The Corporation

“Today, corporations govern our lives. They determine what we eat, what we watch, what we wear, where we work, and what we do. We are inescapably surrounded by their culture, iconography, and ideology.” 

The freedom corporations enjoy has enabled them to prosper enormously, and building on that, they have begun to imprint themselves onto every corner of society and culture. 

“America’s nineteenth-century railroad barons, men lionized by some and vilified by others, were the true creators of the modern corporate era.” 

The railroads, which first connect all of America and its resources, encourage the growth of related industries and open the frontiers for settlement and development. On this great success, the barons campaign for free rein in developing the industrial future, and they are granted that freedom.

“By the end of the nineteenth century, through a bizarre legal alchemy, courts had fully transformed the corporation into a ‘person,’ with its own identity, separate from the flesh-and-blood people who were its owners and managers and empowered, like a real person, to conduct business in its own name, acquire assets, employ workers, pay taxes, and go to court to assert its rights and defend its actions.”

The personhood of a corporation enables it to exercise rights not normally available to inanimate objects. A person can easily sue in court and seek redress from government decisions. Personhood grants great powers to corporations.

Over its relatively short life, the WTO has become a significant fetter on nations’ abilities to protect their citizens from corporate misdeeds.” 

The World Trade Organization seeks to increase international commerce and, specifically, to protect the interests of corporations that do business overseas. Thus it becomes an opponent of anticorporate activists, who believe it exists merely to serve the less benign objectives of corporations.

“Corporations now govern society, perhaps more than governments themselves do; yet ironically, it is their very power, much of which they have gained through economic globalization, that makes them vulnerable. As is true of any ruling institution, the corporation now attracts mistrust, fear, and demands for accountability from an increasingly anxious public.” 

Their  great strength grants multinational corporations great influence, but power can lead to arrogance, and misuse of power—especially when it harms people—can have blowback effects, including protest movements and campaigns that demand restrictions on those same corporations. 

“Corporations now boast about social and environmental initiatives on their Web sites and in their annual reports. Entire departments and executive positions are devoted to these initiatives.” 

With the rise of pro-environment protests, corporations have begun campaigns to project an appearance of earnest good citizenship, with promises of care for workers, communities, and the environment. This is good for business, or corporations wouldn’t devote major resources to it. 

“The ‘best interests of the corporation’ principle, now a fixture in the corporate laws of most countries, addresses [Adam] Smith’s concern by compelling corporate decision makers always to act in the best interests of the corporation, and hence its owners. The law forbids any other motivation for their actions, whether to assist workers, improve the environment, or help consumers save money. They can do these things with their own money, as private citizens. As corporate officials, however, stewards of other people’s money, they have no legal authority to pursue such goals as ends in themselves—only as means to serve the corporation’s own interests, which generally means to maximize the wealth of its shareholders.” 

The purpose of the “best interests” rule is to guarantee that investors don’t suffer ruin from larcenous corporate managers. A side effect, however, is that those managers may not do anything to help other people or their communities unless such action improves the corporation’s financial position. 

“Developing drugs to deal with personality disorders in family pets seems to have a higher priority than controlling diseases that kill millions of human beings each year.” 

Pharmaceutical companies operate mainly in the wealthier nations, where demand for sophisticated medicines offers big profits. Poor people in the Third World, on the other hand, have little money to spend on health care, and their diseases generally do not occur in rich countries, so there is little profit in helping them. 

“A corporation can do good only to help itself do well, a profound limit on just how much good it can do.” 

Big companies with huge resources cannot spend any of their money on good works without proving that such expenditures add to the bottom line. Thus a large portion of the world’s accumulated wealth must not be spent on helping the poor or alleviating suffering. 

“‘If you’re a CEO,’ says [Marc] Barry, ‘do you think your shareholders really care whether you’re Billy Buttercup or not? Do you think that they really would prefer you to be a nice guy over having money in their pocket? I don’t think so. I think people want money. That’s the bottom line.’” 

Shareholders may intone platitudes about corporate social responsibility, but as investors they must protect their holdings from losses. Those investors will quickly abandon even the world’s nicest company, if it is losing money. A corporation’s potential good works are not priorities; making money is.

“The corporation’s institutional makeup, its compulsion to serve its own financial interests above everything else, requires executives to make only those decisions that create greater benefits than costs for their corporations. Executives have no authority to consider what harmful effects a decision might have on other people…” 

Corporate officers are people, like everyone else, and they may very well care about suffering and hardship and wouldn’t deliberately hurt others, but their hands are tied because it is their fiduciary duty to first protect the interests of stockholders, regardless of external effects, as long as profits are protected. Thus corporations can be run by good people and still do bad things.

“The corporation, like the psychopathic personality it resembles, is programmed to exploit others for profit. That is its only legitimate mandate.” 

As would a psychopath, a corporation thinks only of itself and its own interests, regardless of what happens to others. Psychopaths may do it for warped reasons while corporations do it because of their public mandate to seek profits, but in effect both are twisted by their formative experiences. 

