Behind the veil – companies vs the State

Microsoft has been battling the USA over access to data for some time now. And the other big internet companies are backing it too. The USA wants to be able to access data held by Microsoft overseas. Microsoft claims that it does not have to hand it over on request – and that consumer and customer privacy concerns mean it would be a bad idea anyway.

The case has been going though the courts for some time. But it raises some profound questions about the power of companies and the power of the state in the internet age. At the moment most of the law applicable to companies is national law and most national law applies to ‘persons’ subject to the relevant nation state (although sometimes the jurisdiction of the courts is extended to crimes committed overseas). And companies are considered persons before the law.

Now while multinational companies certainly present as a monolithic presence, in fact in order to operate in a different country, it is necessary to set up a separate company registered in that country and subject to its laws. For commercial purposes this doesn’t matter much, since the country where the group is headquartered will own the overseas company and is therefore able to control it.

Companies like to play this both ways. As far as profits are concerned, they may be extracted by HQ as desired, but where a crime or environmental or human rights harm has been perpetrated, the overseas company is assigned responsibility. In this they are helped by the doctrine of the ‘corporate veil’ by which shareholders (including organisational shareholder) are not liable for the acts of their company.

So while we may now be seeing corporate acts through a glass darkly, it is possible that the Microsoft case may lift the obscuring veil. Of course, that would still leave the arguments about privacy. But those should be tackled on the basis of privacy issues, not of general corporate responsibility.




ParcelForced Labour?

If you open your door to a delivery man, you could be looking at a slave.

Cleaners and delivery drivers in the gig economy are being subject to financial penalties for not showing up for work – that’s beyond docking the pay for work not done: it’s a fine on top. According to the Guardian, for Parcelforce, part of the privatised Royal Mail Group, it can be £250 per day on top of the loss of £200  for a day not worked. However other companies, including DPD, have been accused of similar practices.

The practice must create tremendous pressure to go to work, even if you are sick or you have an important appointment. According to the ILO, “Forced labour refers to situations in which persons are coerced to work through the use of violence or intimidation, or by more subtle means such as accumulated debt, retention of identity papers or threats of denunciation to immigration authorities.” Automatic fines of an amount greater than the daily wage would seem to qualify.

No doubt the practice is entirely legal, probably through contracting with the workers concerned on the basis that they take responsibility for providing a service. What they also take is all the risk. It is very far from a contract negotiated between equal parties.

Royal Mail Group’s most recent Modern Slavery Act statement, for some reason, makes no mention of the problem.



Ineos in a state

Fracking is controversial and widely rejected by the communities where it could take place. But the oil company Ineos is pushing forward with its fracking plans in the UK. It seems content to do this at almost any cost to community good will, pursuing legal injunctions making any practical protest illegal.

The damage this is doing to its public relations seems without limit. By taking such a heavy-handed approach, Ineos is storing up trouble for years ahead.

What can possibly justify this? It’s (private) shareholders’ motives are unfathomable.


Creating things that don’t exist

Walmart and Google are entering the voice-shopping market – alongside the other big online players, Amazon and Apple.

Walmart’s goal is to “create customer experiences that don’t currently exist“. Is that a good thing?

It is almost certain that Walmart will have conducted extensive market research to see whether people actually want it and how to do it most appealingly.

What is far less clear is whether they have thought about how to create these new experiences responsibly. It is entirely possible that people will love it all, but that it will change the shopping dynamic in some adverse way (less ‘family time’?). Or it may dramatically improve life for the time-poor.

Either way, the actual social impacts of such a move should be explored.


Pricing in bad behaviour

Barclays’ boss is being investigated by two regulators: the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). The reason seems to be that the CEO wanted to uncover the identity of a whistleblower within the bank.

Of course this is quite contrary to the bank’s own policies on the matter, as set out in their recent report:

“In September 2016, the Raising Concerns (Whistleblowing) Policy was updated to reflect and accommodate recent FCA regulatory changes. This document sets out Barclays Whistleblowing process and strongly encourages our employees to raise concerns about behaviour and practices that are counter to our Values and Behaviours. To facilitate the raising of these concerns Barclays provides internal and external gateways for employees and others connected with the Bank to report both confidentially and, where permissible, anonymously. Where a person raising a concern wishes to remain anonymous, no attempt will be made to identify them. To promote awareness of the process and in particular the gateways, the Bank delivers annual mandatory whistleblowing training to every employee.”

So it was more than likely to have been a mistake by the CEO.

