The power of corporations towards good governance

The power of corporations towards good governance

Yanuar Nugroho, Director, The Business Watch Indonesia,
Lecturer, Sahid Univ. Surakarta, Researcher, Unisosdem Jakarta,
yanuar-n@unisosdem.org

For those who are aware of what globalization is really all
about, the case of Sony, which decided to abandon Indonesia and
lay off more than one thousand people several weeks ago, will be
very easy to understand. Indeed, capital is free to move anywhere
for it does not comprehend such concepts as "nationalism" and
"patriotism". What it is concerned with is the so-called "market
logic", i.e. accumulation of profit. So, it is very clear that
hiding behind the reasons of "inefficiency" and "ineffectiveness"
of its production in Indonesia, the bottom line for Sony is to
maintain profit. And as a consequence, it is to relocate its
production from Indonesia. As simple as that, isn't it?

Yet, the case took on a new twist when the Minister of
Manpower and Transmigration Jacob Nuwa Wea threatened Sony with a
boycott, urging local consumers not to buy Sony electronic
products unless it explained publicly and openly its decision to
leave Indonesia -- a move immediately contradicted by Rini
Suwandi, the Minister of Industry & Trade, who said that it was
Jacob's "personal view" (The Jakarta Post, Dec. 5). What is
unique about Minister Jacob's statement is that it is the first
ever since the New Order that a public power has fought -- if
that is the right wording -- for the public interest. And unless
subsequently shown to be otherwise, Minister Jacob has stood on
the side of labor.

The whole issue is that in the world where we live nowadays
the power of business has become so immense that state power is
desperately needed to protect our shared lives. And, of course,
this not only applies to Indonesia. Look at the following facts.
The Top 200 corporations have been net job destroyers in recent
years. Their combined global employment is only 18.8 million, or
less than 0.033 percent of the world's population, which is just
over 6 billion people. Of these, around 2.8 billion are in the
workforce, in line with the UN's estimation that 47 percent of
the world's population is in the workforce. Hence, the Top 200
employ less than 0.75 percent of the world's workers.

And who are these giant corporations? Noreena Hertz, in The
Silent Takeover, tried to explain that the hundred largest
multinational corporations now control about 20 percent of global
foreign assets -- 51 of the hundred biggest economies in the
world are now corporations, only 49 are nation states. In line
with this, Wal-Mart, the supermarket retailer, has higher
revenues than most Central and Eastern European states; the sales
of General Motors and Ford are greater than the GDP of the whole
of sub-Saharan Africa, and the assets of IBM, British Petroleum
or General Electric surpass the economic capabilities of most
small nations. When pharmaceutical giant Smith Kline Beecham
merged with Glaxo Wellcome, internet service provider
conglomerate AOL with the biggest media group Time Warner, and
communications octopus Vodafone with Mannesmann, each merger
seemed bigger than the one before -- and of course gave more
power to these corporations (Hertz, 2001:7).

It seems that our life is more and more controlled by
corporations that may at their whim choose to nurture or strangle
us. And what is it that most informs their choice? Profit, of
course.

With some 85 percent of the world's GDP controlled by the
richest fifth of the world's population and only 15 percent by
the poorest four-fifths (UNDP, 1998), something has been going
seriously wrong with what we now call "globalization" as the
world's income and wealth remain highly concentrated among the
rich and the majority are being left out. Beyond our awareness,
our earthly life is being endangered by such a situation.

So, what is behind all of this? The answer seems to be simple:
power. In the heart of the deregulation projects of the neo-
liberals, there lies the deregulation of the "reaching-power" of
capital and financial asset owners. Removing various business
controls, by definition, is a step toward giving privileges and
vast powers to them -- and capital flight without any controls
finally becomes the most deadly weapon freely given to business.

The nature of global corporate power has been changing for
over a decade according to the Institute for Policies Study
(2001). It reports an alarming acceleration in corporate
concentration in individual sectors and in the overall power of
the largest corporations in the world, and the job-destroying
activities of large firms. Most alarming: As corporate
concentration has risen and corporate profits have soared,
workers and communities are getting a shrinking share of the
growing pie (Mishel, et al, 1996) .

In this context, we can understand why good corporate
governance is now desperately in need. In political economy
terms, it might read that it is the power of corporations that
has to be democratized for the sake of the public's shared life.
This shows that indeed the market system is a system of power
and, of course, such a system has become very real in the
existing political economy structure.

It is essential, however, not to conflate the term "market"
with "market system". "Market" simply means an exchange
mechanism, barter or monetary, that has been known since long
ago. "Market system" is quite different -- it is a mechanism for
sustaining and reproducing an entire society based on the logic
of profit and loss.

It is here that good corporate governance is essential. No
doubt, the issue of "governance" is of paramount importance to
the problems besetting many societies, including Indonesia.
Nevertheless, the most important point must be fully comprehended
by the "good governance" campaign. It is the point that
"governance" does not always necessarily refer to the
government"s power. It does not merely concern the problem of
statecraft but also the way many societal forces work towards the
betterment of a society.

It is in this spirit that one of the focuses of good corporate
governance should be business practices since these are
immediately relevant. Where does this lead us?

First, good corporate governance is clearly not intended to be
either antibusiness or antimarket. Fair business practices can
offer a good system for generating wealth and economic growth for
most of society. Business practices are clearly not inherently
amoral, rather they are morally ambivalent.

Moreover, neither is the promotion of good corporate
governance intended to worship government although it has a clear
role to play in society. The massive extent of corruption,
collusion and nepotism has shown that the boundaries between
business and government have blurred so much, and revealed a
glaring lack of true political leadership and will.

Second, the bottom line is that good corporate governance
fights for pro-people, pro-democracy and pro-justice business
practices. Is it possible? It has to be because we can all see
that inequalities of income and wealth are bad not only for the
poor, but for the rich as well.

We stand today at a critical juncture. If we do nothing to
challenge our belief system and question the so-called "new world
order" being championed by the globalization of corporations, all
is in danger of being lost. Why? Because the only responsibility
of business is to accumulate profit.

And such profits are often realized without regard to life
itself. So, promoting good corporate governance without
attempting to democratize business power is only an empty cliche,
welcoming a brutal autumn in our earthly lives. Nothing could be
worse than this.