How much power do firms really have?
In a lot of ways, firms have the same rights as people do. They can own property, make contracts, sue and be sued. Although governments can regulate companies, there’s often conflicts of interest among people who have worked across the public and private sector. Aware of their power and under pressure to do more for the community, companies increasingly have things like corporate social responsibility policies to use their power for good – but the fact that the decision to do this is in their hands, rather than in the hands of governments or voters, gives them a considerably large amount of power which we can only influence by choosing whether or not to consume their products.
Powerful firms can employ lobbyists to convince politicians not to pass new laws which which are against their interests. Lobbying isn’t necessarily bad - charities can lobby for governments to pass bills in favour of championing the social cause they campaign for. But it’s often associated with companies convincing governments not to pass laws which might be in the public benefit, but would be damage their business.
Governments have regulations to deal with this power, and companies of any kind need to follow them. But because of what’s known as the revolving door problem, where the same people work across influential industries – starting off, for example, in a governmental department for energy conservation, and ending up on the board of an oil firm – regulators and politicians can end up in each other’s interests on the basis of personal relations or benefits. Of course, this doesn’t always happen; but regulations can’t do much to stop it if it does.
Some firms are taking matters entirely into their own hands via what’s known as corporate social responsibility (CSR), where companies themselves make a commitment to promoting ‘socially responsible’ business ethics, community engagement, accounting standards, and risk management. That means that as individuals, our most powerful tool isn’t necessarily the vote, but our wallets, because where we spend our money affects whose CSR policies are financed.