Taming corporations is the key issue of our times

To appease corporations, people may raze mountains, divert rivers, clear forests, cover countryside in tarmac and shower subsidies upon them, but they have no loyalty to any place, people or product.

Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.

There is a crisis of democracy. People can vote for whichever political party they want, but corporations always win as they fund the parties and legislators; control media and almost everything else. Their interests are promoted by obedient governments. People may elect a party that promises greater investment in education, healthcare and the environment or promises of redistribution of income and wealth but they are soon disciplined by threats of economic turbulence caused by flight of capital.

Taming the corporations is a key issue of our times. They wield enormous power over our lives, but people have little or no say in their affairs. The state gives birth to corporations and nurtures them through legal frameworks, social infrastructure, property rights, subsidies, tax perks and limited liability which enable privatisation of profits and socialisation of losses. The supposed bargain is that corporations will serve society, but that is not the case.

To appease corporations, people may raze mountains, divert rivers, clear forests, cover countryside in tarmac and shower subsidies upon them, but they have no loyalty to any place, people or product. Dodging taxes, abusing customers, exploiting workers, violating human rights and environmental damage are all normalised. Corporations remain the private fiefdom of executives.

At every stage of life, we are abused. Companies like Nestlé and Danone dominate 85% of the baby formula market and hike prices at will to boost profits and dividends. 15 largest children’s home providers make an average 23% profit per year, leaving little for front line services. Supermarkets profiteer from high food and fuel prices. Big pharmaceutical companies have made over £12bn excess profit from just 10 NHS drugs, which had profit mark-ups of up to 23,000%.

Instead of competing corporations such as Barratt Redrow, Bellway, Berkeley Group, Bloor Homes, Persimmon, Taylor Wimpey and Vistry exchanged details about house sales including pricing, number of property viewings and incentives to disadvantage customers. Companies such as Brown and Mason, Cantillon, Clifford Devlin, DSM, Erith, JF Hunt, Keltbray, McGee, Scudder and Squibb colluded to rig bids for demolition and asbestos removal contracts. In 2017, faulty cladding killed 72 people in the Grenfell Tower fire. No one has been charged and thousands of people are stuck with faulty cladding and unsaleable houses.

For most people, earning a decent living is a struggle whilst company execs collect up to 575 times the median employee pay. The case of P&O Ferries illegally sacking 800 workers shows that companies have no qualms about violating laws because governments don’t inconvenience large corporations. The average real wage is unchanged since 2008. Between 2016 and 2023, some 3m workers were denied the minimum wage. Culprits are rarely prosecuted. Trade unions can help but their members are targeted. Balfour Beatty, Carillion, Costain, Kier, Laing O’Rourke, Sir Robert McAlpine, Skanska UK and VINCI PLC collaborated to secretly blacklist trade unionists and deprive them of employment. Abused employees are silenced and bullied into agreeing out of court settlements and signing non-disclosure agreements.

A cost of living crisis is caused by unchecked profiteering. Since the pandemic, electricity and gas supply companies have increased their profit margins by a whopping 363%. Since 2020, big energy companies have made operating profits of £514bn, a major cause of poverty and destruction of industries. Since privatisation in 1989, water companies have levied inflation-busting charges on customers, but haven’t built a single new reservoir. Instead, they paid nearly £85bn in dividends. They dump raw sewage in rivers and flout laws to boost profits.  Despite over 1,135 criminal convictions they remain in control of a vital resource.

Thalidomide, mad cow, cancers and obesity epidemic caused by food high in fat, salt, sugar and chemical additives, are some examples of diseases and disabilities manufactured in corporate boardrooms by wealthy executives living in leafy suburbs. Companies don’t bear the social cost of irresponsibility.

The finance industry is riddled with frauds and fiddles. Numerous financial products, including pensions, endowment mortgages, precipice bonds, mini-bonds, split capital investment trusts, interest-rate swaps, car loans and payment protection insurance have been missold, leaving millions in misery. JPMorgan, HSBC, Standard Chartered, Deutsche Bank and Bank of New York Mellon have defied money laundering crackdowns by moving staggering sums of illicit cash for shadowy characters and criminal networks. Puny fines are ineffective.

