Holidng UK plc to account

Much ink has been spilt about the protests outside St Paul's cathedral, by people better qualified by myself. Whether the protesters are genuine, what they are demanding, and whether the church should take sides are all highly emotional questions. But maybe we should go back to a rather more fundamental question – why do people feel it necessary to protest in this way in the first place?

The answer – and I write as a former chartered accountant – is that it is essentially extremely hard to hold large plcs to account. Many plcs have turnover greater than those of entire countries. Their activities impact on millions of lives directly and indirectly. Yet who actually controls what they do, and how does anyone wronged find redress?

There are several theoretical answers to this. There is a board of directors who are elected annually by the shareholders. But unless there is a pressing issue affecting the company, it is rare for directors to face a genuine contest, and to put forward a coherent case to explain why they are the best choice for the company. There are the non-executive directors who are meant to provide independent scrutiny of the company's activities, and I am sure some of them do an excellent job. But most are directors of other companies elsewhere, and so are part of the same financial system.

Then of course the electorate of a company's directors is the shareholders. In one sense this is right and proper, because they have ventured their capital by investing in the company and this gives them the right to hold the directors and the company to account. But shareholders are not the same as stakeholders.  If, for example, a large supermarket decides to demolish the facilities in a town in order to build a superstore on them, this may make excellent financial sense which will reward the shareholders' investment. But those who no longer have a swimming pool, for example, or a venue for their children's nursery, have little right of redress. Of course it could be argued that the democratic process with all the planning laws etc. should act as a check and a balance. But even if this recourse is available, it is often perceived that the process is slow and generally not in favour of those aggrieved.

Some stakeholders try to address the issue by buying shares so they can address the annual general meeting of the company. But again these AGMs are rarely opportunities for genuine democratic debate. The shareholdings of concerned parties tend to be small, and are outweighed by institutional shareholders who are looking in the first instance for the return on their capital to be maintained.

Besides all this, it is wrong to think of each plc as a single monolithic structure. As international operations their trade spans many countries through a network of companies, and with highly sophisticated organisational structures. This is one reason why the big four auditors have a near total oligopoly of top 100 FTSE companies, because there are few other accountancy firms with the resources to audit such large and complex entities. Even then they can never provide a comprehensive assessment of the probity of a plc – merely an assurance that they have evaluated the risk of misstatement of the companies' affairs.

Now I know plcs do try and work hard to try and engage with the public, and not just for reasons of PR. But it seems to me that behind the work of a few anti-capitalist protesters there is a far larger issue. We are dealing with organisations the size of governments which are not subject to the same checks and balances as the affairs of state. Of course they have to operate within the law. They have to report on their environmental impact, and they like to stress their contributions to charity. But to someone on the outside of the company who is directly affected by their actions there seems little way to bring them to account. And until this is adequately and imaginatively tackled, then I am sure we will see increasing numbers of protests and demonstrations, informed or otherwise.