Corporations

There, I said it, the 'c' word.

It has become one of the dirtiest words in the English language.  We all love to hate them and I am certainly in agreement that most of them are amongst the most evil things humanity has ever created.

Thing is though, I've recently had an epiphany and realized that everything that humanity has achieved over the last century or so would have been impossible without corporations as a method of social organisation.

Things like Jumbo Jets and silicon chips are just beyond the capabilities of individuals or small communities, they require some sort of over-arching social structure to organize and finance them.

I don't think this necessarily needs to be in the form of a traditional company.  The Linux kernel team are a good example of a non-traditional corporate structure, its management is arguably Linus' true genius.

The real problem is corporate governance, the dominant form of which is clearly broken and toxic and in need of killing with fire.

The gradual accumulation of voting rights by institutional investors over several generations has resulted in a small clique of professional Directors gaining control over the vast majority of publicly listed corporations.  Membership in the club is earned through patronage and nepotism.

This group exercises control over vast amounts of Capital whilst not actually owning any significant proportion of it.  It is the individual investors in the institutions in question that technically own everything but this group stands as their proxy in the governance of the corporations they have invested in.  They stock the boards of these companies with their own members who in turn do the same thing to the boards of any other corporations under their control.

It is hard to determine just how monolithic this clique is or how much of humanity's Capital has fallen under its control but it is impossible to deny its existence.

So how do we go about combating this trend?

We need to formulate a new paradigm of corporate governance that excludes this group and that is 'fitter' than the existing arrangements.

My proposals are thus:

Shares should be divided equally between capital investors, employees and society as a whole.  This later group is envisioned as some sort of charitable trust that is tasked with pumping one third of the company's profits back into the community that it exists within and which it cannot exist without.

I would also propose that 1% should be set aside as a founders share, leaving a nice round 33% for each of the other three groups, ensuring that those that are crucial to the birth of all companies always have a stake in what they have created without having a disproportionate percentage of the stock.  The founders share would have a permanent board seat and a veto power attached to it.  Depending on the type of company it might also be appropriate to attach preferential dividend rates to the founders share.

The investor class of shares would be designed as something that is not transferable but that can be redeemed at will for a fixed percentage of the total value of the company according to its most current accounts.  Investors are therefore rewarded appropriately for their investment whilst circumventing the speculative stock markets.

Under this scheme it is not possible to buy more than 33% of the company, it is not possible to oust the original promoters and by placing these restrictions in the Memorandum as unalterable articles they cannot be subverted at any point.  The employees and society at large have as strong a voice on the board as the investors.

Of course none of this is of any value unless a code of conduct is enshrined in the Memorandum of Incorporation.  Legally, in the UK, the board can be compelled to undertake any behaviour that is in the best interest of the shareholders by only 15% of them.  It is therefore imperative to ensure that the moral principles that are to be deemed 'best' for the shareholders are clearly stated at the outset.  This prevents profiteers from dictating policy to the board and similarly permits the shareholders to bring the board back to heel should they stray from the path.

What precisely those moral principles should be is a matter for another post I think.

Corruption

I was going to mention this in the last post but it's too important and deserves a post all of its own.

Corruption is the worst crime a human being can commit.

All other crime is policed, with varying degrees of effectiveness, by society.  Corruption actively undermines the nature of that society and its fundamental ability to create and uphold laws.

The first law of any system of laws should be that efforts to corrupt the system itself are absolutely anathema.  No other crime should be as severely punished nor should have as much of a society's resources devoted to it's prevention.

When you think about it corruption enables every other crime it is possible to commit.  It is the equivalent to committing all of the other potential crimes all at once.

There are three major organisations that create the rule of law.  The legislature, the police and the judiciary.  All three are susceptible to corruption in different ways and how we prevent this should be a constitutional rather than a legal matter.

The legislature is a representative body elected by the people to enact laws to govern society in a way that brings the greatest benefit to all.  In particular it is not elected to provide any benefit to individuals who possess great wealth, power or influence excepting that said benefit is of the greatest benefit to all.

Politics needs to be constitutionally insulated from money.

It cannot cost money to get involved in politics.  Money cannot be allowed to give any particular candidate an advantage over an other in an election.

