5 Examples of The Failure of Shareholder Capitalism
As the cost of Shareholder Capitalism becomes evident, a growing movement of people are demanding change – a new form of Capitalism.
Under Shareholder Capitalism, the need to maximise short-term shareholder returns gave the green light to business-for-profit at any cost, so long as these businesses worked within the letter of the law.
It also gave rise to businesses to push the boundaries and operate beyond the law. My upcoming book, "For Love & Money", explores case studies of shareholder capitalism gone wrong. Here are 5 examples...
In 2014, the mining giant Rio Tinto was given documented advice about some ancient indigenous cave sites, operating less than one kilometre away from their Brockman 4 mine, in the Pilbara region of Western Australia. The mine was expanding at the time.The advice and report from an archaeologist, Dr Michael Slack, alerted that at least one of the caves was “of the highest archaeological significance in Australia” and that the cave sites showed evidence of continuous human habitation going back 46,000 years, making it among the oldest in Australia.These were the Juukan Caves. Six years later in 2020, Rio Tinto blasted these culturally and archaeologically significant caves to smithereens, in order to expand their mine. Rio Tinto’s CEO came out with an apology, explaining that the destruction of the caves was a misunderstanding and taking “full accountability”. After a review, the Board of Rio Tinto made a decision to cut the bonuses of the CEO and other executives. Eventually though, under extreme pressure from investors protesting the inadequacy of the board’s action; and in the face of evidence at odds with the explanation of a “misunderstanding”, the CEO and and senior executives were forced to resign
Commonwealth Bank of Australia (CBA), ANZ Bank, National Australia Bank (NAB), AMP and Westpac
After years of public pressure, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was established in December 2017 in Australia to investigate misconduct and criminal activity within the industry.The Commission found widespread evidence of criminal and unethical behaviour by the Australia’s big four banks and AMP, including forgery, bribery, lying to regulators, failure to verify customers’ living expenses in loan applications and mis-selling insurance to people unable to afford it.
On 17 April 2018, it was reported by the Australian Financial Review that AU$216 million in fees has so far been refunded to customers, including interest, with CBA making up $118 million (55%), ANZ $47 million (22%), NAB $41.3 million (19%), AMP $4.7 million (4%), and Westpac $3.2 million with an additional $24 million in provisions (a total of 12.6%).
Founded by James Packer, Crown Resorts is Australia’s largest gaming and entertainment group. It owns casinos in Melbourne and Perth and was dueto open Crown Casino Sydney.An inquiry was established in 2018 by The Independent Liquor and Gaming Authority (ILGA) in NSW, Australia. It was headed by The Hon PA Bergin SC and became known as the Bergin Inquiry. The Bergin Inquiry found clear evidence of money laundering at Crown Melbourne. It also found Crown’s partnerships with “junket” tour operators, bringing wealthy Chinese high rollers to their casinos, involved links to organised criminal syndicates. The Inquiry’s report was publicly released in February 2021 and was scathing in its criticism of the corporate culture and corporate governanceof Crown Resorts. It found Crown was not fit to hold a gaming license in New South Wales. New inquiries are now likely in the states of Victoria and Western Australia.
A scandal that has become known as “Dieselgate” began in September 2015. The US Environmental Protection Agency found that Volkswagen had intentionally programmed their diesel engines to only activate their emissions controls during laboratory testing. Basically it cheated on its results. Under test conditions, this cheat device showed emissions to be far lower than when the car operated in real conditions on the road. The actual result showed that the engines emitted nitrogen oxide pollutant up to 40 times above what was allowed in the US.
FIFA is the organisation responsible for running world football (soccer). It is responsible for deciding which country hosts The World Cup, the most-watched sporting event in the world, which takes place every four years.
FIFA had for years been dogged by accusations of corruption, but this came to a head in 2010, after awarding the 2022 World Cup to the oil rich Gulf state of Qatar (an outcome many Australians remember because our nation was also in the 2022 World Cup bid and had high expectations). In December 2014, FIFA chose not to release its own investigation into corruption, instead releasing an executive summary which it said exonerated the bidding process. The report's independent author, American lawyer Michael Garcia, resigned in protest.Following an inquiry by the FBI, in May 2015, the US indicted 14 current and former FIFA officials and associates on charges of rampant, systemic and deep-rooted corruption. In December 2015, 16 more officials were charged, including Sepp Blatter the president of FIFA. The charges included bribery, fraud and money laundering.
Corruption, lies, cheating and criminal activity. These are the activities that are being revealed in our business communities more frequently than is acceptable. Not every business operates illegally or plays inside the letter of the law with impunity, but enough businesses have. And they’ve done it at scale, so that today, we face the results of their actions over the last forty or fiftyyears. For decades the pursuit of profit has been “the” energising motivation for most big businesses. This has come at great cost to society. The cost of Shareholder Capitalism has become our poison chalice; our “gift” to future generations. It has been devastating: An unsustainable planet. Deep mistrust of the very institutions that are supposed to serve us – government, business and media. Nations and societies divided by the haves and the have-nots. Entrenched inequality. Idealogical division. Fake news. Alternative facts. Scientific advice ignored and even pilloried. It’s hard not to look back with the benefit of hindsight and wonder how we didn’t see where Shareholder Capitalism would lead us.