Professor Sikka: politicians seek to serve corporations rather than ensuring that corporations serve the people

prem sikka 3A recent article in the Scottish Independent by Professor Prem Sikka (Accountancy, University of Essex) is summarised here. For his more strongly expressed denunciation of the status quo and to follow a large number of links giving information about the organisations and scandals to which he refers, click on the link to the article.

Predatory capitalism eats away at society as people lose faith in any sense of justice, fairness and democracy.

A story that deserves much greater scrutiny:

HSBC, a major global corporation which boasts ethics committees, audit committees, non-executive directors and a major accountancy firm as its auditor, helped 106,000 clients to avoid taxes; all of these collected mega rewards but deny any responsibility for malpractice.

Predatory practices are deeply embedded in company boardrooms. This is the inevitable outcome of a political ideology that promotes faith in unbridled markets and light-touch regulation.

The UK financial sector has sold abusive pensions, endowment mortgages, payment protection insurance and other products. Banks have been engaged in money laundering, interest rate fixing and manipulation of foreign exchange rates. Payday lenders have been charging sky-high rates for lending small amounts of money to the needy and then sending fake legal letters to pressure them into paying.

A brief glimpse of other predatory practices which have also become institutionalised

  • 92% of the UK energy market is controlled by just six global corporations and last year alone they overcharged customers up to £234 a year.
  • Despite subsidies of £4-5bn year to privatised train companies, UK passengers face one of highest train fares in the world.
  • Water and telephone are not far behind.
  • Price comparison websites collude with sellers to conceal the cheapest deals.
  • Supermarkets engage in fake sales to entice customers. They have developed techniques that result in filling chicken with water and selling it as meat. They squeeze concessions out of suppliers, especially small ones, with the threat that unless they acquiesce the high street giants will not stock their products.
  • Big DIY stores use ‘yo-yo’ pricing to fool customers into thinking they are getting a bargain kitchen and other household items. In case, anyone wants to complain, chances are it will be a premium line telephone number which will keep you waiting.
  • Too many doctors have been incentivised by healthcare companies to refer patients to selected private hospitals.
  • Pharmaceutical companies exploit the National Health Service by charging vast amounts for drugs that cost pennies to produce. The price of some medicines has been inflated by as much as 2000% and taxpayer has been fleeced of tens of millions of pounds.

There are two broad reasons for the advance of predatory capitalism

Firstly, major companies are under relentless pressure from stock markets to meet profit forecasts. The markets don’t care if the targets are met through predatory practices.

Secondly, executive remuneration is linked to profits. Personal enrichment, at almost any price, seems to have become a dominant practice. The shame no longer resides to planning or executing anti-social practices, but in possible public exposure.

Instead of strengthening UK corporate laws, successive governments have favoured soft or voluntary rules for the corporate sector.

Executives are allowed to draw up their own rules. The corporate governance code is one such example. Compliance with it is voluntary. It does not give the long suffering public any rights and there are no penalties on corporations or their executives for predatory practices.

Governments are adept at covering up the stench of predatory capitalism.

For example, in July 1991 the Bank of England closed the fraud-ridden Bank of Credit and Commerce International (BCCI). It was the site of the biggest banking fraud of the twentieth-century and some 1.4 million savers lost some part of their savings. However, to this day, the closure has not been followed by an independent investigation. Successive governments concealed the identities of wrongdoers and claimed that it was not in the public interest to reveal them. All this is done to protect weapons exports to dubious regimes in the Middle East.

Prime Minister Tony Blair personally intervened to stop an investigation into allegations of bribery by BAE to secure contracts for the sale of arms. Naturally, BAE professed its innocence and Tony Blair claimed that dropping this investigation was apparently in the national interest. However, the US administration pursued BAE and the company pleaded guilty to making false statements and paid a fine of $400 million for its criminal conduct.

A major shift in law, regulation and political ideology is needed to curb predatory practices, but the inertia and connivance of UK institutions does not inspire confidence. There is little sign that predatory capitalism will be checked for the foreseeable future as politicians seek to serve corporations rather than ensuring that corporations serve the people.

Posted on March 18, 2015, in Banking, Corporate political nexus, Democracy undermined, Finance, Government, Health, Parliamentary failure, Reward for failure, Taxpayers' money, Vested interests and tagged , , . Bookmark the permalink. Leave a comment.

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