It’s amazing how governments don’t get it even when it hits them between the eyes. When Google chairman Eric Schmidt recently professed himself ‘perplexed’ at the row about corporate tax, and Apple’s Tim Cook followed up with the unapologetic, ‘We pay all the taxes we owe, every last dollar’, they were actually pointing out the bleeding obvious. Ministers should be careful what they wish for. Boasting about making the tax regime ‘the most competitive’ in Europe or whatever is like birds of paradise ornamenting their nest sites with shiny coloured objects to attract a mate: no surprise if a) rivals try to outdo them in gaudiness, and b) those courted choose the most attractive nest. Schmidt and Cook were doing no more than calling the government’s bluff.

Slightly less obviously, they were calling the bluff twice over. When Schmidt shrugged, ‘that’s capitalism’, he was right – up to a point. What he should have said was capitalism ‘as currently formulated’, or capitalism ‘as practiced in the Anglo-Saxon world for the last 30 years’. Its rules were not handed down on tablets of stone, to remain fixed for all time. They were man made. And to put it bluntly, if Apple, Google, Starbucks and Amazon pay the minimum amount of tax, arbitrage tax regimes and play governments off against each other, it is because under the system devised by the free-market fundamentalists who hijacked management in the 1980s, that’s what they are meant to do.

For three decades the official mantra of management has been that the business of business is business, and the only purpose of that business is to make money for shareholders. Under this dogma, minimising tax, like minimising payments to suppliers and employees, is not a management option but an obligation. To make sure there is no backsliding, managers are deliberately incentivised to act like shareholders by awards of shares and share options that are triggered when they hit their earnings targets. The whole thing is locked in place by governance codes, sanctioned by governments of all stripes, that cast shareholders as principals and managers as their agents, who have to do what they are told.

Right on cue, Schmidt duly opined that minimising tax was his fiduciary duty. Rubbish. As the formidable legal and governance scholar Lynn Stout (see my review of her book The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations and the Public here) puts it, ‘corporate law does not, and never has, required directors of public corporations to maximise shareholder value.’ For good measure, she adds, shareholders are neither owners nor principals of public corporations, and there’s no good evidence that the body of shareholders (outside the charmed ring of top executives and a few privileged funds, that is) actually gain from shareholder primacy anyway.

In other words, ‘fiduciary duty’ is a self-serving canard that has been repeated so often, and now has such a weight of vested interest behind it, that it has acquired the status of received truth. When an audience of the great and good at the London Business School’s recent Global Leadership Summit was asked to select the No 1 priority of the CEO, the largest chunk replied ‘maximising returns to shareholders’. Asked whether they would go ahead with a profitable strategic investment opportunity if it meant posting lower profit figures in the meantime, a majority of executives answered no.

However, while Schmidt et al are right to say it is up to government to draw the lines on the playing field, and cooperate with others to change its dimensions and the rules of the game if they don’t like the way it is being played, they are also being disingenuous. They know perfectly well that they have made it extremely hard for governments to do these things – directly by lobbying with all their considerable strength for exemptions and privileges but also indirectly by lulling governments into letting them grow so big that, as it now turns out, many of the largest firms have become too large to regulate, let alone to allowed to fail.

So is there no hope of movement? Let’s not give up quite yet. At a Tomorrow’s Company lecture recently, no less than the global boss of McKinsey, Dominic Barton, told an audience of the City great and good that capitalism was in crisis, that shareholder primacy – ie exactly the form of governance and management that is today’s conventional wisdom – is to blame, and that humanity has a mere 10 to 30-year window to get it right before disaster is irreversible. He is of course right. The engine of capitalism, the public limited company, has broken down. It has become a predator on rather than a creator of value, a generator of privilege and inequality for the few rather than of jobs and well-being for the many. The stock market, now a machine for taking money out of the corporate sector rather than putting it in, on both sides of the Atlantic is in steady decline.

As the audience was well aware, the City has historically played a bold and pioneering role in the development of the institutions of capitalism, from the joint-stock company in the 17th century, to the insurance market in the 18th and the stock exchange in the 19th. It is now urgently time for an equally radical initiative – to reshape the modern corporation and its management for the very different planetary conditions of the 21st century. As before, it will require the joint best and most creative efforts of government, the City and business; it also needs the business schools to plot a path out of the sterile cul de sac that they have marooned management in for the last 30 years. The task is daunting but not impossible. It’s been done before; why shouldn’t we do it again?