I don't drink Coca Cola, or eat McDonalds, and all that pinko-liberal leftie hippie longhair tree-hugging stuff. But it's not just because I think it's cool to strut around in tie-dye, and have nothing else to protest about. This post is an attempt to explain what the Corporation is, and why I think it is a Bad Thing.
The Corporation was actually illegal in England between 1720 and 1825 - the Bubble Act made them illegal, because they were just horribly prone to abuse. However, the Act was repealed in 1825, because the Corporation had become necessary during the Industrial Revolution. When people started on a business venture, they normally formed partnerships: two or three people put their money together to finance the new venture. However, it just wasn't possible for these people to raise the sort of capital needed to lay railway track right across a continent, or build huge factories. This is where the Corporation comes in. The idea of a corporation is that people buy shares: an effective way of getting a large number of people to put in their money. In this way, you can raise a much larger amount of money, and finance much bigger ventures. However, the new structure has some clear flaws. On the one hand, you have the managers of the company, who run it, but who have not actually put any money into it. On the other hand, you have the investors, who have put the money in, but do not take part in actually running the company. An important point is to note that the investors have limited liability: this means that they can't lose more than they put in - nobody will sell their house to get the company out of any debt it lands itself in. So, we have two parties: the managers who don't care because it's not their money, and the investors, who don't care because they are not liable if things do go down the creek.
Another problem comes in when mergers and acquisitions are allowed (they were not, at first - they're a terrible idea, and used to be illegal). Now, instead of having lots of smallish corporations, which can be watched and governed, you have an enormous monolithic corporation with hundreds of thousands of people involved. There is no way you can mobilise so many shareholders to try to influence the management of the company. With only twenty shareholders, you can threaten to cut off the money, and force the management to make decisions. With the company sizes we now have, this is just unfeasible - corporations buy each other out, and get larger and larger. To illustrate: there were 1800 corporations in America in 1898. Six years later, in 1904, they had been consolidated into 157. "In less than a decade, the U.S. economy had been transformed from one in which individually owned enterprises competed freely among themselves into one dominated by a relatively few huge corporations, each owned by many shareholders" (Joel Bakan).
The next step happened towards the end of the nineteenth century: the Corporation was reclassified as a legal entity. This means that, to all intents and purposes, according to the law, the Corporation was an actual person. This person could own property, sue people, be sued, and so on. To illustrate - the Supreme Court in America invoked the Fourteenth Amendment in 1886, to say that the Corporation had rights to "due process of law" and "equal protection of the laws". The Fourteenth Amendment was originally entrenched in the Constititution to protect newly freed slaves...
So, we have a legal entity that exists in perpetuity (Disney Corporation is still Disney Corporation even though none of the original employees or shareholders are still alive - the Corporation goes on, people come and go. It owns property, both material and intellectual, and it will continue to own it, long beyond a normal lifetime), which is made up of a bunch of people who really aren't responsible in any sense for what the corporation does.
This is where we get a bit philosophical. You may have read "The Selfish Gene" by Richard Dawkins. His basic argument is animals are driven by their DNA, and everything they do is essentially aimed at passing their genes on. In this way, an animal will appear to be acting irrationally when it starves itself to provide food for its offspring, or when it kills itself to defend them. However, these actions are perfectly rational when you consider that the goal is not self-preservation, but gene-preservation.
We have seen that a Corporation is an entity. I want to argue that it is more similar to DNA-based entities (such as humans) than is at first obvious. It clearly has no DNA driving it to reproduce - that is not what Corporations do. The "DNA" of a Corporation is money: its sole purpose is to make more money. That is what it is for, and every action it does will have the ultimate goal of making more money.
This is going to happen regardless of whether people want it to or not. I'm not saying that people are going to purposefully commit crimes to make money for the corporation. It will just happen. Think about it: if somebody in division A says to himself: "I had better not implement that policy, as it is ethically wrong, even though we'll lose money", his division will not do as well as it could have. At the end of the month, somewhere up the ladder, somebody is going to review the results, and notice that division A has not been doing as well as division B (with an unscrupulous manager). Just because of the numbers, division A will get dropped, and division B will get moved up. It's just a matter of economics. Corporations that sacrifice profits for principles will not do as well as other corporations.
Before I get accused of being overly negative: this Do-Everything-For-Profit thing is actually entrenched in the laws of America. In 1916, Henry Ford decided to cancel the dividend, and funnel the money back to the customers, and the product - he wanted to produce a better car, for a cheaper price. The Dodge brothers (two partners) took him to court, and won. Dodge vs Ford stands as precedent to this day: managers and directors have a legal duty to put shareholder's interests above all others, and no legal authority to serve any other interests. This is the "Best Interests of the Corporation" principle: everything should be done for the best interests of the corporation, and nothing else.
An even scarier legal case: on Christmas morning, in 1993, Patricia Andersen's car was rammed by a drunken driver, and exploded, severely burning her and her children. The findings later were that General Motors had intentionally moved the fuel tank closer to the axle, to cut costs. They realised that this could cause accidents, but they did a little sum: they estimated that there would be about 500 fatalities as a result of this change, and that each fatality would cost them about $200,000 in legal damages. They divided this by the 41 million GM vehicles in operation, and discovered that it would cost them $2.40 per car. However, the cost of ensuring that the fuel tank wasn't a risk was $8.59 per car. Therefore, in the full knowledge that deaths would result, they moved the fuel tank, because it was cost effective.
These sorts of actions are the direct results of an entity whose sole purpose is to make money. And since these entities are now so powerful that they control the government (Corporations are the only things rich enough to fund political campaigns), there is no way of getting rid of them.
Possibly more on this at another time.
Comments
Post new comment