Fixing the Rotten Corporate
States grant corporate charters;
they should start taking some of them away
by John Cavanagh and Jerry
The Nation magazine, December
The global corporations of today stand
as the dominant institutional force at the center of human activity.
Through their market power, billions of dollars in campaign contributions,
public relations and advertising, and the sheer scale of their
operations, corporations create the visions and institutions we
live by and exert enormous influence over most of the political
processes that rule us.
It is certainly fair to say, as David
Korten and others have, that "global corporate rule"
has _ effectively been achieved. This leaves society in the daunting
position of serving a hierarchy of primary corporate values- expanding
profit, hypergrowth, environmental exploitation, self-interest,
disconnection from communities and workers-that are diametrically
opposed to the principles of equity, democracy, transparency and
the common good, the core values that can bring social and environmental
sustainability to the planet. It is a basic task of any democracy
and justice movement to confront the powers of this new global
royalty, just as previous generations set out to eliminate the
control of monarchies.
The first step in the process is to recognize
the systemic nature of the problem. We are used to hearing powers
that be-when faced with an Enron or WorldCom scandal-explain them
away as simple problems of greedy individuals; the proverbial
few rotten apples in the barrel; the exception, not the rule.
In reality, the nature of the corporate structure, and the rules
by which corporations routinely operate, make socially and environmentally
beneficial outcomes the exception, not the norm.
Public corporations today-and their top
executives-live or die based on certain imperatives, notably whether
they are able to continuously attract investment capital by demonstrating
increasing short-term profits, exponential growth, expanded territories
and markets, and successful control of the domestic and international
regulatory, investment and political climates. Questions of community
welfare, worker rights and environmental impacts are nowhere in
the equation. Given such a setup, Enron's performance, like most
other corporate behavior-especially among publicly held companies-was
entirely predictable, indeed, almost inevitable. Enron executives
were only doing what the system suggested they had to do. Corporations
that can successfully defy these rules are the rare good apples
in an otherwise rotting barrel.
That such structural imperatives should
dominate the global economic system and the lives of billions
of people is clearly a central problem of our time; any citizens'
agenda for achieving sustainability must be rooted in plans for
fundamental structural change and the reversal of corporate rule.
New Citizen Movement
Around the world, the spectrum of anticorporate
activity is broad, with strategies ranging from reformist to transformational
to abolitionist. Reformist strategies include attempts to force
increased corporate responsibility, accountability and transparency,
and to strengthen the role of social and environmental values
in corporate decision-making. Such strategies implicitly accept
global corporations as here to stay in their current form and
as having the potential to function as responsible citizens.
A growing number of activists reject the
idea that corporations have any intrinsic right to exist. They
do not believe that corporations should be considered permanent
fixtures in our society; if the structural rules that govern them
cannot be fixed, then we should seek alternative modes for organizing
economic activity, ones that suit sustainability. These activists
seek the death penalty for corporations with a habitual record
of criminal activity. They also demand comprehensive rethinking
and redesign of the laws and rules by which corporations operate,
to eliminate those characteristics that make publicly traded,
limited-liability corporations a threat to the well-being of people
Possibly the most visible and growing
arm of this anticorporate movement is the one that focuses on
the corporate charter, the basic instrument that defines and creates
corporations in the United States. Corporations in this country
gain their existence via charters granted through state governments.
As the landmark research of Richard Grossman and Frank Adams of
the Program on Corporations, Law and Democracy (POCLAD) has revealed,
most of these charters originally included stringent rules requiring
a high degree of corporate accountability and service to the community.
Over the centuries corporations have managed to water down charter
rules. And even when they violate the few remaining restrictions,
their permanent existence is rarely threatened. Governing bodies
today, beholden to corporations for campaign finance support,
are loath to enforce any sanctions except in cases of extreme
political embarrassment, such as has occurred with Enron, Arthur
Andersen and a few others. Even then, effective sanctions may
be few and small.
At the same time, corporations have obtained
many rights similar to those granted human beings. American courts
have ruled that corporations are "fictitious persons,"
with the right to buy and sell property, to sue in court for injuries
and to express "corporate speech." But they have not
been required, for the most part, to abide by normal human responsibilities.