40% of the world’s dirty money is routed through the UK and its offshore satellites. Governments can check it by taking out Unexplained Wealth Orders (UWO) and prosecuting the beneficiaries. Since 2018 only seven UWOs have been issued to recover just £22m. No one has been prosecuted. No government has sought to cleanse the finance industry.  Instead of strengthening public interest protection duties of regulators, the UK government now requires regulators to promote growth of the finance industry.

Auditors, the self-appointed police force of capitalism, are mired in scandals. None noticed that the Post Office didn’t keep proper accounting records and prosecuted innocent postmasters. The audit quality reports show that major accounting firms still don’t meet the feather-duster UK standards. Malpractices only come to light after scandals. For example, PwC programmed its audit partner to spend just two hours on the audit of BHS. KPMG submitted false information and documents to the regulator investigating audit failures at Carillion.

Pandora Papers, Paradise Papers, Bahamas Leaks, LuxLeaks, Swiss Leaks and Panama Papers are some of the episodes that shed light on the destructive tax abuse and illicit financial flows industry dominated by accounting and law firms and banks. They face little retribution. In 2023-24, fewer than five criminal cases were brought against those who aid tax dodgers. The Criminal Finances Act 2017 gave government powers to prosecute companies for tax evasion. Since its introduction, there have been no prosecutions or convictions of corporations”.

The privatisation of healthcare created new exploitative opportunities for corporations. Newmedica, Optegra, SpaMedica, CHEC and ACES are major beneficiaries as the NHS doles out cataract surgery contracts to the private sector. In 2023-24, they made a profit of £169m on the back of profit margins of 32%-43%. Care services for senior citizens are dominated by corporations. Some £1.5bn a year is taken out of the care sector in the form of shareholder returns, leaving less for front line services.

Death is the last chance for corporations to exploit people and they don’t miss it. Regulators complain that funeral directors don’t clarify the prices and bereaved relatives can’t easily haggle.

The above examples are a tiny glimpse of corporate power and abuses. Governments do little to make corporations accountable to the people. Companies such as Alphabet, Apple, Amazon, ExxonMobil, Microsoft, Nvidia, Shell, Walmart and others employ thousands of workers and their revenues exceed the gross domestic product (GDP) of many a nation state. This gives them enormous clout to discipline elected governments by withholding investment, shifting production and tax dodges through complex structure. Corporate hunger for profits knows no limits. In the 1930s Giant corporations and banks collaborated with Nazi Germany as it was profitable. US corporation IBM directly supplied the Nazis with technology which was used to transport millions of people to their deaths in the concentration camps at Auschwitz and Treblinka. In the1950s Anglo-Iranian Oil Company, now part of BP helped to overthrow the government of Iran. Any government resisting corporations can always be toppled. Elon Musk, the controller of Tesla Corporation, is willing to fund Reform UK to advance his ideological project and erode remnants of democracy in the UK.

We have a choice. We can have either democracy and public accountability or rampant corporate power with enormous wealth and power concentrated in the hands of a few business executives, but not both. Corporations must be brought under democratic control. Yet the political system is unable or unwilling to call them to account. Political parties, governments and pressure groups are bought off. Unaccountable corporate power is damaging the fabric of society, the structure of families, the quality of life and the very future of the planet.

A proportional representation voting system has a better chance of enabling people to speak. This must be accompanied by a total ban on receiving and giving of political donations to parties and spurious corporate consultancies for legislators. No one should be allowed to own more than one media outlet. All large corporations must have worker elected directors on their boards and employees must vote on executive pay. Directors must be made personally liable for abuses. Essential industries must be in public ownership with workers and consumer elected directors on boards. Section 172 of the Companies Act 2006 must be reformed so that directors advance the welfare of stakeholders, not just shareholders. Giant corporations must be broken-up to increase competition and reduce their threat to the people. The libel laws need to be changed to favour the citizen rather than powerful corporations. Companies should not be able to conceal any information that could prevent injury, disease and harm to people. The public’s ‘right to know’ should take priority over concerns about corporate secrecy and confidentiality.

The above suggestions are not a panacea but provide a modest start to build a democratic society.