From Lonrho to BHS: The Changing Character of Corporate Governance in Contemporary Capitalism

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This paper was written for a journal special issue in which the contributors were asked to address the question: ‘What would an acceptable capitalism look like?’
In 1973, the former British Prime Minister, Edward Heath, used the phrase ‘the unpleasant and unacceptable face of capitalism’ to condemn the unethical practices of a company called Lonrho. In the UK, the phrase ‘the unacceptable face of capitalism’ has since become institutionalised and is regularly used when particularly scandalous corporate behaviour comes to light. It was most recently used following to collapse of British Home Stores (BHS) in 2016.
It would be easy to conclude that nothing much changed between 1973 and 2016 - that a certain amount of morally reprehensible behaviour is part and parcel of capitalism, the price we have to pay for the benefits it brings. That certainly seems to have been Heath’s view. Lonrho, he argued, was an exception, not the rule: ‘one should not suggest that the whole of British industry consists of practices of this kind’.
This paper argues that while there might have been some justification for claims of this sort in 1973, things have since changed and changed quite fundamentally. It is not simply that the volume of obviously scandalous behaviour has increased - though it has - but that the capitalism that has emerged in recent decades is in its normal operations morally reprehensible and productively dysfunctional, as are the forms of corporate governance that are an integral part of it. In short, the ‘unacceptable’ is part and parcel of contemporary capitalism. It is institutionally and culturally embedded. As a recent blogger observed, comparing the Lonrho scandal to the recent VW emissions scandal: ‘What high standards we must have had back then, four decades ago, if a relatively minor dispute over governance could make such headlines’. Unlike the BHS collapse, the Lohrho scandal didn’t, after all, involve a company collapse, massive job losses or the destruction of thousands of employee pensions.
The paper explores the ways in which corporate governance and capitalism have changed in the forty or so years separating Lonrho and BHS and examines how what could be described with some plausibility as a mere ‘face’ or ‘facet’ of capitalism in 1973 has become closer to the norm in 2017. It begins by sketching out the logic of capitalism and the ethics that must be expected to accompany it, before moving on to explore the different ways this logic has played out in empirical reality since the end of the Second World War, particularly in the corporate context.
The paper argues that the post-war heyday of social democracy saw the logic of capitalism tempered and restrained, but that recent decades have seen the more ‘acceptable’ form of capitalism that resulted from this replaced by a much-less-acceptable, highly financialized, neoliberal form of capitalism in which the logic of capitalism operates in an increasingly pure and unadulterated manner. In this context, the paper argues that it is not, as some have suggested, today’s neoliberal capitalism that is abnormal and exceptional, but, rather, the socially democratic capitalism of the post-war period. As time has passed, it has become clear that the latter was the product of a very specific conjuncture. What we are now experiencing is corporate capitalism operating according to its normal, financialized, and inherently unethical logic. From this perspective, ‘regulation’ in the traditional sense – in which certain arrangements and processes are left untouched and treated as though they are unalterable givens with a pre-regulatory existence - is unlikely to deal with the problems we are facing. An ‘acceptable’ capitalism, the paper concludes, would be much less of a capitalism, or, indeed, something substantially other than capitalism.
Original languageEnglish
Pages (from-to)3-35
Number of pages32
JournalKing's Law Journal
Issue number1
Early online date20 Jun 2018
Publication statusE-pub ahead of print - 20 Jun 2018


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