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I am a man with both a mission, and a problem   As a socialist lawyer with extensive corporate experience both as a manager and Company Director, I can see clearly just how and why the corporate sector has come to dominate our political horizons.  Corporations are able to run rings around Governments, manoeuvring easily to achieve their corporate objectives, apparently beyond the power of nation-states to regulate.  They have dominated the management of world trade and world finance, and find it easy to set the political agenda across the political board.  

The Left has been mesmerised and demoralised by the seemingly unstoppable rise of the corporate sector, within the four corners of the law. 

My mission is to change all that.  It is to bring the corporate sector back within the frame of rational democratic regulation.  Nd as a lawyer, I know precisely how that is to be done.  My problem is that this is such a massive, global political project that nobody is willing to pause to understand it.   I feel like a street beggar straining for attention, as the busy political community rushes by, occupying the entire pavement.  The massive wrongs of the sector have their origins deep in the legal depths of statute law and its judicial interpretation. Yet nobody will listen. 

Although company law details did vary from state to state, Governments broadly left the business community alone, to use this new “statutory kit” in any way they found helpful, without intervention or scrutiny.  And Governments were broadly satisfied, if not positively enthusiastic about, the success of the world’s business communities in using “the company” to exploit the potential of the industrial revolution and to foster world trade.  Japan, one of the last major states to enter the fray, passed its first Companies Act in 1900. 

These new statutes were very simple.  The 1856 UK Act was only six pages long.  All these statutes did was to permit businessmen to register new artificial persons, “owning” them to various systems of shares, and controlling them within foundation documents which they wrote for themselves.   The Courts had long experience of dealing with artificial persons, even though before 1860 there had been very few – each painstakingly created by private Act of Parliament (e.g. the companies through which the canals were built, some harbours, and the early railways, as well as greater legislative creations like the East India Company).   

Crucial was the assignment of all private property rights to these new artificial persons.  Indeed, it is the combination of artificial personality with the law of private property that has produced the poisonous constitutional cocktail that we have today.  All the necessary reforms are to be located within that matrix of artificial personality and private property. 

First, consider this.  All the affairs of a corporation are treated as “private”, and therefore as confidential as the secrets of the bedroom, for natural persons.  The Courts have even developed the supplementary doctrine of “commercial confidentiality”, to extend the veil of secrecy over matters not covered by traditional forms of intellectual property.  This pernicious doctrine is now used to prevent public access to the details of PFI contracts, where Government agencies or local authorities have entered into major contract with private companies: the privacy of the corporate sector excludes prying eyes, even from public business. Contracts which contain the most vicious confidentiality clauses, however contrary to the public interest, will also be enforced by the Courts. 

Secondly, consider the absurdity, indeed the wickedness, of assigning to an artificial person the huge and arbitrary powers attached private property.  Ignoring for the moment the case for re-defining those powers themselves, let’s ask “Why should artificial persons enjoy the same rights as a natural person?”   For natural persons, under Anglo-Saxon law, the panoply of private property rights is huge: we are all entitled to behave irrationally, arbitrarily and secretively in relation to our property.  But the prospect of the abuse of such power is moderated by our very humanity – many people find it impossible in practice to be as cruel, as hard-hearted, as property law permits.  The natural, moral person supervenes.  But that is not so with an artificial person, which is without constraints, and legally committed simply to profit maximisation. 

Thirdly, consider the complete freedom of the business community to write their own corporate constitutions.  In 1856, this no doubt seemed sensible, because Parliament did not wish to be troubled with such matters, in which they had in any event no competence.  And as a feature of company law, I approve of that freedom, because its fosters creativity among entrepreneurs and lawyers.  But when a company is used for trade, and has “shareholders” who have invested funds in the company (whether it is a public company or not), then those shareholders should be given much more power over their own management.   The UK Courts had given up on shareholder power by 1900.  They ruled at an early stage that shareholders were merely “property owners”, with the right to elect the company Directors, to make up the “Board”.  If they didn’t like what was happening in the company, they had just two options – (a) replace the Board, or (b) sell their shares and walk away. One century later, that simplistic verdict must be reversed.   

Trends are already moving in that direction - in the UK, US and on the Continent: Governments are slowly extending the rights of shareholders to censure managements.  But no radical legal change has yet been made: it's all tinkering, varying from one jurisdiction to another.  While (as a professional manager by occupation myself) I do not want shareholders to be able to cripple energetic management, I nevertheless seek a major extension of shareholders’ rights to consider important company decisions before they are made, not after.  Prior shareholder approval is a principle which should be applied to certain key management decisions, including all matters of top-level remuneration packages.

These three principles are the bedrock of radical reform.  But the reform agenda is greater than that.  I would add the need for proper prior vetting of new company formations: in the UK alone, artificial persons are being created at the rate of 5,000 per week, “on demand”.  This process should be brought under administrative control, albeit with a light rein, so as to reduce the incidence of corporate abuse.  I would also remove the right of a company to use the shield of limited liability against the failure of its own subsidiary, an abuse which is rampant in certain sectors, nationally and internationally: when Carlton and Granada abandoned the failed company ITV Digital, a company entirely of their own creation, they committed a grave wrong which should not have gone unpunished.  As is so often the case, they were justified in committing this egregious wrong by the parlous state of company law.