Competition is Killing Us: How Big Business is Harming Our Society and Planet – and What to Do About It by Michelle Meagher

Author:Michelle Meagher [Meagher, Michelle]
Language: eng
Format: epub
ISBN: 9780241988121
Publisher: Penguin Books Ltd

Tug of war

On the face of it, we seem to have a system in conflict: antitrust argues for maximum ‘consumer welfare’ and profit minimization whereas shareholder value demands the opposite – profit maximization at any cost.30

But what at first seems to be a system pulling in two directions turns out to be a mechanism oriented towards a single goal: shareholder wealth. The norm of shareholder value is much stronger than the law of consumer welfare ‒ for the simple reason that consumer welfare under Borkian antitrust is actually corporate welfare, since whatever is good for the presumptively efficient company is assumed to be good for the consumer too. Competition law has typically ignored what happens inside companies, which is where shareholder value casts its spell, focusing instead on dynamics in the market. It is therefore assumed that companies act in a certain way ‒ a way that, when constrained by competition from rival firms, benefits everyone. Antitrust therefore did not need to concern itself with the internal workings of the company, as the market would see to it that consumers would get the lowest prices.

The meme of money propagates itself in the cocoon of the shareholder value company and spreads its wings by hunting for other forms of power. Shareholder value pushes the company to exploit market failures, including by annexing market power and producing externalities, and antitrust does little to stop it. And with money amassing power, other regulators will struggle to prevent the transmission of the spillovers of this industriousness on to society.

The whole of the corporate world, in the US and UK at least, is designed around shareholders, including the defence of the monopolistic companies they invest in. There is no real corporate responsibility. We seem to have forgotten that the formation of a corporation was, and still is, a publicly granted privilege allowed only at the sufferance of the state. Corporate law no longer controls power – as it did before incorporation laws were watered down – and it no longer enforces responsibility either.

As Chief Justice Strine of Delaware, the most important American court for companies, given that the majority of Fortune 500 companies are organized under Delaware corporate law, explains:

Under the current legal rules and power structures within corporate law, it is naïve to expect that corporations will not externalize costs when they can. It is naïve to think that they will treat workers the way we would want to be treated. It is naïve to think that corporations will not be tempted to sacrifice long-term value maximizing investments when powerful institutional investors prefer short-term corporate finance gimmicks. It is naïve to think that, over time, corporations will not tend to push against the boundaries of whatever limits the law sets, when mobilized capital focused on short-term returns is the only constituency with real power over who manages the corporations. And it is naïve to think that institutional investors themselves will behave differently if action is not taken to address the incentives that cause their interests to diverge from those people whose funds they invest.

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