By Michelle Meagher, a competition lawyer and author. Her forthcoming book, ‘Competition is Killing Us’, will be published by Penguin next year. Originally published at openDemocracy
It is almost as if we were not meant to notice. Last month the influential Business Roundtable released a letter, signed by 183 Chief Executives from some of the biggest companies in the world, redefining the role of corporations in society.
Breaking with almost 50 years of practice, the group announced that from now on they would commit to protecting the interests not just of shareholders, but of all stakeholders. Delivered at the height of the business vacation season, with corporate responsibility sitting low on the to-do list behind ice cream and afternoon naps, the timing was incongruous and the wording, like all compromises to consensus, promises almost nothing at all.
The global reader may stumble over some of the phrasing, such as the commitment to a “free market economy that serves allAmericans” – this from multinational companies with globe-spanning markets, outsourced operations and cross-border impact. We may also wonder how the announcement changes the workings of the free market in any discernible way. The weak pledges – to look after customers, to maintain good supplier relationships, to care for communities and the environment – could have been lifted from any one of the companies’ existing annual reports.
Employees at least get some specific assurances – fair compensation, benefits, training and education, diversity and inclusion – although of course the detail will be in the interpretation by individual companies. But communities and the environment, the most vulnerable of stakeholders, get the shortest, vaguest shrift in the statement . Communities will be “supported” and “respected” and the environment will be “protected” through sustainable practices.
Clicking through on the Business Roundtable’s website it is clear that the community and environmental investment that these companies have in mind is very much along the lines of the corporate-social-responsibility-as-charitable-giving that has proven extremely tax-efficient and brand-enhancing in past years, without jeopardising any core profit centres. There is no commitment to engage with the harder, messier, more painful work of changing business models to replenish currently abused and depleted communities and ecosystems.
Indeed the whole letter reads as a poor imitation of the “benefit corporation”, a corporate model designed to legally commit companies to having a “material positive impact on society and the environment”. But reading between the lines is where we get the strongest sense of what this letter is really about: it is a desperate, placatory promise by the leaders of a Ponzi scheme in fear that their pyramid of willing fools may be wising up. The cognitive dissonance of efficient, beneficent, and generous free market capitalism in a world showing increasing signs of social and ecological crisis is beginning to agitate the subjects. We are waking up from the Matrix, and this statement is meant to coax us back under.
The Business Roundtable, rather than offering an alternative to the free market logic that got them to their positions of power, instead doubles down. “America’s businesses”, we are told, “have been a critical engine to its success.” The implication is that American business will also be a critical engine to getting us out of the mess that American business got us into. Meanwhile, the state is nowhere to be seen in this proposed solution, which plays on the accepted view that government is in paralysis and disarray, that the much-needed changes will be too politically difficult, therefore business must step-in to fix the chronic problems which the state cannot fix itself.
But the question we must ask is: why is government in paralysis? And what have those 183 business leaders done to ensure that state of disarray? Are they in fact the ones making sure that the needed changes are politically difficult?
It is at this point that we may become aware, if we are listening closely enough, to two separate conversations. The Business Roundtable letter sits in the stream of “stakeholder capitalism” and corporate responsibility, although the statement notably eschews the word “responsibility” completely. But there is a separate conversation happening in policy circles about corporate power, about the mass consolidation of industry, the market and economic power of corporate titans and how this is leveraged into political power to undermine the government.
Looking at corporate responsibility in isolation has the effect of shielding corporate power from view. But power is exactly what the Ponzi scheme is for. Many of the companies involved in the Business Roundtable have benefited from the disempowerment of competition law – which is meant to prevent accumulations of corporate power and market distortions. Corporate behemoth Bayer is a signatory to the letter, having passed relatively unscathed through an antitrust review process that ultimately blessed its acquisition of rival Monsanto, concentrating the control of global agribusiness into just six hands.
