Question

The movie “The Corporation” opens indicating that the world dominance of corporations is a recent historical phenomenon, and in some ways has replaced the power of monarchies, the church, and other governing social institutions. If there will always be dominating, self-serving institutions, why is corporate rule today any worse than the alternatives?

Answer 1

With the aim for ‘Value maximization’, the management often put their self-interests first before honoring the shareholder’s interest, thereby questioning the accountability of the managers and directors of a Corporate. Often, the common shareholders, who are the owners of the Business, remain as mere ‘puppets’ on the hands of these people who manage and lead the Organization. Enough of window-dressing is done to ensure the true colors of the Corporate is not revealed to the world. Market-wise performance of the Corporate may be phenomenal but in the bargain, there could be an exploitation of the customers and other stakeholders in the process, most of the time, the latter being unaware of such intentions. Here, it is clear that the Corporations are not as transparent as it appears to be before the world. Further, although the stakeholders may expect the managers to absolutely discharge the duties as per the expectations of them, the truth is, there may be a conflict of interests between all these parties which may end up in failure of making a purposeful decision on the part of the manager or even the Management as a whole for that matter.

On the other side, if we go to check the alternatives such as monopoly or oligopoly markets, such markets are rather more transparent in nature and have more certainty in actions than in case of Corporations that are veiled. In case of alternatives, the purpose is so definite that the stakeholders know what is coming for them and accordingly, may take actions. Hence, Corporate rule today is worse than the alternatives.