 My book on Natural Enterprises proposes a partnership model for new enterprise formation and sustainability. Joel Bakan's book The Corporation
argues that, in their single-minded pursuit of short-term profit at any
cost, corporations now behave pathologically (see graphic above), and
against the public interest. Is the corporation, as a model, a hopeless
case, or can it be reformed or reinvented?
There are many who
believe corporate charters can and should be rewritten to require the
pursuit and balancing of a so-called "triple bottom line" -- social and
environmental as well as financial performance. Many others think this
is naive (there are no established or easy measures or benchmarks of
social or environmental performance) and unreasonable when the three
bottom lines are in irreconcilable conflict -- the company that chooses
to emphasize profit over the other two will, in our 'free' market,
outgrow and hence dominate and even eliminate its more balanced
competitors.
Even those who argue that the three bottom lines
should, in the long run, coincide, have to concede that in the short
term -- the horizon of most corporate shareholders and managers --
profits always trump social and environmental responsibility.
Corporations
were originally invented to allow people to raise money for large
ventures. Without the opportunity for substantial return, and limited
liability, investors would not advance funds where there was
considerable risk. But soon, ownership of 'shares' was confused with
ownership of the business. Then, thanks to an incompetent legal error,
corporations were granted the rights of 'persons' -- the right to sue,
to lobby, and to otherwise use the collective wealth of the company to
influence legal, political, economic and social affairs far beyond
protecting the security of the original investment. At this point, the
sole objective of the corporation became to satisfy the shareholders
insatiable demand for higher returns and lower risk on their
investment, at any cost to the real 'owners' of the enterprise -- the
employees and the community who granted the corporation the privilege
of existence.
The end result -- pathological behaviour, a
Frankenstein monster out of control of its master. So what can be done?
Is the corporation salvageable? If not, how can we revoke corporate
charters without precipitating economic chaos?
Bakan proposes
stronger regulation and enforcement, greater legal liability for
officer and directors, public education, and regulated use of the
precautionary principle to govern corporate behaviour. Other corporate
reform advocates have proposed, in addition to the above, the
elimination of 'personhood' rights, moving public well-being activities
back from the private to the public sphere, standard global corporate
codes of conduct (with severe penalties for breaching them), putting
"triple bottom line" objectives into corporate charters, prohibiting
dishonest corporate advertising, ending subsidies for large
corporations, scrapping or redrafting 'free' trade and other
corporatist and anti-democratic regulations, and taxing pollution,
speculation and other 'bads'. I've personally advocated not allowing
corporations to own other corporations, restricting the number of
corporations any one person can beneficially control to one, and
putting a size cap on corporations.
David Korten, author of When Corporations Rule the World, is one of the speakers at next month's Future of the Corporation conference in Boston. The conference is proposing the redesign of corporations according to six principles:
- The purpose of the corporation is to harness private interests to serve the public interest.
- Corporations
shall accrue fair returns for shareholders, but not at the expense of
the legitimate interests of other stakeholders.
- Corporations
shall operate sustainably, meeting the needs of the present generation
without compromising the ability of future generations to meet their
needs.
- Corporations shall distribute their wealth equitably among those who contribute to its creation.
- Corporations shall be governed in a manner that is participatory, transparent, ethical, and accountable.
- Corporations
shall not infringe on the right of natural persons to govern
themselves, nor infringe on other universal human rights.
Korten
has advocated many of the proposals for corporate reform listed above,
and has also stressed the importance of 'relocalizing' corporations to
focus on the needs of the communities in which they are located.
I'd like to believe this can work, and I'm prepared to listen to him with an open mind. But as I've explained before
I think the evolution of dysfunctional and psychopathic corporations is
a complex phenomenon that arose with the full complicity of the public
-- it suited our collective purpose to let this happen. I've become a
skeptic about the possibility of bringing about change by political,
legal, educational or economic means or any other 'imposed' method.
Such impositions and movements have (almost) never brought about
significant change. All we can do is adapt to the current state, and
work around what doesn't work (and perhaps never really did).
The
dysfunctional model of the corporation will suffer the same fate as
every other institution and entity that has ceased to evolve, innovate
and serve our collective interests. It will collapse.
We just
have to wait it out. And in the meantime, we need to design something
new to take its place, something far different from the 'redesigned'
corporation proposed using the six principles above. I think that model
is Natural Enterprise, which achieves the end results of these six
principles, and much more, but not because it is told or regulated to
do so, but simply because it is, and always has been, the way we were
meant to make a living.
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