A finger of fudge is just enough ...


Madoc Batcup is an independent financial consultant, with interests in structured financial products and in the environmental industry. He has also served as a member of the National Association of Pension Funds’ property advisory committee.

Madoc is a law graduate of Cambridge University and of the Institut d’Etudes Européennes in Brussels. Prior to becoming a financial consultant he worked for the investment banking arm of Swiss Bank Corporation in both London and Tokyo.

He is also Director of Wales in London.

The recently announced agreed takeover of Cadbury’s by Kraft has been greeted (if that is the right word) with a sense of disbelief that the venerable maker of so many brands of indulgence tailored to the British taste should have become the property of others. Cadbury, a firm founded by Quakers, has a proud history of having a mission of fair play both towards its customers and its workforce. The housing it created for its workforce on the Bourneville estate was and is a powerful symbol of a more caring approach to capitalism. However since the members of the Cadbury family gradually sold out their shareholdings in the company that bears their name the company has increasingly been run along lines similar to those of any other large multi-national corporate, and only a comparatively small part of its workforce is now actually located in the United Kingdom.

The future of Cadbury, like many of its products, will no doubt result in large chunks being taken out of it after a limited shelf life, and the company’s operations in the UK will doubtless be deemed to be past their sell-by date in the not too distant future. Despite all the sweet words, the finger of fudge is in effect a very large raised American middle finger of one hand. In the other hand is some £12 billion to buy all this comfort food.

The sale of such a familiar name is a jolt and it has highlighted in an unsettling way the unpalatable truth that the purchase and sale of companies even with such iconic brands and history as Cadbury is a decision purely for the shareholders of a company, and comes down purely to price; it is a matter solely for the owners of the equity in the company concerned.


This feeling of unease that this is not the way that things should be done is not unfounded. The example of Cadbury is just one of many thousands of mergers and acquisitions that are happening all the time in various countries and on differing scales. It reflects a very deep schizophrenia in the developed world; a contradiction that we do not care to dwell on. A situation that has been well and truly fudged. It is symbolic of the wider issues of the current economic crisis. In looking at the near collapse of the banking system and the growing inequality in our society, highlighted by the bankers’ bonus issue, the fundamental tenets of capitalism are being questioned. The governments of the developed world proclaim loudly that they are firm believers in one person one vote, indeed they urge this system of governance on other countries, but in the case of companies they turn a blind eye to the fact that they are run on the basis of one pound one vote. In the civic sphere we believe in democracy, but in the corporate sphere we accept the purest form of plutocracy ever devised by mankind. The fate of Cadbury was sealed by a vote of the money. No-one else got a look in. A short period before accepting Kraft’s offer the chairman of Cadbury commented that Kraft hadn't been good at integrating deals, hadn't been good at improving their own results. Perhaps he was only saying it to talk up the price but if he was right, the current shareholders will have sold their shares at the right time and condemned the employees of the company in the UK and elsewhere to a very uncertain future in which they have had no say.

This is really the reason why there is an underlying concern about capitalism – it is controlled by money, and yet we continue to celebrate the triumph of democracy in government. Corporate capitalism is a strange bedfellow for democracy, not only is it wholly and deliberately undemocratic, but it doesn’t even work. This system of plutocracy masquerades under the description of ‘shareholder democracy’, but it has little to do with most shareholders and nothing to do with democracy. The collapse of Enron highlighted the fact that shareholders have little effective control over the management of large companies, and even when there is supposed to be some ‘shareholder’ control, this is often shorthand for insurance companies and other institutional investors rather than the individuals who are the ultimate beneficial owners of the shares.

Corporate capitalism is so entrenched in our society partly because of historical accident and partly because it is not communism – which is taken to be the only alternative and shown to be unworkable. But this is a false dichotomy. The real choice to be made is between democracy and plutocracy, between control by people and control by money. Not only is the voting control mechanism of a company completely alien to the principles of democracy, but it undermines faith in democracy. As citizens (or at least as subjects in the UK) our vote gives us the right to throw out governments which have lost our confidence. No such rights exist in companies. On the contrary, while management can show their lack of confidence in the workforce by sacking them, the workforce has no way of showing confidence, or lack of it, in their management.


If we really believe in representative democracy as a way of groups making decisions then it should be applicable in the commercial sphere as well as in the civic sphere, particularly in respect of large companies. The employees of a company should be entitled at the company’s Annual General Meeting to have a confidence vote in the board of directors, and the right to replace them if they feel they are not managing the company effectively. This would revolutionise the relationship between management and workforce: not only would management feel the need to keep the workforce much better informed about how the company was faring, but they would have to justify their salary levels to their colleagues and co-workers – perhaps a more difficult task than to a remuneration committee. In a system comparable to representative democracy in the civic sphere the workforce would have no rights to manage the company, any more than the electorate has the right to run a country, but they would have the right to hold the board of directors to account in the same way that governments can be voted out of office. This would give the workforce no rights to the profits of a company, the commercial rights of ownership would remain as before, but it would make the management accountable.

The origin of the word company is the Latin words ‘cum panem’ meaning literally ‘with bread’ and implying a group of people with whom one shares bread. If management and workforce alike considered themselves as ‘companions’ instead as employer and employee, then their working relationship might become more collaborative and less contentious. The John Lewis mutual model shows that a business can be run efficiently when employees have a say, but this way of working is not restricted to a mutual framework. By giving the workforce the right to vote at AGMs and the power to agree mergers and acquisitions, the way in which companies are managed could be transformed.

2010 is the 400th anniversary of Sidereus Nuncius, or the ‘Starry Messenger’, the work published by Galileo which as a result of his observations of the moons of Jupiter reinforced the idea that the earth went round the sun rather than vice-versa. The Catholic Church subsequently forced him not to publish further research on the subject, and when he was finally allowed to publish his view that the earth went round the sun he was forced to recant. In this anniversary year it is time to consider that the orbits of the business system should also be viewed differently, heresy though this may seem, and that in the future instead of labour revolving around capital, capital should revolve around labour.


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