Centre for Global Studies and Democracy
We live in a world in which corporations dominate more and more of our lives. Their drive for growth and profit affect the behaviours of their employees, and their advertising shapes our minds. They even own the majority of the media because through it they can purchase influence over politicians and over how we as citizens think and behave.
The largest corporations now have more resources at their disposal than many nations. Perhaps we should think of them as the empires of the 21 st century.
However, they also go about achieving these things in ways that citizens may not always approve of. In doing so, they force onto our societies a form of artificial intelligence. Artificial because the people in those organisations are not free agents acting as they would in their private homes, but instead employees. Servants of corporate interests and thus obliged to behave in ways that benefit the corporation in the ways in which profit and benefit are measured.
And the measure today is profit for the corporation, and externalisation of as many costs as possible. One simple example is the cost of pollution created by fossil fuel based power stations. That pollution has a negative effect on the wider community and planet, however that damage does not incur a penalty for the operator. Because of this, it acts as a subsidy for the company, while impeding the development of cleaner technologies.
Corporations though are also very valuable to us all and are responsible for producing the products and services that we are all dependent on. It would be incorrect to wish to do away with them. The question is whether we can civilise them somewhat to ensure that their behaviours better align with the interests of the wider community. Or failing that, whether we can come up with superior alternatives.
Law Professor Joel Bakan has written a book titled The Corporation: The Pathological Pursuit of Profit and Power in which he details the history of the corporation and the various negative consequences that arise from corporations following their legal charter of profit maximisation.
Bakan writes about the need that corporations have to profit maximise as being a logic that overrides the thinking and feelings that natural persons might have. He explains this with the example of Henry Ford:
“Ford believed that his Ford Motor Company could be more than just a profit machine. He paid his workers substantially more than the going rate at the time and rewarded customers with yearly price cuts on his Model T cars (their original price of more than $900 was slashed to $440 by 1916). ‘I do not believe that we should make such awful profits on our cars,’ he is reported to have said. ‘A reasonable profit is right, but not too much.'”
For such thinking, Ford was successfully sued by some of his investors in what became known as ‘the best interests of the corporation’ principle.
“Profits belong to shareholders, they argued, and Ford had no right to give their money away to customers, however good his intentions. The judge agreed. He reinstated the dividend and rebuked Ford—who had said in open court that ‘business is a service, not a bonanza’ and that corporations should be run only ‘incidentally to make money’—for forgetting that ‘a business corporation is organized and carried on primarily for the profit of the stockholders’.”
The list of corporate misbehaviours is enormous. From preventable oil spills to banking scandals, the fines imposed on corporations are clearly not sending a strong enough signal to alter behaviours.
Perhaps we need a new way to calculate profit and make corporations responsible for maximising those numbers? Or we need to find a way to prevent the externalisation of costs. Both of these measures add burden and require additional calculations. Both require greater consultation with affected parties and ways of measuring and quantifying the impact that one action or another is likely to have. The ideal solution would be a simple one and your thoughts around this are welcome.
Failing the ability to come up with a systemic solution, Bakan reminds us towards the end of his book that corporations are created in law and can be extinguished in law. He writes:
“Charter revocation laws, as these provisions are known, have always been a part of corporate law. They suggest a government can destroy a corporation as easily as it can create one, and symbolize the obvious, though easily forgotten, idea that in a democracy corporations exist at the pleasure of the people and under their sovereignty. As New York Attorney General Eliot Spitzer remarked in reference to these laws, if “a corporation is convicted of repeated felonies that harm or endanger the lives of human beings or destroy our environment, the corporation should be put to death, its corporate existence ended, and its assets taken and sold at public auction….
“The people mistakenly assume that we have to try to control these giant corporate repeat offenders one toxic spill at a time, one layoff at a time, one human rights violation at a time. But the law has always allowed the attorney general to go to court to simply dissolve a corporation for wrongdoing and sell its assets to others who will operate in the public interest.” (Pages 30-31 of The Corporation: The Pathological Pursuit of Profit and Power)
Yet another solution might be to democratise the corporation so that its employees have a greater say in its activities.
Alternatively it might be to democratise the views of shareholders such that each has the same voice irrespective of the number of shares that they own. Or at least even the playing field somewhat.
Finally, there might be other ways in which people can assemble to produce complex products and services. The worker owned cooperative model has demonstrated its success most notably Spain’s Mondragon Corporation.
Cooperatives exist around the world and are actively competing in the marketplace against traditional corporations. If the fines and disincentives placed on corporations for misbehaviour were sufficiently large, and cooperatives proved to behave in better ways, then over time we may see them growing in number.
The ideal solution might even be where no regulations are necessary because organisations are all going about maximising societal wellbeing. And the biggest corporations would be the most socially responsible. Your ideas regarding how to achieve this are welcome!
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