Powerful companies are free to make pledges to which no one can hold them accountable. Think of the recent watering down of post-financial crisis banking regulations or the failed attempts to bring Big Tech to heel – big and powerful companies easily evade public control. Microsoft, Facebook and Google are notably not members of the Business Roundtable – why bother with the charade?
Why should we trust these companies to serve the public interest just because they say they will? We shouldn’t. The passivity encouraged by free market thinking has led to obscenely unequal and damaging results. The public must serve its own interests, either directly or through representation. This is a core principle of political democracy, and is necessary if we are to maintain any semblance of economic democracy.
The Business Roundtable announcement is an important step. Hamstrung by the perception that their primary duty is to shareholders, it is unlikely that many of these CEOs would have felt confident about acting first or acting alone, fearing punishment by the capital markets for sticking their heads above the parapet. The feeling of safety in numbers will have emboldened some of these self-styled leaders. And the letter was after all half right: business will be critical to solving the social, climate and technological challenges we face, although certainly not without the collaboration and guidance of government and society.
But we will not have a chance at influencing companies, and will not be immune to the lobbying counter-strength that corporations can muster, if the fundamental issue of power is not addressed. This means that we should step up global competition law enforcement with the aim of reducing market power, and we should also target the most powerful companies in our economies to give them real responsibilities, on pain of dissolution. Stakeholders do not need to have their interests taken care of by disingenuous corporations – stakeholders need voice, representation, influence and ultimately control so that they may protect themselves. Power and responsibility must finally be brought out of the shadows; the two parallel conversations must become one.
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You know, there is nothing new here. I an skeptical in the extreme regarding anything that a businessman says, much like some are skeptical about anything some politicians say.
It’s a deserved reputation. They have earned the mistrust over the last 40 years.
I remember when they said all the same stuff during the NAFTA negotiations, and noticed the same attitudes about responsibility and power back then. Then came the Panama Papers.
People get up and shout about greasy politicians changing their game all the time, but I think that it is important to look at who owns those politicians. After all, the politico’s behavior is just a reflection of their owner’s desires.
“People get up and shout about greasy politicians changing their game all the time, but I think that it is important to look at who owns those politicians…”
The Business Roundtable types are the cowboy riding the bull (the people, not the stocke market) for the entertainment of the crowd (the generalized elite) at the rodeo and when the bull throws them for a loop the rodeo clowns (the politicians) come out to distract the raging bull.
Same the world over…
No shirt.
The way to challenge corporate power is to relieve corporations of their ill-gotten and never-intended Constitutional “rights” with a Constitutional amendment establishing that 1. Corporations are not people and 2. Money is not speech. Here it is: https://www.congress.gov/bill/116th-congress/house-joint-resolution/48/text
Read the whole thing: it fits on a postcard.
I am shocked that Michelle Meagher, the author of this post, fails to raise this fundamental point. She says, “the question we must ask is: why is government in paralysis?” and then she doesn’t even answer her own question.
The rot started with U.S. multi-nationals and spread from there. Until we put a stop to corporations being able to hire entire law firms to defend their illegitimate claims to personhood rights under the U.S. Constitution, and bribe politicians with unlimited amounts of money, government will remain paralyzed.
Companion legislation to HJR-48 must be introduced in the U.S. Senate. Please, NC readers, educate yourself on this issue at http://www.movetoamend.org and start lobbying your U.S. Senators. 65 House members have signed on — has your Congress Critter?
Hear, hear!
Carla,
Thank you for providing something actionable to do regarding this problem. I read plenty of articles where people diagnose the issue and event suggest what needs to happen but very little information on how. So thanks for the how!
To echo your sentiment:
NMD
Here’s a wild idea about how. The top 4 democratic presidential candidates decide to form a corporation called “The Presidency LLC”, and claim their rights as a (single personhood) corporation. The GOP and the Supremes would be all over that. One up-side might be that citizens united get’s overturned along with the notion of a multi-person president. If they get away with it, the upside might be that we get 4 brains working the executive branch (8 times more than we are used to) – assuming they get along and can agree on stuff.