The primary area where money lends an advantage in political campaigning is the media.  Perhaps it might be wise to simply enact a blanket ban on all political campaigning in these venues.  It has become clear that the partisan political opinions of media corporations have been allowed to leak into the editorial opinions in a manner that is intended to misinform the electorate.  Advertising in general has also proved itself to be a great danger to society if not actively and properly policed.

Direct lobbying is another area where undue influence is exerted on the legislature by vested interests with too much money.  Tobacco is the classic example of an industry that was clearly doing harm that spent money to corrupt the political process to protect their revenue stream.

Tobacco is not, however, an isolated example.  Dozens of cases exist stretching over several centuries of industries that have had their day or that produce products that are not in the public interest spending vast sums of money to corrupt the process of government.  It has almost become a trope, that, as a particular industry or business method enters its inevitable decline it clings on to life, like some sort of unholy revenant, by using money to corrupt the political process.

The Constitution must provide for the outlawing of such practices and for brutal punishments for transgressors.

Furthermore, it needs to provide incentives that help prevent corruption.  We spend nearly three times as much on education as we do on ensuring that our laws are adequately enforced.  This is a ludicrous reversal of the proper order of things.  Those that uphold the law should be amongst the best paid and most revered members of our society.  They should want for nothing.

If politicians, policeman, prosecutors, judges and prison guards are amongst the wealthiest elite members of society there will be less opportunity to subvert the rule of law with money.

On government and taxation.

The thing is, I don't think the majority of Scots really want independence.

Not that I don't think that they should or will have it, I just don't think they want it.

And trying to sell people something that they don't want is a loser.

However, I think an overwhelming majority of Scots want change.

If there is one thing that we can all agree on it's that politics is broken and that some faction or another will be first against the wall when the revolution comes.

The people of Scotland won't buy independence but they will buy Constitutional Change.

It will have to be packaged just right.  It will have to be their Change not somebody else's.  The Yes campaign needs to say to people 'Vote Yes and what form independence takes will be entirely up to you.  We will hold an extensive, fair and open national debate on the available options and leave the decision up to you.'

The Yes campaign also needs to rigorously avoid engaging the No campaign and its endless series of 'gotcha' trap-questions.  Whatever unpleasant scenario they conjure up the rebuttal has to be 'We will leave that up to the people of Scotland.  It's their country and their future, we will show them the respect of letting them decide how these issues should be tackled.'

What it boils down to is that the people of Scotland want to be in a position to decide how they are governed and not merely by whom.  Offer them that and they'll have your arm off.


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Taxation.

The current method of taxation is stupid and wrong-headed.  There, I've said it, the Emperor has no clothes.

A graduated taxation scheme that gets ever more onerous the more that one earns places the greatest motivation to avoid it on those best able to do so.

Stupid, stupid, stupid.

It is actually a disincentive to wealth creation.  Why work a bit harder in this tax year when more than half of the profits will go to the government?  Instead people push the work into the next tax year and take it easy for a bit.

People aren't stupid, particularly as a mass psychological entity.  They instinctively recognise the law of diminishing returns and optimize their performance to get the best profit from the least effort.

To me it looks like the whole plan was cooked up by someone that thought they were a genius.  When they were done they leaned back in their chair, stroked their white cat and cackled 'The more they earn the more they have to pay us.  We'll be rich I tell you. Rich, rich!'

And then they had to go downstairs for their Tea 'cos their Mum was calling...

On its surface it is genius.  If you look at the graph of taxation against income you clearly see that the amount of money that the government can claim from a single individual is unlimited.  Of course that is just an illusion.

The amount that the government earns from a single individual is limited by that individuals willingness to keep  grafting when most of the money goes to the State and by their ability to afford accountants that ensure as little income as possible is actually liable to tax.

So if the amount of tax the State can extract from an individual is effectively capped why not work within those limits?

Perhaps if you can remove all the incentives to fiddle the system you can stop wasting quite so much money trying to prevent tax avoidance.

So here's my solution, it's a little rough, needs tweaking to ensure that nobody is significantly worse off but it gets the point across.

