Corporate governance

Written on May 7, 2007 by Max Oliva in Corporate Governance

J.Pozuelo-Monfort, MSc candidate in economic development at LSE
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Corporations are oftentimes like families. Corporations are oftentimes structures governed on a one-vote per share basis where some parties have many more votes than others, and therefore much more control. Corporations are therefore non-democratic in essence in what can be considered a plutocracy where only the powerful determine the direction of corporate strategy. Today’s capitalism is conceived as a top-down approach. Capitalism is built from the roof to the floor. The rules of the game need to be reversed. Today the universe of consumers follow the directions dictated by corporations. Today the consumer arena renders to the persuasion of advertisement. Today marketing is a weapon of mass persuasion, capable of driving trends and enforcing likes.
Once upon a time, in the middle of the XIXth century, corporations were more democratic. However today academics have decided to describe purely undemocratic behavior within corporations with such terms as agency problem.
In this scenario corporations have created its own code of conduct they have decided to denominate corporate governance. The architects of capitalism once built a basis unable to prevail over time, the same architects who now attempt to reinforce that same basis. The architects that once failed to construct properly should not be given a second opportunity under the likely event of failure. Third-parties with no stake in the game ought to take responsibility for what has become a matter of serious consideration. Corporations need to fulfill a set of ethical principles and be judged by consumers for its ability or inability to comply with the regulation. The consumer will then have real purchasing power. A consumer’s purchasing power will then have an impact on corporations. The marketplace will then be democratic in essence and corporations will not be ruled by the better off, but by individuals who make thousands of purchasing decisions every year.
A new capitalism will then arise. A more democratic capitalism.


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