In the wake of a phone-hacking scandal, a parliamentary committee in the U.K. has decided that media baron Rupert Murdoch is “not a fit person to exercise the stewardship of a major international company.”
This is not exactly good news for Murdoch, but nor is it catastrophic. The parliamentary committee that chastised him has no real power, and certainly not the power to act on its assertion that Murdoch is unfit to run a company.
The power to make that determination—and hence in principle to hobble the U.K. branch of Murdoch’s media empire—is regulatory agency “Ofcom,” or Office of Communications. According to the Washington Post, “The independent agency has the power to take a TV license away from anyone deemed ‘unfit’ to hold one.”
But assertions by a parliamentary committee that a corporate leader is unfit should give us all pause—not to contemplate the fate of the accused, but to contemplate the larger question of governments telling us who is fit to be in business. I have no particular sympathy for Rupert Murdoch, but I also think it’s a very good thing that the committee wagging its collective finger at him has no teeth.
One of the virtues of free markets is that governments generally don’t play a role in deciding who gets to be an entrepreneur or who gets to run a corporation. A corporation is a piece of private property, albeit a rather complex and unusual kind of private property. In small organizations, you get to be chief by starting the business yourself; in larger ones, you get hired by the shareholders or (as in the case of cooperatives) by the employees or customers who own the thing.
Contrast this to a communist or feudal system under which an aspiring entrepreneur has to grovel at the feet of some bureaucrat or feudal lord just to be granted the privilege of starting a business and supplying his or her fellow citizens with the products they want and need. Under such a system, you only get to be head of a large, productive organization if government officials give you the nod. Now of course, some people won’t see that as such a bad thing. If you see a corporation as primarily a public institution—one whose goals ought to be public ones—then perhaps you also think its leaders ought to be chosen by (or at least subject to veto by) representatives of the public.
But consider: the committee mentioned above was composed of members of two different political parties. The committee’s report was approved by a 6 to 4 vote, divided along party lines. So before you give a hearty cheer for this instance of government censure, remember that under a different system such censure might have teeth, and such a committee could easily be dominated by a party other than the one you prefer.