Reverse the slope of the graph.  So long as the area under the graph is the same for your current economy it doesn't matter how the taxes are raised.  Start with a high rate of tax, say 40%, and gradually reduce it the more money people earn all the way down to, say, 1%.  Do exactly the same thing with corporations.

The trick is to create a tax regime where there are no points where earning more would mean you would keep less.  I am convinced that the secret to this will be a universal social pension.  Pay a minimum income to everybody in return for a small social contribution.  If you do useful work in your community, work that it would be otherwise uneconomical for anyone to pay to have done, the State will pay you just enough to survive on.

This pension will be available to everyone, you won't have to prove that you qualify and go to fifty job interviews a week, just show up and help run the crèche in the community hall, or pick up litter, or help repair headstones, or whatever.  If you are too old or infirm to contribute then we pay you automatically and helping look after you becomes a reasonable thing for the young and able bodied to do to qualify for their pension.

But after that every penny that you earn is taxable.

Ideally I would like to create an alternative tax regime where nobody pays any more than they do now but with the slope of the graph reversed.

I'm not sure that isn't fundamentally  impossible but I'm willing to throw it out there and see if a solution can't be found.

Briefly my addled mind debates whether or not it would be possible for both schemes to run concurrently with the choice of which to take part in be voluntary.  Surely that's crazy.

I'm sure I can apprehend the edges of a spectacularly elegant solution but the details elude me.  For now.

I need comprehensive economic data, Customs and Revenues data for the whole of last year for everyone in the UK, and the smarts to be able to plug that data into various models and uncover the answer I'm looking for.

So?  Where to go from there?

I think the best place to start is the Darien Project.

The Darien Adventure was the single most influential event in Scottish history.  Possibly hyperbole but a case that I can argue with conviction.

Had they succeeded in establishing a trade route across the isthmus of Panama much of Scotland's subsequent economic history might have been substantially different.

As it was, their spectacular failure led to an economic union with England that created unprecedented levels of growth and wealth in Scotland.

It was the energy and drive of the Scots that fueled the success and growth of the British Empire.  William Patterson's other great brain-child, the Bank of England, re-invigorated the British economy and made her the great naval power that dominated the subsequent century.

What we need now, in these times of supposed 'austerity', is a project.  Some great venture that will create wealth in all levels of society just from it's own momentum.  A venture that is prudently conceived so as to reduce the probability of its failure but so massive that its momentum will confer great benefits to future generations even should it pass too close to the Sun.

(A unrelated thought occurs here, it is difficult and imprudent to tax the wealthy.  They don't want to be taxed and have the means to do something about it.  The success of the Bank of England clearly demonstrates that the wealthy are far more willing to loan money to the State than gift it.

Given that the wealthy are disinclined to pay tax and will waste economic resources fighting efforts to impose it upon them why bother making the attempt?

But that's another post so I better finish this one so I can get on with that one.)

So the Darien Project is that massive venture.  A construction project on such a scale as to take the breath away.  Whole new technologies will have to be invented, whole new manufacturing techniques, new precision automation equipment, spin-off industries that on their own would be a massive economic benefit to Scotland but that put together will create a pocket super-economy that will dominate on a global scale.

It is choosing to think big for a change.

fp

So you're going to seem a bit crazy blogging to yourself but what's new.

Hi, me, nice to hear from you again.

I've got a lot to say and you really need to start to pay attention or your never going to get out of the starting blocks here.

So here's the thing.  They're just not thinking big enough.

I mean seriously fifty tonnes?  You've just not grasped how this works and the economies of scale that you should be able to profit from here.

So, what am I trying to achieve here?

I'm trying to 'crowd-source' my own thoughts to create something transformational that turns the world on its head in the same way that the steam engine did.

Of course that's going to be hard if it's just me reading this but we'll just have to make do.

I need to decide how to organize this.  Should I go with the selfish, bwahaha, world domination version or is there some sort of open source version of this that I can still leverage to create an above average level of wealth for myself and everybody else involved without turning into a dick.

I'm still quite attached to the idea of being in possession of at least half the equity but maybe 1% would be enough.  I think perhaps incorporating as a company limited by shares with a 1% founders preference issue that has veto power is the fairest way to go.  I still have control without unfairly hogging the profits.

Perhaps this will all be clearer in the light of sobriety....