The Future of Company Law: Fat Cats, Corporate Governance and Workers

Submitted by carolyn on Fri, 01/10/2004 - 11:58

By Bill Wedderburn

Published in October 2004

All too often we hear news stories about “fat cat” employers paying themselves huge pay increases along with massive bonus packages. The CBI claim that the problem is “confined to a few instances”. The TUC on the other hand call this a “crisis in the legitimacy of capitalism”. However described, what is certain is the discrepancy in pay is fuelling the general inequality apparent in our society.

Nor is the problem restricted to the issue of boardroom pay. Corporate bodies accumulate, invest and manage massive capital resources both nationally and globally. The power invested in the Directors of these corporations is central to the present and future state of mankind. They determine our health, prosperity and the very survival of the planet. So what mechanisms of control are in place to prevent abuse of this power? Could and should anything be done to ensure corporations fulfil their social responsibility to society?

In this excellent and very timely publication by undoubtedly the UK’s leading expert on company law, Professor Lord Wedderburn first examines the extent of what he refers to as the “new development”. He then goes on to critically assess the government’s latest proposals for the reform of company law, concluding that the recent Company Law Review did not face up to, expose or propose remedies on how to control the new elite of corporate governors. He then considers some of the conventional answers said to be the way forward (greater disclosure of directors’ rewards, shareholder activism and independent non-executive directors) and explains why he believes they are inadequate. Finally, he concludes that if we want to modify management control of corporate assets we need to insert worker representatives through trade union machinery at appropriate points in corporate governance – starting with the remuneration committees.

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