Public accountability expected of business

Public accountability expected of business

B. Herry Priyono, Researcher, Alumnus, London School of Economics,
Jakarta

The ambiguous character of business has put us in an awkward
position to demand its social accountability. In this ambiguity
are rooted many current intractable problems, from the
controversy over the Shareholders Settlement Program (PKPS) to
the problem of non-performing loans; from the collapse of our
sustainable ecology due to reckless industrial expansion to
sudden capital flight in search of a safe haven.

There is every basis to see business process as public and,
therefore, should be judged according to the criteria of
democratic accountability. We may learn a great deal from the
economist Lindblom, when he says: "By any test that you use,
businessmen (sic.) are equal to that of government officials. We
shall consequently have to abandon the traditional view that
corporations are private organizations. We shall have to
acknowledge the public character of enterprises." (1984).

The remaining defense for the private character of business
seems to be the status of property. This, of course, is one of
the perennial issues since the times of antiquity. Its modern
polemics involve the likes of Locke, Rousseau, Hegel, Marx,
Hayek, down to the proponents of economic neo-liberalism. For
John Locke, for instance, the sanctity of private property is
part of natural law.

However, there is another reason. Private property (a
landowning and mercantile class in Locke's time) was believed to
be the surest defense against tyranny. What Locke seemed not to
have foreseen is that the present-day property owners/controllers
have gradually become a new Leviathan, both at the global and
national levels.

It is the claim to private property that is at the heart of
the argument about the private character of business. The claim
can be boiled down to private ownership or control over capital.
Business process is conceived as private precisely because the
source of the very process (i.e., capital) is a form of private
property.

By contrast, the process within state institutions is viewed
as public on the grounds that the very process cannot, at least
in the democratic conception, be based on private ownership. In
short, the state is not a private property. This may explain why
the criterion believed to be applicable to this realm is
democratic accountability.

The problem with this line of reasoning is not that the notion
of private property is indefensible, but that it is being emptied
of its societal implications arising from the power-related
exercise of property. This is merely a stratagem of separating
"property" from its Siamese twin, "power".

It is misleading, for the two can hardly be separated by any
surgery. The exercise of capital power conducted by business
enterprises is an exercise of power with its deep societal
implications, "public" in character and, therefore, should be
judged according to the criteria of democratic accountability.
Even if for various reasons the rights to private property are
warranted, the claim that the only norm applicable to its
exercise is liberty is indefensible.

If this line of reasoning is alien to us, it may be because it
challenges the existing notion of business prerogatives. The
public nature of business activities was also long underscored by
the great advocate of liberties, John Stuart Mill. At the heart
of it is a distinction between basic principles of liberty and
rules of thumb.

The rights to business activities in free trade are simply
rules of thumb and cannot be defended by the criteria of basic
liberty or derived from the rights to private property. He
clearly noted that business and its various activities are a
social act which may harm the interests of others, be they
individuals or society in general: "Trade is a social act.
Whoever undertakes to sell any description of goods to the
public, does what affects the interest of other persons, and of
society in general; and thus his conduct, in principle, comes
within the jurisdiction of society..." (1859).

Indeed, there is every reason to argue that the criteria of
democratic accountability should also be applied to what business
enterprise does, as much as it has always been applied to the
state.

The ambiguous character of business may persist, for it has
handsomely served the unfettered logic of profit accumulation.
And we will be continuously deluded by the misleading idea that,
since business is a private realm, no democratic accountability
can be applied to its activities.

As briefly noted, however, such a claim can no longer be
defended on its own ground. Indeed, inside our political-economic
problem there is an intellectual predicament struggling to stay
hidden.