Volkswagen emissions scandal: We need more power for shareholders, not less - The City View

 
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VW CEO Martin Winterkorn stood down yesterday over emissions scandal (Source: Getty)
This column warned yesterday that people already suspicious of the motivations and practices of the corporate world would be buoyed by the scandal engulfing Volkswagen.
A cloud of noxious fumes still lingers around the reputation of the carmaker, and is likely to do so for a long time yet.
So it is with perfect timing that a new campaign launches itself on British business today.
The B Corp movement is unveiling itself in Camden with a range of companies signing up to the group’s objectives of creating a new economy that “serves people and planet as well as profit.”
Companies wishing to join this laudable mission must demonstrate a commitment to “harnessing the power of business as a force for good.”
It’s a nice sentiment, but one that ignores the fact that business, innovation, enterprise and yes, capitalism, are overwhelming forces for good in their own right.
To qualify as a B Corp a company must “change its legal documents so that employees, communities and the wider environment rank alongside shareholders in decision making processes.”
Herein lies the problem.
It’s not the campaign’s motives that should be questioned, but their methods. Shareholders, and the interests of shareholders, are the vital underpinning of the modern corporation. Should there be more shareholders? Yes.
Should they be more active in corporate decision making? Absolutely. Should a board be legally obliged to consider so-called community interests with the same legal weight given to shareholder interests? Of course not.
Adam Smith identified the wider benefits of a butcher or baker acting with regard to their own self interest, and though we live in a more complex society than the one observed by Smith, his points stand true.
The interests of the shareholder may be served by market expansion and an extended product reach, but so too are the interests of the consumer – through newer, cheaper and better goods and services, the social benefits of which may be immeasurable.
Companies with a disregard for wider stakeholders tend to reap what they sow. It’s called creative destruction, and it’s a far more effective driver of economic and social progress than a badge to display on a label or a website.
The B Corp might suit some people, but it certainly won’t suit society as a whole.

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