In a previous post, we considered the problems of ensuring companies do the right thing – socially, environmentally, and economically. I suggested the adoption of a Shareholder Statement of Interests as a tool for conscientious owners to express their aims, and to provide a ‘job description’ for the company as a whole.

But why should the rest of us think this especially important for companies?

Well, a company is an artificial creation, a ‘person’ in the eyes of the law. True, a company cannot vote. But it has other powers that far exceed those of natural persons. Mostly, this is due to the fact that the company is an ‘umbrella identity’, under which many natural persons – people like you and I – can gather their resources and have them directed to certain purposes. It’s that ability to gather and direct, to enter into and perform legal obligations, to contract and transact, that makes a company an extremely powerful entity.

The greater the gathering of wealth, the greater the power. If we add to that the expertise of professional management and professional marketers, we can quickly understand how some mega-companies gain power and wealth to rival or even exceed that of many national governments.

You and I, as natural persons, have limitations. We learn and grow, mostly by making mistakes – whether small or great. We miss some opportunities, squander others, and a great many simply escape our attention. And the thing is, no matter how incompetent or foolish, we can’t fire our management! We’re a natural person, stuck with who we are. It’s one of the things that keeps us all more or less, as individuals, roughly equivalent.

But companies are not like this. They can import the best brains – the best of our experience and natural talents – to run themselves. They can concentrate and amplify the talents we natural people have. And they’re a legal person, with an identity that doesn’t inevitably die, get frail, or even have to sleep!

The point is that there’s a large imbalance of power between natural and legal people. And, as we all know, power can be used for both good and bad purposes. Shouldn’t we therefore want to know what purposes a company has, before we add to (or even just support) its power through employment, or investment, or purchasing its products? Shouldn’t we, the natural people, ask these ‘legal people’: “What do you want? What are you trying to achieve in our society?”

I don’t suggest that we want to know their business, but what they value. We want to know how the conscience of each artificial person works.

And what better way to find out than a Statement of Shareholder Interests?

Most people want to be helpful and good. Even if we occasionally aren’t or cannot, we mostly want to do – and be seen to be doing – the right thing.

But can we as a society ensure that even companies do the right thing – socially, environmentally, and economically?

There are two difficulties with this, and I think we can solve them both.

Firstly, a company has a legal structure which can easily separate the shareholder from the way the company is governed. Especially in large public companies, any given shareholder is often one among many anonymous (and, individually powerless) thousands.

Secondly, it is commonly thought that the company exists to make a profit, and that this consideration must trump all others. The governors of the company (the Board of Directors) are responsible to the shareholders, who fire them if they do a bad job. And the Board in turn fires management who do a bad job.

But what do the shareholders actually want? That’s the question I think we should begin to answer explicitly with something like a Statement of Shareholder Interests.

New Zealand law says that Directors must “act in good faith and in what the director believes to be the best interests of the company”. Two questions lurk here: what constitutes ‘the company’, and what are its ‘best interests’? The law does not say.

I think shareholders should.

But how will we start doing this? Well, why shouldn’t I start with my own company? And you with yours? Webstruxure has two shareholders, who are happily aligned in their views about decent corporate citizenship. It’s easy for us – as it is likely to be easy for the many thousands of small-to-medium companies out there.

These documents should be public. They should be available to customers, potential partners, and investors. It would be easy to buy, partner, invest – and be employed – ethically.

For anyone with an interest, or potential interest, in a company, a public declaration that “we, the shareholders”, want a particular mix of outcomes is far more powerful than a ‘values’ statement put out by the marketing department.

Values are nice wishes; a declaration of shareholders’ interests is a job description.