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Only One Reason to Grant a Corporate Charter
This is an expanded version of a presentation given to the Summit on the Future of the Corporation, Faneuil Hall, Boston, MA, November 13, 2007:
It is fitting that we hold this conversation on the future of the corporation in historic Faneuil Hall, the Cradle of Liberty. Deliberations in this very room more than 200 years ago were the first step on a long walk away from a king named George that launched a new nation and led ultimately to the end of monarchy. May the success of our forbears inspire us in our deliberations on the future of the private-benefit corporation.
The Big Picture
I recall my business school professors many years ago calling us to look at the big picture to identify the systemic cause of whatever immediate problem symptom captured our attention. We would do well to apply this wisdom as we look ahead to the role of the private-benefit corporation in a profoundly troubled 21st century. We must identify the deep systemic causes of the social and environmental crises unfolding all around us-no matter how troubling the resulting conclusions may be. Here is the big picture in brief outline.
- Consumption: Growth in human consumption resulting from a combination of population growth and growth in consumption per capita is depleting the natural life support system of the planet, disrupting hydrology and climate systems, and threatening human survival.
- Inequality: Unconscionable and growing concentration of financial power in a world engaged in an ever more intense competition for a declining base of material wealth is eroding the social fabric to the point of widespread social breakdown.
- Institutional Pathology: The most powerful institutions on the planet, global financial markets and the transnational corporations that serve them, are dedicated to growing consumption and inequality. They convert real capital into financial capital to increase the relative economic power of those who live by money, while depressing the wages of those who produce real value through their labor. They offer palliatives that leave the deeper cause of our potentially terminal environmental and social crises untouched, because they are the cause.
Our future depends on a dramatic cultural and institutional transformation to reduce aggregate consumption and achieve an equitable distribution of economic power.It requires an epic institutional transformation to:
- Reduce aggregate human consumption.
- Redistribute financial power from rich to poor to achieve an equitable distribution of Earth's life-sustaining wealth.
- Increase economic efficiency by reallocating material resources from harmful to beneficial uses. Examples include reallocation from military to health care and environmental rejuvenation, from automobiles to public transportation, from suburban sprawl to compact communities, from conversion to reclamation of forest and agricultural land, from advertising to education, and from global financial speculation to investment in self-reliant local economies.
- Invest in the regeneration of the living human, social, and natural capital that is the foundation of all real wealth. This requires reversing the current process of converting the real wealth of living capital into the fictitious wealth of financial capital and accepting the resulting negative returns to financial capital. It may take us awhile to recognize that just as increasing financial capital at the expense of living capital makes us collectively poorer, increasing living capital at the expense of financial capital makes us collectively richer.
- Accelerate social innovation, adaptation, and learning by nurturing cultural diversity and removing intellectual property rights impediments to the free and open flow of beneficial knowledge.
These are imperatives of the 21st century and it is difficult to identify a constructive role in addressing them for the private-benefit corporation-a term for any corporation chartered solely to serve the narrow and exclusive private financial interests of its investors and top managers.
The Private-Benefit Corporation
The private-benefit corporation is an institution granted a legally protected right-some would claim obligation-to pursue a narrow private interest without regard to broader social and environmental consequences. If it were a real person, it would fit the clinical profile of a sociopath.
The basic design of the private-benefit corporation was created in 1600 when the British crown chartered the British East India Company as what is best described as a legalized criminal syndicate to colonize the resources and economies of distant lands to benefit wealthy investors far removed from the social and environmental consequences. That design has ever since proven highly effective in advancing the private interests of the world's wealthiest people at enormous cost to the rest.
The private-benefit corporation uses its economic power to privatize (internalize) gains and socialize (externalize) cost. The resulting concentration of wealth creates an illusion that wealth is being created, when the actual consequence is a net destruction of real wealth. It is an institutional form best suited to achieving outcomes exactly the opposite of those we humans must now pursue.
The only legitimate reason for a government to issue a corporate charter giving a group of private investors a legally protected right to aggregate and concentrate virtually unlimited economic power under unified management is to serve a well-defined public purpose under strict rules of public accountability. This defines a public-benefit corporation, which can be chartered as either for-profit or not-for-profit. The private-benefit corporation is an institutional anomaly, a creation of monarchy that properly shares monarchy's historic fate.
