Stick to your job

March 17, 2008 10:40 AM

David Cameron is to announce today that company directors should no longer be responsible for maximising shareholder value.  Apparently, they should also have all manner of other responsibilities; for fat children, drunks and even recycling.  There is even a threat of legislation if bonuses aren't based on these, diverse, objectives.


This attacks the very foundations of proper corporate governance.  Company directors manage a firm on behalf of its owners, the shareholders, and effective corporate governance policy is predicated on ensuring that they pursue shareholder value and don't use their position to indulge their own interests.  If we fudge the issue by placing all manner of other responsibilities on directors we weaken effective accountability, as there is no longer a clear standard that directors can be held to and make it harder to effectively separate ownership and management.  How many people will invest in a public company if their money is going to be used to support all manner of moral crusades they may or may not support or place particular value upon?  Are there clear, objective standards on which to judge how large a director's bonus should be if it is based on how 'responsible' he or she is?


At the same time this proposal would further weaken ordinary people's responsibility for their own conduct.  Instead of holding individuals and, in the case of children, parents responsible for obesity, drunkenness and what they do with their waste we are going to make corporations responsible.  Those businesses have only marginal control over the issue so the final result will be a less responsible and well behaved society.  A poor result for undermining shareholder capitalism.

David Cameron is to announce today that company directors should no longer be responsible for maximising shareholder value.  Apparently, they should also have all manner of other responsibilities; for fat children, drunks and even recycling.  There is even a threat of legislation if bonuses aren't based on these, diverse, objectives.


This attacks the very foundations of proper corporate governance.  Company directors manage a firm on behalf of its owners, the shareholders, and effective corporate governance policy is predicated on ensuring that they pursue shareholder value and don't use their position to indulge their own interests.  If we fudge the issue by placing all manner of other responsibilities on directors we weaken effective accountability, as there is no longer a clear standard that directors can be held to and make it harder to effectively separate ownership and management.  How many people will invest in a public company if their money is going to be used to support all manner of moral crusades they may or may not support or place particular value upon?  Are there clear, objective standards on which to judge how large a director's bonus should be if it is based on how 'responsible' he or she is?


At the same time this proposal would further weaken ordinary people's responsibility for their own conduct.  Instead of holding individuals and, in the case of children, parents responsible for obesity, drunkenness and what they do with their waste we are going to make corporations responsible.  Those businesses have only marginal control over the issue so the final result will be a less responsible and well behaved society.  A poor result for undermining shareholder capitalism.

Latest Blogs:

TaxPayers' Alliance Icon

Get nanny out of the nursery

12:00 PM 20, Oct 2017 Ben Ramanauskas

TaxPayers' Alliance Icon

Magna Carta - A Very English Tax Revolt

9:09 AM 26, Sep 2017 Daniel Pryor

TaxPayers' Alliance Icon

Who will defend the defenders?

12:03 PM 20, Sep 2017 Duncan Simpson

TaxPayers' Alliance Icon

What’s wrong with the all-ages graduate tax?

6:09 PM 18, Sep 2017 Jan Zeber

TaxPayers' Alliance Icon

Should taxpayers fund Zumba, facials and spas for the NHS?

4:02 PM 18, Sep 2017 Ben Ramanauskas