The Guardian view on the government’s corporate reforms: entrenching neoliberalism, not ending it

Milton Friedman

Milton Friedman's 1970 assertion that "the social responsibility of business is to increase its profits" has profoundly shaped corporate governance and economic policy for decades. His neoliberal ideology viewed companies primarily as instruments for political and economic agendas, prioritizing shareholder value above all else. This perspective has led to a system where executive compensation has ballooned, with UK bosses now earning significantly more than average workers, a disparity that critics argue is a direct consequence of this profit-centric philosophy. The current government's consultation, despite a stated aim to move away from neoliberalism, appears to be reinforcing these very principles by proposing measures that further dilute corporate accountability and transparency.

Andy Burnham

Andy Burnham, a prominent figure who has pledged to end neoliberalism, finds his government's recent consultation on corporate reporting at odds with his stated goals. The consultation, initially presented as a move to cut "red tape," is instead seen by critics as a step backward. By proposing the removal of information such as the ratio between CEO and average worker pay, the government risks obscuring a critical metric of internal inequality. This move is particularly perplexing given concerns about fairness and the potential for consumers to make informed choices based on a company's pay disparities. Furthermore, the proposal to scrap annual shareholder votes on director pay, a measure introduced by a previous Conservative government to curb "the unacceptable face of capitalism," would remove a modest check on boardroom excess, aligning the Labour government with the interests of corporate lobby groups like the GC100.

Katharina Pistor

Legal professor Katharina Pistor's observation that "corporate law is a tool that creates inequality" provides a crucial lens through which to view the government's proposed reforms. The consultation's suggestions, such as allowing fully virtual annual general meetings (AGMs), are presented as enhancing accessibility but are criticized for potentially reducing shareholder engagement and the ability to hold management accountable. The BP shareholder vote against virtual AGMs highlights the concerns of many that such a shift can diminish transparency and accountability, making it easier for companies to avoid difficult questions. Instead of streamlining reporting, the government is urged to consider a new regime that genuinely recognizes the interests of workers and society, perhaps by mandating worker representation on boards and increasing transparency on all pay levels, as advocated by more holistic models like B Corporations.