance rights in business as the continuation of apartheid (outside state institutions). Under apartheid, populations of people were systematically disenfrancised (not deemed worthy of participating in governance or the wealth created by past labour) because of their position in society. In today's business, workers and customers (particularly in Anglo-America cultures) are not deemed worthy of participating in governance or the wealth created by past labour because of their position in the company. Having money - argue the authors - is not a good proxy for sound decision-making (when the goal is the maximisation of six Six Forms of Wealth.

Like apartheid, the basis of separation (that all decision-making rights stem from the interests of those who invest financial capital only) is not logical. It is not in the interests of wider society and creates crises.

Excluding stakeholders causes crises

The authors do not mince their words. On p. 91 they state "Excluding most stakeholders - human and non-human - from the key decisions that create our shared reality creates a gravity that is pulling us deeper into the swamp of extinction". The issue is not financial return to shareholders per se as it is important to pay back investment capital. The issue (for the authors) is that paying money to financial investors is not (or should not be) the purpose of the business. One type of Capital should not be created at the expense of other capitals.

A second issue is that financial shareholders not only get all voting power; they also get all the rise in the (financial) capital value of the business and all financial dividends (surplus cash). Without a stakeholder class to represent the needs of children, grand-children, or other forms of life (even that on which we ourselves as humans depends) the 'cost' of decisions on their futures are not articulated. The stakeholders missing from AGMs are those the bear the costs of decisions (staff, customers, suppliers and future generations).

Multiplied a million times across millions of companies, and we arrive at the multiple crises of today. (p. 93).

Incorporation and ownership

Through a discussion of what happened when one of his books was being copied in Singapore, the issue of property (and its value) is explored. Using the metaphor of solitary animals and ant colonies, the issue of variation in attitudes to ownership is made clearer.

[Editor's note: there are statements here that I do not think are supportable with credible studies (such as 'we are now at a point where either all humans learn to thrive together, or we all experience a collapse'). I can't think of a single research informed example where everyone thrives together, or where all humans experience a collapse together. My own research shows that for each initiative, there are counter-actions, counter-initiatives, even when they are well-hidden from executive eyes. Even in the recent COVID-19 crisis, the situation is far from uniform internationally - some countries fared well in comparison to the US and UK without putting any 'lockdown' measures in place.]

On p.95, the authors argue that (legal) slavery has ended in practically every country, but it still continues through forced labour, sex work, forced marriage etc. Treating people as property continues, to the obvious detriment of the thing (person) owned. With the advent of fossil fuels, both the social and economic arguments for freedom (from slavery) changed, as it became obvious that paying everyone and enabling them to buy goods created a virtuous cycle that both raised standards of living and emancipated many people.

Between 2010 - 2013, Graham wrote a white paper on applying the concept of freedom to companies as well as people and asks the question how property ever became accepted as the basis of a (free) market economy?

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