Many business dealings have recently been given personal faces.
The judgment against the James Hardie board over a statement declaring its provisions for victims of asbestos to be fully funded focused attention on the then chair of the Board, Meredith Hellicar. The illness and death of Richard Pratt focused attention on his collusion in price fixing and on the case brought against him by Graeme Samuel of the ACCC. The BrisConnections circus has focused on the faces of Nick Bolton and Trevor Rowe.
The focus on individuals risks losing sight of the social implications of the way business is conducted. It is easy to lose sight of the larger issues in seeking to blame or praise the individuals whom we identify with the companies. Worse, the personal focus makes it easy to assume that such things are an excusable or inevitable part of doing business.
In fact each of these cases is an object lesson in why larger economic principles, until recently regarded by their devotees as self-evident, are untenable. In particular, they show that it is naïve to place one's trust in the efficiency of the markets and to decry regulation.
They also show that it is absurd and wicked to limit the responsibility of company boards to the interests of share-holders. These conclusions should be self-evident, but the response to the recent cases suggests that the conventional and self-serving wisdom waits for its day to return.
There is nothing more efficient for a business, nothing more profitable in the short term for shareholders, than to have a monopoly or to collude with one's competitors in fixing prices. It is not surprising that in Samuel's estimation, a good deal more goes on that can be brought to light.
The business version of trustworthiness — the handshake that is one's bond — makes collusion virtually indetectable. It successfully channels resources from the community to businesses and undermines the trust that the community can place in business.
Although the tributes to Pratt as friend and philanthropist are properly generous and heartfelt, it is a pity that his friends at times have defended his reputation by vilifying Samuel or minimising the seriousness of collusion. The tacit acceptance of price fixing suggests why markets need regulation and why regulation will be opposed.
The focus on Meredith Hellicar in the James Hardie affair has also lost sight of the larger issues involved. The central issue has been seen