Finding the ugly truth behind ‘limited liability’
THE Chinese Communist Party has assured China’s citizens that the investigation into the deadly explosions in Tianjin will be thorough and transparent and that there will be no cover-up.
No doubt the party will be hoping the anger evident in the thousands of messages on WeChat within the first few days will have dissipated by the time the results of the investigation are known. As we know from the Marikana inquiry, these sorts of investigations are so politically sensitive their outcome is rarely satisfactory.
But whatever happens, it is unlikely that one critical piece of information will be revealed: exactly who is behind Ruihai International Logistics, the company that owns the storage facility that contained the highly explosive materials. Company executives have been arrested, but so far there has been no mention of owners.
Finding out who owns what in China was always difficult. It became considerably more difficult in 2012 after the New York Times and Bloomberg carried deeply embarrassing stories about the huge wealth that had been accumulated by the families of two prominent politicians, former premier Wen Jiabao and current president Xi Jinping.
The two registered owners of the building are believed to be fronting for the real owner, rumoured to be the son of the former head of public security at Tianjin Port. The family connection might explain why a warehouse so close to a residential area was allowed to store such dangerous material.
Of course, finding out who owns large companies has become an almost impossible task anywhere in the world.
It may be that the citizens of Tianjin will never find out who is responsible for the catastrophic damage.
But would that be much different from the outcome of trawling through BP’s shareholder register to determine who should be held responsible for the deaths and damage wreaked on the Gulf of Mexico?
A cursory trawl indicated there were a lot of British pensioners among the guilty shareholders. They got off reasonably lightly, the company has shrunk and is vulnerable to takeover. The BP share price has dropped to about a third of its value before the 2010 disaster. Former CEO Tony Hayward was axed. But no one went to jail.
The reality of 21st-century shareholder capitalism is that no one is really held to be the responsible owner, the person held to account when things go wrong. We are trapped in a concept of limited liability taken to such extremes it borders on anarchy. In theory, the shareholders are the owners, but most are anonymous. Check out the shareholder register of any listed company and you will find layers and layers of nominee shareholders. This is largely due to the mindnumbing complexity of the investment world. It means there’s rarely line of sight between the actual owner of the shares and the investee
In theory, the shareholders are the owners, but most are anonymous
company. No line of sight, no responsibility.
This may be efficient from the perspective of the people who manage the funds that are poured into listed companies, but it has huge drawbacks, chief of which is the absence of real accountability. Corporate governance experts would have us believe all shareholders are accountable, but given the anonymity, this is tantamount to none being accountable.
So while there’s a temptation to berate an arcane Chinese system that might allow the owners of a storage facility to avoid being held publicly accountable, we should realise that the very sophisticated Western system of ownership has created the same sort of structure.