A fascinating proposal from the Relationships Foundation in Britain which would, if implemented, give corporate governance a radical overhaul in a way that we have never seen before.

The foundation's paper The Relational Company: Exploring a New Business Vehicle says that the problem with companies now is that shareholders have the rights of ownership but none of the responsibilities. Similarly, directors share some of the reward but don't carry much risk.

Under its model, the company's owners, the shareholders, would accept responsibility as well as risk. Shareholders would be located in the region where the company operates and their number would be limited. In an insolvency, shareholders would be obliged to make a limited contribution to the creditors' losses. Shareholders would be required to attend a minimum number of meetings, and to encourage long-term involvement, shares could be only be bought and sold at a defined period. Furthermore, the highest paid employees, including directors, could not be paid remuneration greater than 10 times that paid to the lowest paid employee in the company. Any rights to shares or the grant of share options would be given to all employees.

Are these notions too idealistic and restrictive? The writers argue that such companies could operate under a significantly reduced legal and regulatory burden. Why? Because their accountability would not rely primarily on laws and enforcement.