They are strongly protected by limited liability rules, so shareholder-owners
of a corporation cannot be prosecuted for acts of the institution.
Nor, in any meaningful sense, is the corporation itself vulnerable
to prosecution. Corporations are sometimes fined for their acts
or ordered to alter their practices, but the life of the corporation,
its virtual existence, is very rarely threatened, even for great
crimes that, if carried out by people in many states of the United
States, might invoke the death penalty.
Of course, it is a key problem that these
"fictitious persons" we call corporations do not actually
embody human characteristics such as altruism or, on the other
hand, shame-leaving the corporate entity literally incapable of
the social, environmental or community ideals that we keep hoping
it will pursue. Its entire structural design is to advance only
its own self-interest. While executives of corporations might
occasionally wish to behave in a community-friendly manner, if
profits are sacrificed, the executive might find that he or she
is thrown off the wheel and replaced with someone who understands
State charter changes could alter this.
State corporate charter rules could set any conditions that popular
will might dictate- from who should be on the boards, to the values
corporations must operate by, to whether they may buy up other
enterprises, move to other cities and countries, or anything else
that affects the public interest. In Pennsylvania, for example,
citizen groups have initiated an amendment to the state's corporation
code that calls for, among other things, corporate charters to
be limited to thirty years. A charter could be renewed, but only
after successful completion of a review process during which it
would have to prove it is operating in the public interest. In
California a coalition of citizen organizations (including the
National Organization for Women, the Rainforest Action Network
and the National Lawyers Guild) petitioned the attorney general
to revoke Unocal's charter. Citing California's own corporate
code, which authorizes revocation procedures, the coalition offered
evidence documenting Unocal's responsibility for environmental
devastation, exploitation of workers and gross violation of human
rights. While this action has not yet succeeded, others are under
Revoking a charter-the corporate equivalent
of a death sentence-begins to put some teeth into the idea of
accountability. Eliot Spitzer, Attorney General of New York, declared
in 1998: "When 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."
Although Spitzer has not won a death sentence against a habitual
corporate criminal, he has taken up battle with several giants,
including General Electric.
Even if corporations were to be more tightly
supervised, that would not be enough to change society. Such actions
must be supported by parallel efforts to restore the integrity
of democratic institutions and reclaim the resources that corporations
have co-opted. But tough charters and tougher enforcement would
be a start.
Names like Exxon, Ford, Honda, McDonald's,
Microsoft and Citigroup are now so ubiquitous, and such an intimate
part of everyday life, that it is difficult for many people in
the industrial world to imagine how we might live without them.
But there are hundreds of other forms of economic and business
activity. And by whose logic do we need transnational corporations
to run hamburger stands, produce clothing, grow food, publish
books or provide the things that contribute to a satisfying existence?
Transition to more economically democratic
forms becomes easier to visualize once we recognize that many
human-scale, locally owned enterprises already exist. They include
virtually all of the millions of local independent businesses
now organized as sole proprietorships, partnerships, collectives
and cooperatives of all types, and worker-owned businesses. They
include family-owned businesses, small farms, artisanal producers,
independent retail stores, small factories, farmers' markets,
community banks and so on. In fact, though these kinds of businesses
get very little government support, they are the primary source
of livelihood for most of the world's people. And in many parts
of the world- notably among agricultural and indigenous societies-they
are built into the culture and effectively serve the common interest
rather than the favored few. In the context of industrial society,
the rechartering movement and the parallel efforts to eliminate
"corporate personhood" and exemptions from investor
liabilities are important steps in a similar direction, seeking
to alleviate the dominance of institutions whose structural imperatives
make it nearly impossible for them to place public interest over
John Cavanagh, director of the Institute
for Policy Studies, and Jerry Mander, president of the International
Forum on Globalization, are authors, along with seventeen others
from around the worid, of Alternatives to Economic Globalization:
A Better World Is Possible (BerrettKoehler), from which this article
Control of American Democracy