The power of corporations towards good governance

Wednesday, 18 December 2002 Leave a comment Go to comments

The Jakarta Post, Wednesday, 18-12-02

by Yanuar Nugroho,

For those who are aware of what globalization is really all about, the case of Sony, which decided to abandon Indonesia and lay off more than one thousand people several weeks ago, will be very easy to understand. Indeed, capital is free to move anywhere for it does not comprehend such concepts as “nationalism” and “patriotism”.

What it is concerned with is the so-called “market logic”, i.e. accumulation of profit. So, it is very clear that hiding behind the reasons of “inefficiency” and “ineffectiveness” of its production in Indonesia, the bottom line for Sony is to maintain profit. And as a consequence, it is to relocate its production from Indonesia. As simple as that, isn’t it?

Yet, the case took on a new twist when the Minister of Manpower and Transmigration Jacob Nuwa Wea threatened Sony with a boycott, urging local consumers not to buy Sony electronic products unless it explained publicly and openly its decision to leave Indonesia — a move immediately contradicted by Rini Suwandi, the Minister of Industry & Trade, who said that it was Jacob’s “personal view” (The Jakarta Post, Dec. 5). What is unique about Minister Jacob’s statement is that it is the first ever since the New Order that a public power has fought — if that is the right wording — for the public interest. And unless subsequently shown to be otherwise, Minister Jacob has stood on the side of labor.

The whole issue is that in the world where we live nowadays the power of business has become so immense that state power is desperately needed to protect our shared lives. And, of course, this not only applies to Indonesia. Look at the following facts. The Top 200 corporations have been net job destroyers in recent years. Their combined global employment is only 18.8 million, or less than 0.033 percent of the world’s population, which is just over 6 billion people. Of these, around 2.8 billion are in the workforce, in line with the UN’s estimation that 47 percent of the world’s population is in the workforce. Hence, the Top 200 employ less than 0.75 percent of the world’s workers.

And who are these giant corporations? Noreena Hertz, in The Silent Takeover, tried to explain that the hundred largest multinational corporations now control about 20 percent of global foreign assets — 51 of the hundred biggest economies in the world are now corporations, only 49 are nation states. In line with this, Wal-Mart, the supermarket retailer, has higher revenues than most Central and Eastern European states; the sales of General Motors and Ford are greater than the GDP of the whole of sub-Saharan Africa, and the assets of IBM, British Petroleum or General Electric surpass the economic capabilities of most small nations. When pharmaceutical giant Smith Kline Beecham merged with Glaxo Wellcome, internet service provider conglomerate AOL with the biggest media group Time Warner, and communications octopus Vodafone with Mannesmann, each merger seemed bigger than the one before — and of course gave more power to these corporations (Hertz, 2001:7).

It seems that our life is more and more controlled by corporations that may at their whim choose to nurture or strangle us. And what is it that most informs their choice? Profit, of course.

With some 85 percent of the world’s GDP controlled by the richest fifth of the world’s population and only 15 percent by the poorest four-fifths (UNDP, 1998), something has been going seriously wrong with what we now call “globalization” as the world’s income and wealth remain highly concentrated among the rich and the majority are being left out. Beyond our awareness, our earthly life is being endangered by such a situation.

So, what is behind all of this? The answer seems to be simple: power. In the heart of the deregulation projects of the neo-liberals, there lies the deregulation of the “reaching-power” of capital and financial asset owners. Removing various business controls, by definition, is a step toward giving privileges and vast powers to them — and capital flight without any controls finally becomes the most deadly weapon freely given to business.

The nature of global corporate power has been changing for over a decade according to the Institute for Policies Study (2001). It reports an alarming acceleration in corporate concentration in individual sectors and in the overall power of the largest corporations in the world, and the job-destroying activities of large firms. Most alarming: As corporate concentration has risen and corporate profits have soared, workers and communities are getting a shrinking share of the growing pie (Mishel, et al, 1996) .

In this context, we can understand why good corporate governance is now desperately in need. In political economy terms, it might read that it is the power of corporations that has to be democratized for the sake of the public’s shared life. This shows that indeed the market system is a system of power and, of course, such a system has become very real in the existing political economy structure.

It is essential, however, not to conflate the term “market” with “market system”. “Market” simply means an exchange mechanism, barter or monetary, that has been known since long ago. “Market system” is quite different — it is a mechanism for sustaining and reproducing an entire society based on the logic of profit and loss.

It is here that good corporate governance is essential. No doubt, the issue of “governance” is of paramount importance to the problems besetting many societies, including Indonesia. Nevertheless, the most important point must be fully comprehended by the “good governance” campaign. It is the point that “governance” does not always necessarily refer to the government”s power. It does not merely concern the problem of statecraft but also the way many societal forces work towards the betterment of a society.

It is in this spirit that one of the focuses of good corporate governance should be business practices since these are immediately relevant. Where does this lead us?

First, good corporate governance is clearly not intended to be either antibusiness or antimarket. Fair business practices can offer a good system for generating wealth and economic growth for most of society. Business practices are clearly not inherently amoral, rather they are morally ambivalent.

Moreover, neither is the promotion of good corporate governance intended to worship government although it has a clear role to play in society. The massive extent of corruption, collusion and nepotism has shown that the boundaries between business and government have blurred so much, and revealed a glaring lack of true political leadership and will.
Second, the bottom line is that good corporate governance fights for pro-people, pro-democracy and pro-justice business practices. Is it possible? It has to be because we can all see that inequalities of income and wealth are bad not only for the poor, but for the rich as well.

We stand today at a critical juncture. If we do nothing to challenge our belief system and question the so-called “new world order” being championed by the globalization of corporations, all is in danger of being lost. Why? Because the only responsibility of business is to accumulate profit.

And such profits are often realized without regard to life itself. So, promoting good corporate governance without attempting to democratize business power is only an empty cliche, welcoming a brutal autumn in our earthly lives. Nothing could be worse than this. (*)

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