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.