Why do we even need a Constitutional Amendment? It doesn’t say Corporations have rights, in fact it doesn’t I believe say anything about them at all.
Just Congress expressing the limits of a Corporation via law would do. And I would love to see such a law brought before our supposedly “original intent” jurists of the Right Wing. There goes all their friends….
But the representatives legislated to change corporations into people!
But very special people. None of them have to fear the death penalty, unlike we mere flesh and blood corporations.
@RBHoughton — Actually, it is unelected, appointed-for-life Supreme Court justices who have consistently, over many decades, “found” corporations in the U.S. Constitution. That’s why only a Constitutional amendment stating the obvious — that corporations are not people, and money is not speech — will right this corrosive wrong.
Overturning Citizens United will do nothing, except return us to the state of democracy we were enjoying on Jan. 20, 2010. Remember how great that was? Obama and Congress had just handed the insurance and pharmaceutical companies health care “reform” on a silver platter.
Please do check out HJR-48 and help to move it forward!
If you ever read the history of this Supreme Court ruling they quote that supposedly gives corps “personhood”, it is disgusting. It was I believe, Santa Clara county vs. Southern Pacific RR in 1876. Decisions at that time were written by hand (no typewriters) by the Clerk of the Court. There was the “head note” and the decision. I can find nothing in the decision that makes corps into “persons” but the head note is what they use to confer this right. Following from Wikipedia
When the Santa Clara County v. Southern Pacific Railroad Company, 118 U.S. 394 (1886), came before Justice Waite in the US Supreme Court, Sanderson (lawyer for Southern Pacific) asserted that ‘corporate persons’ should be treated the same as ‘natural (or human) persons.’ and although the court specifically did not rule on it the court recorder John Chandler Bancroft Davis inserted the following dictum in the headnotes:[13]
The court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of the opinion that it does.[14]
Before publication, Davis wrote a letter to Waite, dated May 26, 1886, to make sure his headnote was correct to which Waite replied:
I think your mem. in the California Railroad Tax cases expresses with sufficient accuracy what was said before the argument began. I leave it with you to determine whether anything need be said about it in the report inasmuch as we avoided meeting the constitutional question in the decision.[4]
Hence this dictum in the headnote and the Waite reply changed the course of history and how corporations came to have the legal rights of a human person:
Thomas Hartmann in his book Unequal Protection: The rise of corporate dominance and theft of human rights has the following to say [15]
In these two sentences (according to the conventional wisdom), Waite weakened the kind of democratic republic the original authors of the Constitution had envisioned, and set the stage for the future worldwide damage of our environmental, governmental, and cultural commons. The plutocracy that had arisen with the East India Company in 1600, and been fought back by America’s Founders, had gained a tool that was to allow them, in the coming decades, to once again gain control of most of North America, and then the world. Ironically, of the 307 Fourteenth Amendment cases brought before the Supreme Court in the years between his proclamation and 1910, only 19 dealt with African Americans: 288 were suits brought by corporations seeking the rights of natural persons.
Thank you for this, baldski. You know your history!
Here’s a “brief” from Move to Amend on the Corporate Hijacking of the 14th Amendment:
https://movetoamend.org/sites/default/files/corporate_hijacking_of_the_14th_amendment_.pdf
We do need to repeal personhood for corporations. We should also alleviate their obligation to survive by ruthless competition – What are they, gladiators? We need to control markets to the degree that terminal competition is a thing of the past. It diminishes corporate profits to do things right; to preserve environments; to pay employees well, invest in capital improvements and research, etc. Competition for profits is antithetical to socially good corporations. Right now unqualified profits are the goal – but profits are the problem because ill-gotten profits get reinvested in the same business model (for one thing, for another they preclude proper responsibility to people and the environment, etc). This whole idea of corporations needs a few tweaks to make it function properly toward the end we all seek.
Agreed, This is a step on the road to direct rule by bankers / insurers. Representatives and NGOs become superfluous.
If we really wanted to restore the peoples voice in government we would withdraw the concessions to biz that successive parliaments have conceded.
