The Hindu News Update Service

The last several decades have involved a shift of power, writes Robert B. Reich in ‘Supercapitalism’ (www.landmarkonthenet.com). The shift is from being citizens to being consumers and investors, with democracy turning weaker in comparison to capitalism, he observes.

“Capitalism’s role is to enlarge the economic pie. How the slices are divided and whether they are applied to private goods like personal computers or public goods like clean air is up to society to decide. This is the role we assign to democracy.”

Supercapitalism has replaced democratic capitalism, declares Reich. Should we, therefore, push companies to be more ‘socially responsible’? No, he says. “Corporate responsibilities to the public are better addressed in the democratic process than inside corporate boardrooms.”

The most effective thing reformers can do, according to Reich, is to reduce the effects of corporate money on politics, and enhance the voice of citizens. “Corporate executives who sincerely wish to do good can make no better contribution than keeping their company out of politics. If corporate social responsibility has any meaning at all, it is to refrain from corrupting democracy.”

Another suggestion that the author puts forth is to abolish the corporate income tax. Decisions by millions of shareholders about how and when to reinvest the funds is more likely to be wiser than decisions made by a relatively small number of corporate executives, he argues.

“One important by-product of this reform would be to puncture the widespread but false notion that corporations pay taxes and therefore deserve to be represented in political process.”

Inclusive growth

In a market-led growth process and competitive environment, what can be the apt strategy for smaller states and those facing special constraints (such as the hilly terrains)? Should they adopt a growth path relying on their competitive advantage, or ‘replicate a highly diversified product structure as in larger and better endowed states’? What is the relationship between economic indicators and the human development ones?

These are some of the questions dealt with an essay included in ‘Inclusive Growth in Globalised India’, edited by P. Jegadish Gandhi (www.ddpbooks.com). Among the 25-plus essays included in the book are a few on the topic of financial inclusion, a pet theme of banks these days.

Ethics are critical

Just one legal transgression can cost a company millions of dollars, write Chris Moon and Clive Bonny in ‘Business Ethics’ (www.vivagroupindia.com). “Firms that do not have ethics programmes run the risk of more stringent penalties than those that do. Furthermore, bad publicity can have a profound impact on brand value.”

Companies that apply ethical auditing and measure their triple bottom line – economic, environmental, and social sustainability – outperform the market index, the authors note. “Not only does an ethical approach increase shareholder value but other stakeholder gains too.”

The new economy has brought greater transparency and greater flexibility but also greater complexity, and therefore new and greater risks, state Moon and Bonny. “Companies need to have robust systems in place to manage reputation risks.”

The AGM (annual general meeting) has become prone to ‘unexpected shareholder resolutions and activists determined to make their point in their pursuit of getting companies to balance private profit with public good.’

There may be short-term costs when a business raises its ethical game, concede the authors. “But, in the longer term, businesses that are trusted and respected by their employees, suppliers, customers and the wider community are more likely than businesses that are not, to provide their shareholders with a better return and to be sustainable.”

Business