What every country needs is good corporate citizens. Arguably, we need them more than we need good police, politicians or governments. If the individuals who keep our streets safe become corrupt, we can get rid of them. In a democracy, government can be booted out by ballot. Companies, however, can endure for a very long time, whether we like it or not, exercising huge and largely unaccountable power as they feed us, clothe us, invest our savings and keep us warm in our homes.
It is only when they become bad citizens that we even bother to ask how companies should be governed. When businesses cheat, lie, pollute and bribe, the state can prosecute and the injured can sue for compensation but a company that behaves badly is worse than a backhanding politician.
In the case of the Libor rigging scandal, we know that the culture of an entire industry has come under suspicion, not just a trader called Tom Hayes. Last week, the head of Volkswagen in the United States blithely told a congressional committee in Washington that the rigging of emissions tests on VW diesel cars, a fraud that will cost the German company many billions in penalties and costs, was done by two software engineers, without senior management knowledge.
Even if that was credible, it implies catastrophic management failure in one of the world's greatest motor companies. But even if the cheats were in the boardroom, the likelihood is that VW will survive and thrive again, thanks to its wealth, global reach, technological superiority and political support. So will Barclays and other banks caught in the Libor scandal and as BP has survived, despite the environmental damage and monumental cost to the company from its negligent drilling of the Macondo well in the Gulf of Mexico.
Casting prejudice aside, most people don't want badly behaved companies to fail. Where businesses are large, the unintended victims would be many and the loss of wealth-creation capacity would be damaging for communities. What is needed is better behaviour and that means more than a new CEO and more staff in the compliance department. The buzzy idea promoted by some is that large firms need to stop parking the company's conscience in a unit called Corporate Social Responsibility. You probably have one in your place of work: It is normally headed up by an amiable but semi-retired former chairman of the board and is staffed by enthusiastic but naive graduates who write lots of reports.
The important point is that CSR has nothing to do with core business and therefore, according to John Browne, the former CEO of BP, it should be scrapped. He should know: Lord Browne was a first-mover and huge enthusiast, committing BP as far back as 1997 to the Kyoto climate change agenda, re-branding the oil company with its much derided "Beyond Petroleum" slogan.
Although the former CEO has not changed his views about the climate, he is candid about the failings of CSR, "a fluffy, largely irrelevant cost centre." In his book Connect – How companies succeed by engaging radically with society, he calls for a root and branch change in corporate attitudes to the societies in which companies do business. For a CEO, he says, it means knowing intimately the world you inhabit, the government, consumers and civil society. It means questioning what is the role of your business in that society and actively engaging with its representatives.
As Lord Browne describes it, a typical large company CEO would spend so much of his time dealing with politicians, regulators, journalists, non-governmental organizations, trade unions and consumer activists that he will need to hand over most of the running of the company to a chief operating officer. It may not be entirely coincidence that the founders of Google have done just that.
It raises the ultimate question that lies behind all corporate governance issues: What is a company for? Opponents of CSR and its ilk have long insisted that the job of a company is to make money for its shareholders – the rest is the job of government. As long as companies obey the law, they are doing fine. Unfortunately, a culture that seeks only to maximize shareholder value will ultimately be driven to do things that increase profit at the expense of customers, suppliers, the environment and the wider community.
Far better to treat a company as a person than a money machine. The joint stock limited liability company was invented in order that a private business venture could survive, long term, independently of its owners, raising capital and contracting with others as a "person" in its own right. It is the sense of durability that matters. When that is acknowledged, the need to behave ethically, to "do as you would be done by" becomes obvious. Just as a human being will suppress his immediate desire in order to sustain necessary long-term relationships, so would a company. And just as a good neighbour will keep his garden tidy and mend a broken drain, so will a good corporate citizen.
Still, corporations must be managed and governed by individuals, some of whom will be weak and greedy, you might argue. Where were the non-executive directors of Enron and the supervisory board of VW, packed as it is by representatives of unions, family members and local government representatives? There is no helpful answer except to say that they are not the answer. However, the solution may soon be upon us whether we like it or not.
At the very end of Lord Browne's book, he recounts an interview with Tim Berners-Lee, in which the inventor of the World Wide Web paints a picture of future corporations run by artificial intelligence. "People wonder when robots will be sufficiently intelligent to be given access to the rights of a human being; the right to a trial ... the right to open a bank account; the right to fund political campaigns. … I think that that particular transition has already taken place. The corporation has all of those rights and it is increasingly operated by artificially intelligent computers."
Would a robot corporation want to rig the accounts, cheat an emissions test or ride roughshod over safety rules on a drilling rig? Arguably, an artificial intelligence corporation would be a stickler for the rules. It might be a truly socially responsible company. Whether it would be good for us is another question.
Carl Mortished is a Canadian financial journalist based in London.