Unless this infamous ruling is overturned there is absolutely NO chance of any change for the better of our political system. I’m just so shocked for many years that this ruling has not been energetically challenged. Even by citizens taking to the streets!
Citizens taking to the streets? Corporations are citizens of the highest calibre, and they’ll probably own the streets by the time anyone else gets there.
In 1789 the Bastille was stormed. What could we storm today? A thing that sources its materials around the world, assembles them in China, sends its profits through an impenetrable network of tax havens and loopholes, and is owned by global shareholders? Decapitating Hydra is easy by comparison.
Carla
While I admire the nobility of HJR-48, I don’t think the senate, controlled by the neoliberal elites and the multinational mega-corporations, will pass it. The onset of economic recession/depression will make everyone fall in line. We would have the Obama era recession rescue as the nearest example to follow – bail out the banks, support the insurance industries, subsidize big AG and fossil fuel extraction. I think that overturning Citizens United will take some kind of novel guerilla tactic (legal and non-violent of course).
Overturning Citizens United would not change either corporations’ illegitimate claim on constitutional rights (Santa Clara vs. Southern Pacific Railroad 1886) OR the doctrine that money is speech (Buckley v. Valeo).
Of course the U.S. Senate won’t pass it NOW. The House hasn’t passed it, either. Democrats in both chambers are just as dependent on, and in thrall to, corporate largesse, as Republicans.
We need to be ready. Much of the campaign for HJR-48 is about educating people and building a movement. A democracy movement. Things can, and do, change on a dime. When it happens, we need to be ready with a viable alternative to chaos and destruction.
You may say that’s naive — it won’t matter. I say, working on democracy now gives my life meaning now. If it doesn’t matter later, I will have wasted — exactly — nothing. I count myself as extremely fortunate to be able to spend my time and effort on this work.
We are moving steadily and, seemingly, inexorably towards a corporate-based feudalism. As long as corporations are favored by law to pursue their own interests while individuals and communities tend to be stymied by law to pursue their interests corporations will, according to game theory, win out in the end because of their obvious competitive advantage. We can see this from their ability to run the federal government and major financial networks. I see no way out of this situation at present.
The author talks about “we” should do this or that. There is no “we” to do anything. Real power in Washington is maintained through muscle in one form or the other. You mess with an entrenched faction and they’ll destroy you in one way or the other because all the other factions will unite. Ultimately, the real power is with the corporate networks that have now become much more robust than before the ’08 crisis. I
It’s possible that some reform government could take hold in Washington at the Executive level but Congress is so thoroughly corrupt I see no way to enact significant reforms that would change the power-relations in Washington and the country. To challenge corporate domination there has to be some combination of a change of heart in the board rooms and a true populist movement that is unpersuaded by the mainstream corporate propaganda organs and their perennial ability to misdirect and fool the public.
Thanks for this comment.
Chris – “We are moving steadily and, seemingly, inexorably towards a corporate-based feudalism” What would be the test to know that we have achieved that end say versus already being there?
” I see no way out of this situation at present. ”
I do, but it’s very violent.
I agree. The Vanguard has to do some horrible things before that “City on a Hill” is ready for us to ascend to it.
This is doubly weird, given the “multi-national” observation:
>as the commitment to a “free market economy that serves all Americans”
Because other people don’t count? Shouldn’t it serve everybody, at least everybody whose country subscribes to a “free-market” economy? Of course, this is the real tell that we are having hot-air blown up our butt. You don’t say “Americans are special” out loud – heck, the 1% certainly doesn’t believe it – but you make them think that you believe they are. They then start preening and thus you can continue to take advantage of them.
This approach may have run out given the results of Ms. “America is Already Great” vs. MAGA-hatted Trump. I hope so, but the popular vote does not support that theory.
I’d say “multinational” needs uniformly to be replaced by “supranational.”
Welcome back amigo.
All these rent seeking scum corps shift their share of external costs to people all around the world.
