View source for Part 2 - Chapter 4

= The company as property =

Citing Ostrom as inspiration for a new public policy debate, the authors begin the process of introducing the differences between private property and commons.

They start with a discussion of the Gini coefficient (which measures inequalities in wealth, where 0 is equality, and 1 is all wealth held by small elites). Applying the Gini coefficient to ''companies'', rather than nations, the authors argue we can reveal wealth inequality between investors, executives and staff. If above 0.4 in a company, there is a danger of social breakdown (loss of the 'social license to operate'). Using this argument, the authors show the idiocy of defending 300:1 (or even 500:1) pay ratios of senior executives and front line staff. The authors suggest 15:1 might be a the kind of gap needed for a respectable Gini coefficient.

== Incorporation and apartheid ==

The authors frame existing approaches to membership and governance rights in business as the continuation of apartheid (outside state institutions). Under apartheid, populations of people were systematically disenfrancised (not deemed worthy of participating in governance or the wealth created by past labour) because of their position in society. In today's business, workers and customers (particularly in Anglo-America cultures) are not deemed worthy of participating in governance or the wealth created by past labour because of their position in the company. Having money - argue the authors - is not a good proxy for sound decision-making (when the goal is the maximisation of six [[Capital|Six Forms of Wealth]].

Like apartheid, the basis of separation (that all decision-making rights stem from the interests of those who invest financial capital only) is not logical. It is not in the interests of wider society and creates crises.

== Excluding stakeholders causes crises ==

The authors do not mince their words. On p. 91 they state "Excluding most stakeholders - human and non-human - from the key decisions that create our shared reality creates a gravity that is pulling us deeper into the swamp of extinction". The issue is not financial return to shareholders ''per se'' as it is important to pay back investment capital. The issue (for the authors) is that paying money to financial investors is '''not (or should not be) the purpose of the business'''. One type of [[Capital]] should not be created at the expense of other capitals.

A second issue is that financial shareholders not only get all voting power; they also get all the rise in the (financial) capital value of the business and all financial dividends (surplus cash). Without a stakeholder class to represent the needs of children, grand-children, or other forms of life (even that on which we ourselves as humans depends) the 'cost' of decisions on their futures are not articulated. The stakeholders missing from AGMs are those the bear the costs of decisions (staff, customers, suppliers and future generations).

Multiplied a million times across millions of companies, and we arrive at the multiple crises of today. (p. 93).

== Incorporation and ownership ==

Through a discussion of what happened when one of his books was being copied in Singapore, the issue of property (and its value) is explored. Using the metaphor of solitary animals and ant colonies, the issue of variation in attitudes to ownership is made clearer.

['''Editor's note''': there are statements that are hard to support with evidence from credible studies (e.g. 'we are now at a point where either all humans learn to thrive together, or we all experience a collapse'). It is hard to think of a single research informed example where everyone in a company thrives together, or where all humans experience a collapse together. My own research showed that for each initiative, there are counter-actions, counter-initiatives, even when they are well-hidden from executive eyes. Even in the recent COVID-19 crisis, the impact was not uniform - some countries fared well compared to the US and UK without putting 'lockdown' measures in place.]

On p.95, the authors argue that (legal) slavery has ended in practically every country, but it still continues through forced labour, sex work, forced marriage etc. Treating people as property continues, to the obvious detriment of the thing (person) owned. With the advent of fossil fuels, both the social and economic arguments for freedom (from slavery) changed, as it became obvious that paying everyone and enabling them to buy goods created a virtuous cycle that both raised standards of living and emancipated many people.

Between 2010 - 2013, Graham wrote a white paper on applying the concept of freedom to companies as well as people and asks the question how property ever became accepted as the basis of a (free) market economy? On p.97, this argument ramps up with a discussion of asset-stripping that ignores, marginalises (and even destroys) stakeholders on which the company's success depended. If the legal rights of a natural person (not to be bought and sold) were extended to companies, this could not occur.

['''Editor's note''': there is a paradox here as the documentary 'The Corporation' (2004) demonstrated how corporate power is a product of corporations claiming the same rights as legal persons over many years - the dire situation the authors describe is (at least in part) a product of extending rights originally designed for people to the corporations, and who exercise that power to overturn the rights of individual people.]

In a key question, the authors argue that a meaning-making narrative in which financial investors own the company and treat it as property to be bought and sold cannot ever be a narrative that will address climate crisis and social injustice. To overcome this, power needs rebalancing so it is issued to all parties providing different types of capital (human, social etc.), and the company itself needs to end its slavery to the owners of financial capital. 

['''Editor's note''': there is already a powerful academic constituency - funded by Frank Bold, and referred to later in the chapter - that continually points out the fallacy that investors own companies and that Directors must act in the interests of investors. In UK Company law, nobody owns the company - only the share certificates that grant decision-making and financial rights - and Directors' actual legal obligation is to the future of the company, not its investor community. However, I do accept that the meaning-making narrative in the minds of the public is that entrepreneurs and investors own companies, and can organise and exploit them as they wish].

p. 99 - "I (Graham and Jack) believe that we cannot address the adaptive challenges of climate change and the SDGs if we continue to apply any or all of the concepts of property to our businesses."

However, shortly after they seek to retain the meaning-making story of property but frame it is different the meaning-making story of freedom, and argue for a complimentary pair and 'how to use both meaning-making stories simultaneously to create sense'. This can be done - by using 'existing company law...to protect the Commons of the law' within a FairShares Commons.

=== Myths ===

Myths are introduced as stories 'that have little grounding in actuality' (p.101). Myths can only be defended by force (extreme violence), not by evidence. The Myths are:

* Shareholders own the company and its assets (not true)
* Directors of the company are there to serve the shareholders (not true)
* The company exists of maximise shareholder value (not true, but a reality if an organisation does not define its purposes clearly)
* Buying shares is the only way for a stakeholder to gain the right to vote in a General Meeting (not true, companies can define membership according to any criteria they decide, as happens in companies limited by guarantee).
* Money is neutral










 

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