Nobel Peace laureate and anti-poverty campaigner Professor Muhammad Yunus today called for a fundamental rethink of company law in order to help the world's poor.
The Bangladeshi banker and former economics professor wants to see a relaxation of the obligation on public company directors to maximise profits for shareholders. This would foster the creation of 'social businesses' which can pursue anti-poverty objectives such as providing housing and healthcare, Yunus told an event titled 'Lawyers Against Poverty'.
Yunus (pictured) won the Nobel prize for his pioneering work as founder of the bank Grameen, using microfinance to provide loans to rural people too poor to qualify for a bank loan. In the social business sphere, he established a joint venture with French food company Danone to provide nutritionally enhanced yoghurt to poor Bangladeshi children. This type of business allows a company to recoup money invested but not take any dividend beyond that point.
'Corporate law in many countries requires companies to maximise profit or shareholders can sue the company,' he said. 'In that system how can you create a social business? We agreed a 50/50 joint venture with Danone in which they would pay €500,000, but their lawyers advised them that you cannot invest money in a company that will not give you a dividend.
'Danone had to write to shareholders to get approval for them to contribute part of the dividend money. Ninety-eight percent agreed and Danone raised €35m which they put into a social business fund.'
Yunus was scathing about the world's banking sector, which he dismissed as wholly dysfunctional as it will not lend to 80% of the global population.
Loan-sharking, which is how he described payday and short-term loan companies charging exorbitant interest, is now a 'global phenomenon' in consequence, he noted. He also expressed shock at the poverty he has experienced in advanced economies, including the UK. 'In Glasgow, there are families in a fourth generation of unemployment. I had no idea that existed in Europe,' he said. Yunus is chancellor of Glasgow Caledonian University.
Grameen, 'the only lawyer-free bank in the world', lends small sums up to $1,500 to poor people based entirely on trust, he explained. Yunus said almost 100% of those debts are honoured.
When creating his banking concept, Yunus said he looked at what conventional providers did and then decided to do the opposite. Asked what lawyers could do to alleviate poverty and mass unemployment, especially among the young, he urged IBA delegates to think in the same way.
'Lawyers create the mould and the mould creates society,' he observed. 'Law is always working for the powerful because poor people cannot access the existing system. As in banking, lawyers need to reinvent that system and this is a forum for creating an alternative that works for the poor as much as it works for everyone else.'
Concluding, he noted provocatively: 'You introduced me here as banker to the poor. How do you introduce the other bankers?'
The IBA plans to release a video of the 'Lawyers Against Poverty' session on its International pro bono website and to pursue the ideas raised.