Bookcase: Firm Commitment

Is the company, the institution designed to deliver brave, new and commercially enlightened world, morphing into something more sinister?
The question is seriously addressed by Colin Mayer, professor of Management Studies at Oxford University’s Saïd Business School, in this impressively argued new book. Companies, of which New Zealand currently registers around 40,000 new ones each year, were created to provide means of extracting ourselves from poverty, inequality and environmental destruction.

They have, in large measure, accomplished this. The corporation has transformed our lives as if it were faithful servant. It is, however, legal fiction created in mankind’s own image. The company is, as Mayer puts it, something that is both ourselves and simultaneously distinct from us.
But like Frankenstein, the creature has acquired characteristics which were not part of its original design or ever intended – faithful servant no more. Evidence that the little monster now and then runs amok is everywhere. Some of its most outrageous manifestations are Enron and the banking fraternity that stalked Wall Street and the City of London.

Mayer explains in eminently readable prose, just how the corporation has evolved over the past 100 years. Its evolution has not, as we might have expected, been in ways that make it better suited to the world in which we now live. One cause of this mutation is our misconception of the nature and role of the company. The author’s three-part explanation of how the corporation is failing us, why it is happening and what should be done about it is at once enlightening and simultaneously scary.

Shareholders, often aided and abetted by minion directors, have assumed too much power. company’s first and foremost objective is not to its shareholders, or even to its stakeholders, according to Mayer. Rather, company’s objective is to make, develop and deliver things and to service people, communities and nations. They are not simply device designed to enrich those who invest capital in them. company, the author argues, is device for getting groups of people – workers and managers as well as investors – to commit themselves to long-term goals.

Mayer doesn’t debunk the company; quite the opposite. He does, however, want to redress the balance and right the ship by looking at the positive aspects of corporate conduct – what it could do – and the normative ones – what it should do.
He wants ethics infused into enterprise, firm commitment established and corporations trusted without relying on regulators or the state to take matters into their own hands. These points of the corporation’s currently adrift moral compass are, he argues, critical to economic efficiency and social welfare. The moral corporation is, Mayer argues, an economically efficient corporation.
Firm Commitment is an important book. It provides an impressive explanation of the state of things and blueprint for converting the corporation into 21st century organisation that could perhaps be trusted to promote the interests of economies and societies everywhere.

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