A New Economy
The work at hand necessarily goes well beyond redesigning the private-benefit corporation to hold it accountable for its harms. We need to bring forth a new economy designed to value and nurture life in all its many forms and unleash the full creative potential of the human species to this end. Organization theory suggests that such an economy will necessarily be decentralized, self-organizing, and grounded in principles of cooperation and mutual caring free from the distorting influence of the massive concentrations of centrally controlled and managed economic power the private-benefit corporation makes possible. This suggests a planetary system of self-reliant community-based economies comprised of locally rooted, human-scale enterprises that engage in balanced, rule-based fair trade at the margin.
As with any other segment of public life, markets must have a framework of rules defined and enforced by democratically accountable governments to secure the public interest. The freer the economy from distorting concentrations of economic and political power subject to abuse by the ethically challenged, the smaller such governments can be.
Business enterprise is integral to any economy. Business enterprises, however, may take many legal forms that confer no special rights or privileges beyond those of any natural person and properly limit the concentration of unaccountable economic power. These forms include cooperatives, partnerships, sole proprietorships, and special for-profit corporations with charters designed to balance public and private interests.
Each of these legal enterprise forms is more consistent with the beneficial function of markets than are global-scale transnational private-benefit corporations with internal centrally planned economies larger than the economies of most nations. Breaking up the larger private-benefit corporations into smaller component enterprises either rechartered as public-benefit corporations with clear public purposes or converted to non-corporate enterprise forms is an essential step toward restoring beneficial market discipline and responsible, rooted private ownership.
So where do we look for leadership in the monumental undertaking at hand? As continued denial of the reality of global climate change became untenable, private-benefit corporations turned from denial to an effort to turn the crisis into an opportunity to increase their profits. They are implementing energy cost savings and promoting carbon-trading schemes, ethanol subsidies, government guarantees for nuclear power, coal gasification, carbon sequestration, and other measures that treat symptoms within a business as usual framework of economic growth and financial returns to the already moneyed. Cutting costs through energy efficiency is clearly a positive contribution, but it must go well beyond the easy reductions that produce a quick increase in the financial bottom line.
Private-benefit corporations are not touching any proposal that would limit aggregate consumption or their own power. In its present form, the private-benefit corporation is incapable of voluntarily sacrificing profits to a larger public good. Yet this is exactly what would be required for them to provide leadership in reducing aggregate consumption, increasing equality, and redirecting the economy from producing what is profitable to producing what is needed for healthy children, families, communities, and nature.
Capitalism, which means quite literally rule by financial capital-by money and those who have it-in disregard of all non-financial values, has triumphed over democracy, markets, justice, life, and spirit. There are other ways to organize human societies to actualize the positive benefits of markets and private ownership. They require strong, active, democratically accountable governments to set and enforce rules that assure costs are internalized, equity is maintained, and market forces are channeled to the service of democracy, justice, life, and spirit.
Leadership in advancing the deeper institutional changes essential to the human future must come from awakened citizens working from outside the existing institutions of elite power. This work begins with exposing the myths that blind us to the irreconcilable conflict between capitalism and democracy and to the potential of community-centered, life-serving market alternatives based on principles of responsible citizenship, community, and equity.
We are the people to whom the founders of our nation referred to as "We the People." We are the ones we've been waiting for.
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71 Comments so far
Show AllTHE HOW TO IS AS PLAIN AS THE NOSE ON YOUR FACE!!
He who has the power to grant and register the Corporate Charter also happens to have the power to suspend it or take it away. That would be the Secretaries of State, and they are elected officials. Perhaps in the similar way that one by one the individual States Attorney's Office's brought suite against the giant Tobacco Corps. then too the possibility exists that under the representation of the electors courageous Secretaries of State could begin to require Corporations to provide more public benefit than they cost. The fact is, that many smaller cities and towns have already begun the revolution by banning specific corporations or even groups and types of corporation in participating or doing business in their respective jurisdictions.