“Power concedes nothing without a demand. It never did and it never will. Find out just what any people will quietly submit to and you have found out the exact measure of injustice and wrong which will be imposed upon them, and these will continue till they are resisted with either words or blows, or with both. The limits of tyrants are prescribed by the endurance of those whom they oppress.”
― Frederick Douglass
Small claims court is a useful venue. Death to them by a thousand cuts.
No lawyers allowed. If one gets a judgement, plenty of opportunities to collect.
i.e. Deputy sheriff takes money directly out of cash drawer at the end of the day if a check isn’t delivered within a certain period of time. Also, the hassle factor, seize or delay an airliner or container ship, to satisfy a relatively tiny judgement, makes payment by a corporation very likely.
Plus the embarrassment factor. Millions are spent on advertising by them. A well placed news story, Yelp review or other campaign, can offset whatever advantage that ad campaign might produce and the corporate it knows it.
Yes, Dan, a great idea. In fact, i’ve done some of this myself when I practiced law (sheriff seized the aircraft upon landing). But nowadays I’m afraid they’ll cut you off with the arbitration clause.
In some and more places, in small claims courts the mope plaintiffs are not allowed to have lawyers but the corporate defendants bring theirs. Not so hard to get the rules changed to protect the guilty. Like the Delaware corporation law, the “tax code” (code is law, remember?) , the Federal Rules of Civil Procedure on shareholder derivative actions/standing, class actions, multidistrict litigation, stuff like that. And Glass-Steagall.
Why does a statement like this from the Business Round Table deserve any more notice than the wind blowing from our Winter chimneys?
The smoke color is the giveaway, gray means this, black means that, white means the other, all subject to flexible definitions.
Now, add in the private equity and venture capital groups and there might be (slightly) more to that Business Roundtable proffer.
I would like to believe the Bidness Round Table’s statement amounts to more than “We just need to improve our messaging” – but I don’t.
The Business Roundtable is finally seeing the handwriting on the wall, however late to the game they may be; i.e. a large swath of the population is not reaping the benefits from the economic system and if nothing changes, the pitchforks will eventually come out and force a solution that might not be favorable to the interests of the Business Roundtable.
Think of the recent watering down of post-financial crisis banking regulations or the failed attempts to bring Big Tech to heel – big and powerful companies easily evade public control. Michelle Meagher
If the finance system is fundamentally corrupt, and it is due to government privilege for depository institutions, aka “banks” – allowing the richer to steal from and oppress the poorer – then what does financial regulation without fundamental reform do but:
1) Legitimize a corrupt system
and
2) make government an accomplice to the theft and oppression?
This is not to say we don’t need interim, merely pragmatic if necessary, financial regulation to buy us the time needed for fundamental reform – we certainly might.
But let’s not deceive ourselves that regulation alone can ever make a fundamentally corrupt finance system work properly.
Strike “alone” from last sentence since I don’t believe the addition of anything else, such as welfare for the victims, can make a fundamentally corrupt finance system work properly either.
I think the missing word is ‘accountability’.
Without it, the rest of this is drivel.
Scrap limited liability for shareholders. Doesn’t take a constitutional referendum to do that. Let the owners seek out their indemnity insurance from … Lloyds syndicates.
Or let’s make large corporations much more democratic by, say, redistributing their shares equally to all citizens every seven years or so.
The justification for this is not mere pragmatism but the recognition that what was built with the citizens’* credit rightly belongs to the citizens.
*Due to government privilege for the banks, they extend what is, in essence, the public’s credit but for private gain.
Or they could let the corporations vote like they do in the City of London. Not London as such but the financial heart of the city –
https://www.bbc.com/news/uk-politics-39283177
reminds me of this:
“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered…. I believe that banking institutions are more dangerous to our liberties than standing armies…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” [bold added]
Not that banks should not allowed to create bank deposits but as 100% private businesses with 100% voluntary depositors.
