The 10 Most Important Principles of Directorship
The old ideas aren't working.
Confidence in capitalism is collapsing. The gap between the 1 % and the rest has been growing for forty years. And, corporations are six times more likely to die in 2016 than in 1976.
The old theories of shareholder ownership, good governance and profit maximization are making a mess of things.
But these are not theories. Theories are meant to explain things, not change things for the worse. No, they're the pillars that prop up the investment industry.
Agency theory is their improbable mission statement. Maximizing shareholder value was never the moral responsibility of a corporation. It's the vision statement on the desk of every hedge fund manager. Good governance is not a virtue, it's little more than the codification of their investment strategy.
Time for company directors to start again with a different set of first principles based on the law and capitalism's original ethical framework:
1. Corporations are not property or a technology . . .
It is a universal affront to the rule law to conceive of a corporation as property. No one can lawfully own a corporation. A corporation cannot be bought and sold or compelled to work for another.
Corporations are distinct, separate and sovereign persons.
What makes a corporation a person ? It’s not biology. In the eyes of the law, flesh and blood are not the markers of personhood. A person is anyone or anything to whom a state grants the rights of personhood: the right to own property, the right to make promises, the right to sue and be sued and the right to be responsible for wronging another.
Nor, is sentience a barrier to personhood. The law has long recognised that those who cannot act for themselves may act through agents, such as a board of directors. Who, historically, had an unequivocal duty of loyalty to the corporation.
If corporations are not property, how can they be considered a mere tool or technology. While a technology is created to achieve an objective, a person cannot be brought into being for an objective. In any other context, this suggestion would be abhorrent and offensive.
Yet, despite their personhood, corporations are still treated and mistreated as technologies. According the norms of corporate governance, corporations exist to enrich other persons (both corporate and human) Misconceived as nothing more than elaborate cash machines, they are denied their most fundamental right: the right to choose and realise their own purpose through their agents.