It's not up to shareholders to make companies behave morally

Mark Carney quotes Adam Smith and of course everyone claims him for their own version of reality. Philliip Inman in The Observer:

This amounts to just another form of self regulation, which cannot succeed when companies, under pressure to drive up profits, would be taking actions that increase their costs. Only cross-party, popular action, forcing governments to impose rules on corporate behaviour, can inject some morality where so little manifestly exists.

Matthew Syed also slightly misses the point:

This is why it can be argued that the problem we have in the West today isn’t capitalism per se; it is the way that giant corporations have sought to rig markets in their favour. They have been assisted by a group of economists who, in the 1970s, started to say some truly bizarre things. That markets don’t need regulation. That government is bad. That companies have no responsibility to society, but only to their owners. In effect, they sought to denigrate the values that markets had cultivated, insinuating that sectional interests alone should prevail.

Given that we are on the extreme bleeding edge of those being criticised here it’s worth our pointing out that no one at all believes that markets require no regulation. The discussion is about who does that regulating.

Some regulation does indeed need to be at the level of government - to pick an extreme example who may own a nuclear bomb, say. But the ethics and morality of business, that’s best done by consumers. On the entirely logical grounds that there are many different ethical and moral systems, many of which conflict. Therefore it’s necessary to allow the adherents of each to deploy their own - subject to the usual third party harm restrictions - as they wish.

So, if you prefer your soya fed chicken to not have a link with farming Brazil’s Cerrado then that is available. As is organic, free range, and factory farmed, chlorine washed and Cerrado stuffed. Your morals and you impose them upon suppliers by making a conscious choice.

Not making a choice on such grounds is rather evidence that you don’t care enough about the ethics to bother. Something which isn’t a great argument in favour of getting government to force you.

The ethical and moral monitors of corporate behaviour are us, as consumers.

Those who would rule us think differently of course. Allowing us to do our own thing rather takes the fun out of ruling. Further, we might make the wrong choices, impose the wrong moral values. This summer, for example, there was a rag trade company accused of using subcontractors in Leicester that paid below minimum wage. The share price dropped precipitately as worries about the consumer reaction spread. A few weeks later it became apparent that the teenage customers for the schmutter didn’t care and had carried on buying - the share price revived.

The consumers had shown they didn’t care about the allegations. That is, for them this was not a moral nor ethical issue. Well, that’s how society is supposed to work. We’re all free to live our lives as we wish, inside whatever moral and ethical constraints we wish to impose upon ourselves.

The opposition to this consumer regulation comes from those who would impose, upon others, their own ethical strictures. And that’s not really moral, is it?

Shareholder primacy is regulated by consumer supremacy and that’s, barring those extreme cases of things that go bang, the way to do it.