ENEMIES OF CAPITALISM

Journalist Colin James, had this thoughtful article in the December issue of New Zealand Management magazine.

His theme is summarised in the introductory paragraph:

Rip-offs and amateurism in business damage capitalism just as surely as child abuse accusations damaged the Catholic Church.

He calls upon “capitalism’s leaders” to expose and denounce not just unlawful business misconduct but also “venality” and “incompetence” as well.

He does not appear to accept any limitations on speaking out:

… the “difficulty of getting proof” defence, which one business lobby luminary uses, is unconvincing.

The term ‘luminary’ doesn’t fit, but I worry that he could be thinking of me!

I totally agree about the need for lawful and ethical business conduct and have written and spoken about it a number of times, for example here and here.  But speaking out about specific cases raises a number of tricky issues.

For a start, what’s special about business?  The same argument could surely be applied to many walks of life.  For example, one could say that amateurism or incompetence in journalism damages the news media.

A fair reply might be that people can and do criticise amateurish or incompetent journalism.  But by the same token, people in business, business journalists and others comment on the strategies and performance of businesses all the time.

Then you have to wonder where to draw the line.  There is no end of folly in the world, including in business.  Firms routinely go broke through incompetence, as well as for other reasons.  Is there any point in a running commentary on human folly?

Colin James is right to say that “morality and ethics aren’t court matters” and that trust is essential to the efficient conduct of business.  Business people certainly steer clear of others whom they regard as untrustworthy.  But again, what’s special about business, and is speaking out about suspected unethical behaviour feasible?  The law of defamation – which journalists are very conscious of – exists for good reason.

If a journalist asks me for my opinion about some fully disclosed skulduggery I’d be glad to comment.  But for anyone in my position to issue gratuitous statements about conduct which they cannot know enough about would be reckless and irresponsible.

Because I am sympathetic to Colin James’ general theme I put my money where my mouth is and took part in an action against a former chairman of Fletcher Challenge for insider trading.  The motivation was to demonstrate that people in business did not condone such behaviour by their peers.  But the basis of the case was a finding of insider trading by the Securities Commission.  Frustratingly, it was necessary to spend $70,000 to get a court order to get the necessary information out of the Securities Commission.

The proceeds of that action were placed in a trust called the Business Integrity Trust, the purpose of which is to help parties to take cases against business misconduct if the cases seem meritorious and they lack the resources to do so.

Absent a finding by an authority such as the Securities Commission or its successor, or by a court, it is hard to see a lot more scope for condemning business misconduct.  The issue of verification cannot be lightly dismissed.

We have always relied on the Fourth Estate to expose wrongdoing and reflect our morality back to us.  If Colin James is willing to rush in where the more cautious among us have feared to tread, perhaps he can set us an example to follow.

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