Most of us don’t know the history of corporations as legal entities. The corporate charter was a privilege, and a very limited one too. It had a finite term, and could be and was revoked for violations and illegal behavior. And there were laws and enforcement and a different attitude toward corps. Corporate officers were subject to liability. Here’s an article that explains how tings used to be, before corps figred how to buy their way out, and there’s no reason (ha ha) that the old rules could not be brought back: http://reclaimdemocracy.org/corporate-accountability-history-corporations-us/ And Glass-Steagall while “we” are at it? Whoever “we” are?
And Glass-Steagall while “we” are at it? Whoever “we” are?
Except that “redlining”, for example, preceded the repeal of Glass-Steagall, did it not?
Face it, the finance system has been corrupt since before Alexander Hamilton, at least to the founding of the Bank of England in 1694.
Admittedly, perhaps only hindsight is 20-20, but with modern insights into the nature of money, what excuse remains for not reforming finance along ethical lines?
The industrial age forced a nation of farmers to become wage earners, … from http://reclaimdemocracy.org/corporate-accountability-history-corporations-us/
Don’t think so. Otherwise farmers and ex-farmers would be Luddites and not haters of banks.
Plus worker-owned co-opts could have been the norm in the Industrial Age except for government privilege for usury cartels.
Interesting article though…
The industrial age forced a nation of farmers to become wage earners, …
I don’t know why you find that strange. I don’t know quite how it worked in the USA, but in England enclosures and more ‘efficient’ agriculture had a lot to do with it, and in contemporary Cambodia debt and outright land grabbing have a lot to do with farmers migrating to the cities in search of money.
Still, as you say, interesting article.
Because industrialization, by itself, can’t force anyone to do anything, can it? But combine it with government privilege for finance and the public can be dispossessed and dis-employed with what is, in essence, the public’s credit but for private gain.
To be sure, very small farms might not be able to compete against larger farms where machinery can be efficiently employed but past a certain minimum size, are farms that require, for example, two or more tractors any more efficient than farms that can fully utilize just one?
But in any case, the aggregation of small farms into larger farms should have been financed ethically in which case farmers would not have been reduced to wage slaves.
Adding:
And would it be necessary for even mere subsistence-sized farms to compete with larger farms IF ALL fiat creation beyond deficit spending for the general welfare were in the form of a Citizen’s Dividend? Especially if boondoggles such as excessive military spending were greatly curtailed?
Uh, aren’t these the same corporations which used to have goals and purposes that involved their standing as a member of their communities, but then dumped those in favor of a single goal, that of maximizing shareholder value? Aren’t these the same CEO’s that lauded that move, certainly once they started getting paid in stock options? (And CEO remuneration skyrocketed because of that.)
We need a new definition for “two faced,” “double dealing” plutocratic asshats. Oh, these people just provided one.
In the U.S., the states charter corporations. In the early 19th century, the memory of the domination of the crown corporations that ruled much of colonial life was fresh in the minds of those in state government. They mandated limits: charters were granted for specific purposes, and for prescribed times — twenty years was typical. If a corporation engaged in activities other than those enumerated in the charter, the charter could be revoked.
http://reclaimdemocracy.org/corporate-accountability-history-corporations-us/
JTMcPhee totally best to the punch—THANKS , JT !
The NC commentariat is the bomb!
but then dumped those in favor of a single goal, that of maximizing shareholder value? Steve Ruis
Actually, the purpose of a corporation should be to OBEY* the will of the shareholders and that may or may not be to maximize shareholder value. Therefore the more broadly and equally owned the shares of a corporation are, the more likely the corporation’s actions will conform to what the general public desires.
So we’re back to the necessity of ethical finance so that corporations can not escape the need to share equity to finance themselves by, in essence, using the public’s credit but for private gain.
*For the simple reason that shareholders jointly OWN the corporation as evidenced by this: Unless a legislature renewed an expiring charter, the corporation was dissolved and its assets were divided among shareholders. from http://reclaimdemocracy.org/corporate-accountability-history-corporations-us/ [bold added]
I’m come to the conclusion that the shareholder/management balance of power has gone way too far towards management, and that non-voting index funds are a major contributor to this.