Is not the problem that company law enshrines the primacy of the shareholder? Directors, whilst having regard to their stakeholders, have to put their owners first.
As well as escalating dividends, this is manifest in share buybacks, using money that should have been invested in the business. Markets demand this as shown in comparative market ratings. It is also shown in the number of companies sold to overseas owners.
We may recall that Theresa May promised Company law
reform following her appointment as Prime Minister; nothing came of this.
If Labour is serious about rebalancing the economy, Company law needs a radical overhaul to embrace all stakeholders, something that will demand the Wisdom of Solomon but also an eye to the practice in other countries.
The role of private equity highlights the problem with so much of public life hidden from effective governance.
Executive pay is demonstrably far too high as your leader and two previous articles rightly point out.
It seems that the coterie of senior executives and their counterparts in their large shareholders are some sort of mutual benefit society. However, what they are doing is not only legal it is almost encouraged by a company law that is wedded to the primacy of the shareholder. If you scratch my back…
Absurd levels of executive pay are bad enough, the primacy has for me an equally damaging impact: senior executives and shareholders all too often sell out to the highest bidder, leaving jobs at risk and the nation’s manufacturing sector denuded.
Theresa May said she was going to address this fundamental flaw and bring in wider responsibilities to all stakeholders. I hope that this government may at last take action.
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