Arcadia and the failings of modern capitalism
7 December 2020
I have carefully read Larry Elliott’s piece (The inevitable collapse of Arcadia is a cautionary tale for British capitalism, 2 December). He cites the overwhelming significance of “short-termism” and other abuses as part and parcel of the general British problem. Arcadia is cited as a particular example of systematic abuse of corporate stewardship. But what is strikingly absent is any mention of the fundamental underlying cause of this malaise – executive-dominated unitary boards in Anglo American jurisdictions – and the fundamental failures in corporate governance they encourage.
As with so much else, we seem to be unaware of how corporations are governed in other jurisdictions that yield far superior results for investors and other stakeholders. Have a look at how Germany runs its businesses. Independent supervisory boards are mandatory. The independent supervising directors are there to oversee what the executive directors are up to. The scandal of Arcadia could not have arisen with that level of corporate governance. Over many decades their form of corporate governance has generated a positive stakeholder-oriented culture. We need to understand how it works if abuses in Britain are to be prevented.
The Centre for International Economics