I liked Corbyn’s suggestion last week of a new law to prevent the payment of dividends by companies which are not paying at least a living wage to all their staff. Any reasonable definition of a ‘viable business enterprise’ ought to exclude any business which can only turn a profit by underpaying its staff. Underpaying staff whilst paying dividends to shareholders is just a simple and blatant way of transferring wealth from labour to capital.
The response of the CBI spokesperson was a little over the top – not to say out of touch with reality. He said "The idea of politicians stepping into the relationship between a private company and its shareholders would be a significant intervention, and not one that we would support" as though the idea of legislative regulation of that relationship was an entirely new and novel suggestion. I would have thought that anyone representing the CBI would at least be aware that the various Companies Acts are full of provisions which regulate that relationship.
And rightly so, too. There are rules covering the way in which companies are managed, and rules governing the rights of shareholders and the responsibilities of companies and their directors. Other legislation also affects the relationship – health and safety legislation and employment protection legislation, to name just two examples, both restrict the unfettered right of businesses to behave as they wish in the interests of shareholder profit.
I’m sure they’d argue that statute enshrines the duty of company directors to consider first and foremost the best interests of shareholders at all times, and that that’s what they’re doing in opposing this suggestion. But as the previous paragraph illustrates, that duty has already been curtailed in a number of ways; it’s a duty which takes primacy only within the limits of any other legislation, and all Corbyn is proposing is another limitation on that duty – and quite a small one at that.
I can understand why the representatives of capital would want to maintain as far as they can the current presumption in favour of the interests of capital. But I do wonder whether they have really thought this through. It looks like a very short term and narrow view of the interests of capital to me.
A successful capitalist economy depends on there being a sufficient number of consumers in a position to buy the products and services which businesses produce. From the perspective of any individual company, it might well appear advantageous to pay wages as low as possible in order to maximise its own profits; but from the point of view of the economy as a whole, underpaying employees is a huge problem in the long term. Such narrow short termism is one of the fundamental problems of capitalism as an economic system, and it’s part of the reason for cyclical boom and bust.Capitalists need external regulation and legislation for their own good; the fact that they don’t recognise that themselves merely reinforces the need. So, on this one, I’m with Corbyn in principle. Sadly, I think the chances that his own party would ever allow him to implement such a proposal are even less than the chances of him getting into power.