Who is “accountable” to whom?

Accountability is very important. It is a mistake to think that people and organizations are just that responsible When there is some kind of government (a group of people with guns, so we’re clear) they look over their shoulders. I hear the “accountability” objection to school choice regularly, whether the selection takes the form of vouchers that fund students rather than systems or charter schools playing by their own rules.

However, free markets do indeed have multiple levels of accountability. First, the company is accountable to its owners. The employees of the company are the fiduciaries of the shareholders who have entrusted the workers with the fruits of their labor because they expect the well-cultivated and well-tended fruits of those workers to bear fruit. Perhaps they have completely miserable motives and only seek to indulge their lusts. Maybe they want to retire comfortably. Perhaps they want to use the income to fund a hospital or university. Their reasons are their own, and the people who run and work in companies are already legally responsible to them.

The company is also accountable to its customers. If a company stops delivering value to its customers, the customers stop coming. Under Albert Hirschmann’s work, clients exercise Exit Regularly, remarkably, they don’t have to justify themselves to anyone. Maybe they want to boycott Starbucks because of its owners’ stance on same-sex relationships. Maybe they want to boycott Chick-fil-A because of its owners’ ambivalent stance on same-sex relationships. Maybe they don’t go to Starbucks or Chick-fil-A because they don’t like coffee or chicken. They vote with their dollars for or against venti frappuccinos and spicy chicken sandwiches, and they own the producers. responsible for their performance by rewarding them with profits or punishing them with losses.

Consider the periodic food scandals. I can think of one fast food chain that was ground zero for e.g. coli when I was in sixth grade. I’ve never been there, and I’ve associated the brand name with stomach ailments every time I’ve seen it advertised. Some people might look at the fact that Botulism Burger is still around and claim that the company suffered no consequences for its actions. But the company has already suffered. Botulism Burger would probably have expanded more widely and quickly had it not upset its customers. There may still be a Botulism burger in every city. Without the scandal, there might have been one in every neighborhood.

Every dollar someone earns gives them a vote on how the means of production are used. I have seen it objected that this privileges the rich, but think of places where the political class despises them. Walmart. dollar general. McDonald’s. They do not have locations on Rodeo Drive. These corporations succeed not because they have pleased the elites, but because the bourgeoisie and the bourgeoisie vote for them, regularly if not always enthusiastically, for the fruits of their labour. I think their business votes should count much more than the observers’ political votes. The observers and elites may mean well, but they simply don’t know the specific circumstances of time and place that customers at Walmart, Dollar General, and McDonald’s base their decisions on. I don’t visit these places nearly as often as I once did, but that’s because, as a steady college professor, I make a solid upper-middle-class income which affords me much more scope. If we care about the plight of the poor, we will make them richer, expanding rather than restricting their choices.

When people talk about “corporate accountability,” they usually mean “accountability to controllers who have no serious interest in what they do and who bear no meaningful personal cost if their calls for accountability are misplaced.” Consider wages. To whom is the company “ultimately responsible”? The company is accountable to its shareholders, creditors, employees and customers. It is not meaningfully “accountable” to anyone who looks at me and says, “I disagree.”

People hold companies accountable by accepting or rejecting what they offer. Don’t like wages at Walmart? work elsewhere. Costco and Buc-ee both pay well. Don’t like the food at Olive Garden? Don’t eat there. Don’t you think Amazon is a good stock to buy? Don’t buy it. Worried that Amazon is a bad credit risk? Don’t lend them. very easy.

Many critiques of bourgeois society implicitly assume that profit-obsessed leave money on the table to indulge their “tastes for discernment”. Compare higher-paying Costco and lower-paid Walmart, but think specifically about what’s implicit in the arguments that Walmart (or Sam’s Club, specifically) should be like Costco. Let’s say Costco really offers a better business model. In this case, I can’t imagine a profit-obsessed company like Wal-Mart failing to take notice and failing to imitate everything Costco does. Otherwise, we should probably think that it is possible that the people who run Walmart know more about what works for their company than a professional daydreams about what the world should look like and taps into a laptop somewhere.

The fact that it is not as easy as we think for someone to simply switch from one job (at Walmart or Sam’s Club) and go to Costco or somewhere else for higher wages should lead us to two conclusions. Either 1) there is something we don’t account for when we only look at wages, or 2) there are some hidden transaction costs that prevent companies from hiring the best talent. Let’s say Costco’s strategy scales and so does Walmart’s, and Walmart systematically underpays workers. In this case, we should see them raid Wal-Mart for talent and open stores in the shadow of Wal-Mart. If there are regulatory barriers preventing it, then it is the regulatory barriers rather than the big business model that is to blame.

It is a mistake to think that companies need to be more accountable. They are already to its owners, creditors, customers and employees. Suppose they make systematic and predictable errors and do not serve any of these target groups as best they could, given the limitations they face. In this case, there are practically unlimited piles of money that critics and dreamers can pick up, if only they stop criticizing and come up with a plan of action.

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