“The Corporation”: Discover a Key Root Cause of our Current Woes

October 16, 2007

After having viewed the film “The Corporation” when it was in the theaters, I recently decided to read the book of the same name. Although much of the information was similar, I found the tone of the book different than the film (or my memory of it, in any case) and I felt profoundly moved by it.

In brief, the cogent and powerful book summarizes the history of the legal creation of corporations, the nature of their intent, and the subsequent role that they play in current society. Since their one and only legal goal is to generate profit for their shareholders, they cannot legally make decisions to protect the common good, or take care of others/the environment, unless it might some how be financially beneficial to them. In fact, they are compelled to “externalize” their costs as much as possible (meaning, to behave in ways that would cause the surrounding communities, government or environment to absorb/pay for collatoral damage. To do otherwise would be illegal.

Soak on that for a minute. To do otherwise would be illegal. We have created a legal structure that is compelled to do things that many of us abhor.

In particular, I greatly appreciated the author’s distinction between the goal and outcomes of the corporate structures and the intentions of those men and women who direct them.

It never ceases to amaze me how we as a people (myself included) can demonize the directors of a company (say, in the oil, automobile or real estate development industries, to name a few frequent targets), and yet when I meet and work with them, they are fine, well meaning, caring people.

Too often, we as humans fall into a behavior of angry blame or demonization, creating “Us vs. Them” dynamics between people or groups. I see this in every single large organization I come in contact with, as well as in more troubling arenas where the consequences are far-reaching (Democrat vs. Republican, US vs. the Arabic/Muslim world). This also tends to be the analytical frame of most books/films of this genre (what I would call “exposÃ©”): “Sicko” by Michael Moore is a recent example of this, or “Who Killed the Electric Car”. They expose the “evil-doings” of these corporate monsters. These types of films tend to get us (or me, anyway) angry and reproachful, all the while feeling powerless to effect change against these monoliths.

The tremendous value of this book lies in stepping out of this dynamic and reminding us that the CEOs leading corporations committing these (at times, atrocious) acts are for the most part very humane people. They are simply caught in the system, and they divorce themselves emotionally from the costs of their decisions in order to survive. Of course, they could do something different (and they often do), but the structural pressure is very difficult to resist (and it’s illegal, as Bakan points out with tremendous irony).

Due to the spectacular power that corporations wield (through lobbying and campaign contributions, etc, especially in the US), it seems unlikely that government will be able to dramatically guide, control or eradicate the externalizing behavior of corporations. Perhaps after the excesses of the past 6 years, the pendulum will swing… In the meantime, I kept asking myself as I read this book what solution there might be at a legal/structural level. If we attempt to limit or regulate the current corporations through government, there will continue to be the same uphill battle. Teddy Roosevelt (the Trust-Buster) and Franklin Roosevelt (with his New Deal) were able to implement changes that brought the system more into balance; but following generations always forget, and we regress again to a state where more rapacious corporate behavior dominates. In any case, it would be a battle fought tooth and nail, with no victory ever really safe.

So I believe that our ability as a human race, within the current structure of the public-private system, to limit the corporation’s pathological behavior is insufficient, especially given the current pace of impact on the planet. We cannot afford to watch the runaway train barrel towards destruction much longer. I do not know a lot about law, but I believe that we need to examine if it is at all possible to create a different legal framework for corporations.

For example, today, the two main non-governmental organizational structures are ‘for profit’, and ‘not-for profit’. We have created a dichotomy with profit as the dominant criterion. Is there no other choice than this duality? Can the legal structure of private corporations be modified or transformed in order to integrate a broader goal, or multiple goals? Can we invent an organization that reflects our whole self (the self that incorporates both our desire for financial abundance, but also relational connection and a sustainable future for our children)? We have many brilliant people on this planet; surely such a legal structure is inventible?

As much as I believe that corporate powers would deride and resist governmental and other attempts to limit their influence (for fear of not succeeding as dramatically as they do without these limitations) perhaps a proposal to abolish the current limited liability structure and to integrate humane and environmental values with financial goals could be more palatable? As I’ve written the idea above, it certainly sounds more radical, but on the other hand, we would be giving something precious back to all the corporate executives currently signing big checks to lobbyists: the legal and social incentive to make a difference. Every one of them wants that deep inside, they’ve simply forgotten or don’t know how given the constraints they work in. If we change the system, their behavior will follow. Perhaps many of them would even be grateful to be able to work in alignment with their aspirations and values…

Problems that I see with my proposal:
— First, I have no idea if it is legally feasible to have a corporation with two goals (or more?). Are we capable of operating without one dominant goal to guide us?
— What would these other values/goals be? I have suggested ‘humane and environmental’ above, but it is not terribly developed. Could we define something universal enough that it would function clearly in all cultures?
— How would we measure the success or failure of these other goals? We can’t account for humane/environmental goals on a spreadsheet, like we do for profit. Money is objective, clearly quantified. Maybe we need to invent a new kind of currency?

I was very grateful to read “The Corporation.” It has helped me more than any other book in recent memory to understand the root causes of our current social and environmental challenges, both thanks to the basic concept it describes, as well as the non-combative mindset Bakan models.

Shayne Hughes