“Throughout the economy today, the regulatory system often fails because of lax regulations and ineffective enforcement. Until that changes, we shall continue to suffer unnecessary disasters and harm to people, communities, and the environment. That is the price we all pay for the proclivity of corporations to profit by harming others.” 

The only way to control corporate bad behavior is through regulation and enforcement, but these have become lax, especially in recent decades when privatization and deregulation are the norm.

“The New Deal reflected Roosevelt’s conviction that the Great Depression would end only once the market’s invisible hand was replaced by the very visible, and benevolent, hand of government.” 

Before the Great Depression, liberal Western nations theorize that market freedom will generate prosperity, and while this is to a large degree true, business freedom can lead to big problems. Economist Adam Smith teaches that private individuals, working for their own accounts, inadvertently also contribute to society as a whole, as if an “invisible hand” is directing their self-interest onto a higher path. Roosevelt believes, though, that the invisible hand is insufficient, and that the visible hand of regulation is needed to make sure everyone gets a fair shake and isn’t cheated out of rightful prosperity by corporate malefactors.

“Lacking the legal license to spend shareholders’ money without a reasonable prospect of return, corporations spend money on politics for the same reason they make other investments: to advance their own and their owners’ financial self-interest.” 

Why can corporations make political contributions when they can’t simply spend money doing good? The answer is that they can do both, so long as such expenditures improve their financial results. Political contributions, though widely considered a corrupting influence, nonetheless benefit corporations’ bottom lines. Any public company that does not lobby when its competitors do so can be sued by shareholders for failing to defend the company’s interests in the political process. 

“Though privatized services might by some measures and in some contexts prove more effective than public ones, privatization is flawed as a general and long-term solution to society’s problems. Philosophically, it rests upon a distorted and incomplete conception of human nature. Self-interest and materialistic desire are parts of who we are, but not all. To base a social and economic system on these traits is dangerously fundamentalist.” 

Many services are provided for all citizens by governments on the grounds that private purveyors might favor the wealthy against the poorer customers. The theory is that governments will consider the welfare of all of their constituents, whereas private companies will consider only the bottom line. A marketplace run by companies may also tend to distort people’s values, skewing them toward consumerism and away from other values—aesthetic, community-oriented, spiritual—that are less easily monetized. 

“Advertising is now inescapable, whether on our television or computer screens, huge outdoor billboards and electrical signs, wrapped around buses and subway cars (sometimes covering even their windows), or at museums, concerts, galleries, and sporting events, which increasingly seem like little more than shills for their corporate sponsors.” 

There has been an explosion in marketing in public places, with ads popping up everywhere, from museums to sporting arenas to buses and subways. Fewer and fewer places allow people to participate in worthwhile activities without a constant barrage of interruptions that exhort them to spend their money on consumer goods. 

“With half the world’s population living in poverty and the earth spiraling toward ecological catastrophe, Karl Marx’s prophecy that capitalists would eventually hang themselves on their own excesses will come true […] unless corporations change their ways.” 

As the population increases and the world seems to get smaller, corporations have less room to behave badly, since such behavior can now affect millions and sometimes billions of people. Enough such incidents of poor or harmful behavior, and a groundswell of anticapitalist sentiment, might upend the corporate system or perhaps discard it altogether for some other economic system.

“…enforceable laws, enacted by government—regulations—must be at the heart of any effective strategy to curtail corporate harms and exploitation.” 

Corporations are liable to do almost anything, and it is only the overwhelming power of government’s enforcement arms that can curtail the worst offenses of the business obsession with profit. No other approach can truly halt it. Any nongovernmental approaches to curtailing corporate excesses—public-interest organizations, watchdog groups, humanitarian campaigns—ought to be backed by the full force of government power.

“Governments create corporations, much like Dr. Frankenstein created his monster, yet, once they exist, corporations, like the monster, threaten to overpower their creators.” 

The establishment of corporations as money-making concerns generates the resources eventually to control the very governments that give birth to them. Money talks, and with corporations that talk is louder than anything else, including any sense of obligation to the lawmakers who fostered the corporations in the first place. 

“Government regulation, unlike market-based solutions, combines authority, capacity, and democratic legitimacy to protect citizens from corporate misdeeds.” 

The marketplace may discipline corporations, but to what end? Will that kind of regulation cause businesses to fall in line behind what the people want, or merely what the biggest corporate operators demand? Democratic government, on the other hand, must respond ultimately to the citizens’ wishes. It is better, then, to have corporations under the final authority of the people than merely under the control of other corporations.

“Deregulation is really a form of dedemocratization, as it denies ‘the people,’ acting through their democratic representatives in government, the only official political vehicle they currently have to control corporate behavior.” 

When corporations are left largely to their own devices, their actions no longer fall under the purview of democratic institutions. As such, they are outside the reach of voters, who might have legitimate reasons to want to oversee those freewheeling businesses, lest they get out of hand.

“The corporation is not an independent ‘person’ with its own rights, needs, and desires that regulators must respect. It is a state-created tool for advancing social and economic policy. As such, it has only one institutional purpose: to serve the public interest…” 

Corporations are created by governments, and governments have the power to uncreate them. If corporations fail to serve the public interest, as established by a democratic government, they ought to be revised or replaced.