wheredanton said:
That's true. But I'd bet more people understand government than the ins and outs of corporations law.
They don't need to. They just need to know what company makes the products best/closest to their needs. There's a concept in engineering that I believe is applicable here, known as "black boxes". The average car owner doesn't need to know how a car works, just that it doesn't break down and goes as fast as they need it to go. Under the bonnet is a black box. The mechanic doesn't need to know how the electronics of a car work, just that they do. If there's a problem that's not mechanical in nature, then the onboard computer, which is a black box, can be sent back to the manufacturer for repair or replacement.
If company A makes cheaper biscuits of the same quality as company B, it doesn't matter to me that this is because company A has an efficient management structure, just that they make cheaper biscuits.
On the assumption that there is perfect competition in the market and that if one firm increases its price or removes a core ingredient consumers will 'vote' with their dollars by placing their dollar votes somewhere else. There isn't perfect competition, the market is a very good but imperfect when it comes to corporate accountability, as discovered 200 odd years ago in the US. They invented antitrist laws. We have Competition law to ensure 'competition'.
Monopolies that don't come about from government intervention are exceedingly rare, and if too much profiteering is occurring there's nothing stopping a large corporation from another sector entering to make it competitive (e.g. when Virgin Blue came into the Australian market of its own accord, preventing a Qantas monopoly following the demise of Ansett).
You have scary amount of faith in corporate accountability.
Or very little faith in government.
Corporate accountability can often takes years; corporations are designed in a way so as to avoid accountability or at least spread it around; Share price isn't everything; you assume that everyone has the same interests, certain stakeholders (ie shareholders, directors) would have an interest in covering up or minimising the impact of toxic chemicals in childrens toys, other stakeholders (parents) have other interests. What if a family with a large proportion of their earnings invested in poison Toys Limited? Are they going to put their money elsewhere forcing their dividend and share price down?
Strawman. Consumers take their money out of toxic toys inc because dead babies, while hilarious, tend to smell. Shareholders see this lack of consumer confidence and remove their money from the company, causing the share price to spiral down.
Secondly it's a lot cheaper to introduce proper quality control measures than to silence word of mouth or bribe the coroner to lie about the cause of death.
Is it fair that wealthier people have a greater ability to buy shares in these companies (mr poor ownes 20 shares in poison toy limited, Director of company (mr rich) ownes 40 000 shares (say a majority)). Mr poor has pretty much zero influence in governance of the corporation with his 20 shares. Since he is poor he may have no choice but to purchase produce from a dodgy corporation because of its low price point.
If this dodgy corporation didn't exist he wouldn't be able to purchase produce from
anywhere.