People no longer have faith in the economy or their governments and businesses are to blame.
That's the case being made by one researchers in his new book, "Firm Commitment" (OUP Oxford 2013). Colin Mayer, professor of finance at Saїd Business School, University of Oxford, places the corporation at the center of this national failure of trust and at the heart of current economic problems. He contends that corporations no longer serve the interests of society at large and have been hijacked by their shareholders.
"The corporation is arguably the most important institution in the world, an institution that employs us and invests our savings and is the source of economic growth and prosperity around the world," Mayer said. "Yet the corporation has lost its purpose and become dominated by short-term financial concerns, to the exclusion of all others and to the detriment of us as its customers, employees and communities."
In the book, Mayer not only calls upon policy makers and senior business figures to reform the corporation, but also sets out a program of measures focused on the institutions' ownership, values, governance, regulation and taxation. Some of the specific steps Mayer argues for include:
- Corporations taking responsibility for the consequences of their own conduct and placing control in the hands of long-term, committed shareholders
- Clearly articulated values with truly independent boards of directors responsible for ensuring that those values are adhered to
- Tougher enforcement of regulation when corporations breach laws and threaten systemic stability, but less intrusive regulation elsewhere
- The use of the corporate tax system to align the interests of corporations with those of society at large
Mayer said some of the most successful corporations in the world already abide by these principles. Among the examples he points to are Tata, the Indian conglomerate and owner of Jaguar Land Rover and Corus Steel, the media firm Bertelsmann and the Carlsberg brewery. All these businesses are controlled by foundations that ensure the corporations abide by a core set of principles and values, Mayer said.
The author believes regulation can no longer be the sole instrument to control corporations and that re-establishing trust in the corporation is one of the most important policy issues of the 21st century.
"Without it, economic policies will fail, environmental degradation will continue and financial systems will collapse," he said. "With it, we can achieve far greater levels of economic and social well-being than at present."
Mayer will speak about the themes in his book at several appearances across the county this week, including at the Columbia Law School in New York on April 9, the Stanford Law School in Stanford, Calif., on April 11 and the Churchill Club in San Jose, Calif., on April 12.