We consider that the power of trading corporations has increased to unacceptable levels, and ought to be constrained by Governments.  The abuse of corporate power takes the form of workforce exploitation, trade union repression, environmental pollution, money-laundering, destructive relocation, market manipulation, monopolistic exploitation, corporate fraud, bribery, tax evasion, excessive executive remuneration, and the deception of investors. These abuses of power touch every corner of every contemporary society.  And they call for a radical programme of legal reform, not to prevent the use of “corporations” for trading purposes, but to limit the damage caused by the abuse and exploitation of the processes of incorporation.   

We understand and acknowledge that the deployment of corporations (artificial legal persons) has proved advantageous to the modern world, in the development of both political and commercial institutions.  The device of limited liability, the mobilisation of multiple shareholders in support of trading enterprise, the emergence of Stock Markets, and the facilitation of business succession and transfer – these are all key gains which could not have been achieved without the use of incorporated forms of trading.  Our objective is to strengthen and improve that process, not to obstruct it.

We affirm our support for reforms to secure the implementation of five key strategic principles; minor changes, the mere modification of the duties of Directors and auditors in trading corporations will not address the underlying faults of system.  In identifying these five principles, we have principally in mind their application to major corporations. Sole traders and partners, who trade without incorporation, accepting personal responsibility for their actions, their commitments and their debts, would not in any event be affected by these reforms, nor would their requirements apply to small local companies. We regard the opportunity to use corporations for private trading purposes as a privilege which should be granted to the business community only on terms, and those terms should have regard for the public interests of the wider society.  Properly understood, there is an underlying deal between society and its business communities. 

We seek to renegotiate and renew that deal.

• Modern management has taken exclusive control of corporations, through the domination of their Boards of Directors.  The 19^th century checks-and-balances, between shareholder and Board, between auditor and shareholder, between Board and management, have completely broken down.  Executive management dominates every corporation, with “Chief Executive Officers” (CEOs) enjoying unprecedented concentrations of power.  The remedy is to give greater power to shareholders to share power with the management, in particular with the right to a prior vote on key issues facing the company, including executive remuneration.

• The right to use an artificial person for trading purposes represents a privilege, a key advantage granted to the business community.   Yet company formation is effectively “on demand” in the UK:  no prior checks are made before the creation of a new corporation is authorised, neither the identities of the promoters or nor their purposes are scrutinised.  Before authority is given for the creation of any new “company”, the applicant should be required to satisfy the Companies Registrar that its formation is for a legitimate purpose, that there is no element of tax avoidance, and that the tax affairs of the promoters are in good order; other considerations should also be taken into consideration, such as possible terrorist links and smuggling connections.  And registration charges should be significantly increased so as to deter the frivolous use of incorporation procedures.

• When the concept of “limited liability” was developed in the 19^th century, the object was to protect wealthy individual investors against the risks of financial ruin, in the event of company collapse.  No shareholder could under any circumstances be called upon to pay more to the company than he had personally pledged to invest.  That protection has proved a key advantage in the development of modern economies, and should not be displaced or qualified.  There was however no suggestion that a company (i.e. an investor which was itself a “corporation”) should be able to create another artificial person, and hide behind its own subsidiary.  The extension of limited liability to artifical persons themselves, to “holding” or “parent” companies, has now become a vehicle for deceit and fraud, and should be discontinued.  Every company should be required to bear its due share of the indebtedness of any failed subsidiary.

• Corporations have succeeded to all the property rights accessible to natural persons, as a matter of legal reasoning: artificial or “legal” persons are entitled to enjoy all the relevant rights of a natural person.  In Anglo-American legal systems, this means that corporations can take advantage of the very powerful ”absolute” property rights enjoyed by natural persons.  These include the right to exercise property rights arbitrarily, without assigning a reason to their exercise, and without any requirement to act reasonably in using them: such property laws even accord to a natural person the right to destroy his own property at whim.  This presumption should be changed: all corporations should, as a condition of enjoying the advantage of artificial personality itself, be placed under a general duty to act reasonably in the exercise of their powers.  Corporations should expect to be subject to judicial scrutiny for acting arbitrarily, unreasonably, negligently, or destructively.

We commit ourselves to securing these reforms throughout the European Union, the USA, and the English-law jurisdictions with comparable systems of company law.  A  cross-Party, cross-border consensus within that frame would generate a powerful platform for global reform. 

The world’s many company-law jurisdictions, and their interconnectedness with contract, property and other laws, go to make the constitutional law of global business.  We are committed to a major programme of constitutional reform.