The really sad thing though (apart from the mistake) was the markets’ reaction. Halfway through the day this was revealed, Barclays share price had risen by over 3%.

What this suggests is that the consequences for banks of inappropriate behaviour are very limited indeed. Or perhaps that since all the banks are so similar in this kind of respect, it makes no difference to investors where they invest in the sector.


How much is a human being worth?

Over recent months the government has declared that employees (including bosses) should be neither over-paid nor under-paid. That’s fine – but how do you judge what is too much or too little?

It turns out that at the top, the level of pay for CEOs currently bears no relationship to performance, as measured by return on capital invested. Yet pay at the top is typically set by a dedicated remuneration committee. The problem is that the members of the committee are part of the magic circle of top employees themselves – so of course they behave ethically and treat others just as they would like to be treated. The result is that top pay escalates without apparent limit.

For those companies that obey the law, at the bottom of the employee payscale there is the minimum or ‘living’ wage which will in practice define the pay of the lowest paid. (Actually there is a big space below that characterised by under-employment and zero hours contracts, but that is perhaps another story.) As far as employees go, there is a proposal for companies to publish the ratio of the pay of their highest paid individual to the average wage. Why the average? Because the average is higher than the lowest wage, which will usually be the minimum wage, and so yields a more comfortable ratio.

On the technical side, companies should simply be transparent about the ratio of the highest to the lowest paid. A number of organisations in the charitable sector already declare that. And companies should also publish the ratio of the rate of increase of the CEO to that of the rate of increase of the company’s return on capital – as well as their highest to lowest pay ratios.

But perhaps more importantly in relation to governance, not only should remuneration committees include employee members as has been suggested, but their remit should be extended to consider the pay of all employees. That would go some way to bring the full spectrum of employees face to face with the full spectrum of pay rates. Maybe that will increase the appetite for fairness.


The press cannot regulate itself

The main mass circulation UK newspapers have set up IPSO to regulate themselves. Everyone else wants something independent of the newspapers to regulate the industry. The main alternative proposal is Impress, supported by Max Mosley and the Rowntree Trust.

The newspapers say that if anyone else controls them it could mean the end of press freedom – something crucial to a functioning democracy.

But they should not pretend that they can regulate themselves. The conflict of interest is obvious and fatal. It is to the credit of the Financial Times, Independent and Guardian that they will not join IPSO. However the Financial times and Guardian are trying to regulate themselves directly through a private complaints system. That doesn’t really help.

If the press want any kind of public respect, the onus is on them either to join Impress – or come up with something better.


Where does everything come from?

And for that matter, where does everything go?

We live in a world with global supply chains and apparently bottomless consumption. The demands of the market are that companies get stuff and sell it – but they do not often remember where it came from and perhaps don’t much care where it goes. So to deliver accountability – and even transparency about what has happened in this global world – traceability is essential. This is a complex and difficult thing to do and to ask of companies. While some companies, such as airline manufacturers, do traceability naturally, others, such as the automobile industry, may have it thrust upon them.

Here is a short concept note on the need for a general traceability standard.

So that we can answer the question, where does everything come from?


Brexit after Brexit

Now that Brexit is on its way, everyone is trying to work out what it means. I believe the most profound implications are not about the re-configuration of the UK’s political parties, or the length of time withdrawal may take, or the possible economic impact – or even the fragmentation of the United Kingdom.

The most important implications will be what it means for social conditions and the environment. Brexit is a giant exercise in re-regulation.

Clearly part of the motive for leaving was to achieve a reduction in the regulation of business. I fear that will mean harder working conditions for the majority of the very people that voted to leave. But what no-one is talking about is a possible relaxation in environmental regulation.

It will be a Pyrrhic victory for Britain if the planet is defeated.


Is Plan A a stitch-up? Or just over-spun?

Labour Behind the Label has released a report that criticises the achievements of H&M and M&S in their clothing supply chains.

M&S in particular comes off in a bad light. Its 2010 Plan A commitment to deliver a living wage appears to have failed. What the report establishes is that workers in key parts of M&S’ supply chain are still living in poverty. But as the report acknowledges, M&S cleverly did not actually commit to delivering people from poverty – what they committed to was more like ‘enabling’ fair wage conditions to arise. And in 2015, when the commitment was supposed to have been completed, it just turns out that they haven’t arisen.

Of course M&S is not alone in this. It is a widespread failing of much CSR that public statements are carefully crafted to convey the impression of responsibility while actually, technically allowing the company to avoid blame if things don’t work out. That way the PR gain is maximised – at least in the short run.

In the long run people will simply not believe them.