The time is now be be involved fellow activists! Start by contacting your Secretary of State and ask them to hold irresponsible corporations accountable! Here is the site for all their webpages: http://nass.org/index.php?option=com_content&task=view&id=44&Itemid=1 Participate in the dialogues in your town meetings and city councils and at the very least introduce these very important concepts into the conversation. If they won't listen then run for office.
I still believe we can bring our democracy back around but time is running out. The Government has lost its way and are edging us closer and closer to an economic depression. Please lets do everything we can RIGHT NOW!!
An errant thought--we change the definition of 'status' so that it no longer implies unceasing acquisition to beat the Jones'. What if it implied stretching a penny until it was flatter than a piece of foil. Then the rules of the game will have to change.
Another errant thought--as long as we think we cannot change things we will be proved correct. Korten, Hartman, Lappe'(Frances) and scores of others have tossed out ideas to restrain or eliminate corporate rape, it is up to each of us to pick one we like and work on it. From what I can tell the most effective, quick acting solution is to change the definition as Korten suggests in this article. Then we can make corporations as liable for damages as any other entity. The quickest way to the head is through the pocketbook.
Living your own life below the radar or as quietly as you can will often be a good way to make your contribution. Most people don't notice or care what you doing if you aren't a big showoff. Remember, it is easier to ask for forgivness than for permission. If someone objects to what you do, be polite and claim ignorance of transgression. (This works better for old, female blondes!)
Many great comments and ideas here, but I notice a streak of fatalism that runs against the grain of history. In the 1890s, robber barons ran the country and President William McKinley was their boy. The lower classes didn't have a chance and it was never going to change. Then in the 1930s, thanks to the collapse of the stock market and the election of Franklin Roosevelt, an era of progress began in this country that wasn't checked really until the election of Ronald Reagan in 1980. (Even Nixon, as bad as he was, supported such things as the EPA, Social Security, and gas mileage standards.)
Thanks to the tone-deaf and incompetent neocon elitists of BushCo, America has now gotten a good look at government run by a corporate plutocracy, and they don't like what they see. I asked a Republican who had voted for Bush twice to list his successes -- after a long moment, he said "Well, he lowered taxes for the rich." That will be Bush's pathetic 'legacy' -- in all other aspects he's been a complete failure and the worst president and administration in our history.
As I mentioned previously, the Republicanism of the corporate neocons will be eliminated by an economic disaster, which is currently coming to a head -- just read the financial pages.
After every such 'realignment' things have gotten better for the average American, although there was some pain in the transition. Far from being comfortable in their wealth and hubris, the smart corporate elites are very much as worried as the ancient monarchs -- the head is never easy that wears the crown.
Not to be overly optimistic, but greedy, grasping plutocrats and monarchs throughout history always plant the seeds of their own destruction -- they can't help themselves -- and their ultimate failure is inevitable. We are seeing that truth played out in our newspapers and TV screens daily.
BeyondEmpire, let's not discount the simmering anger of the infamous Silent Majority. I remember Eisenhower and I have never seen an administration so loathed; the fury is quiet, but palpable. As John Dryden once said:
"Beware the fury of the patient man."
Americans have been very patient, but they are ready to pop. Our Washington and New York based media, and the Beltway political class just don't seem to understand this -- they are ten years behind what's really going on.
I can't find anyone out here in fly-over country who supports Bush these days -- even Republicans. And the GOP is in disarray with the current crop of Republican presidential candidates inspiring little heat, with the exception of Ron Paul and Huckabee.
I think the next election will twist the MSM Conventional Wisdom is knots.
BeyondEmpire, let's not discount the simmering anger of the infamous Silent Majority. I remember Eisenhower and I have never seen an administration so loathed; the fury is quiet, but palpable. As John Dryden once said:
"Beware the fury of the patient man."
Americans have been very patient, but they are ready to pop. Our Washington and New York based media, and the Beltway political class just don't seem to understand this -- they are ten years behind what's really going on.
I can't find anyone out here in fly-over country who supports Bush these days -- even Republicans. And the GOP is in disarray with the current crop of Republican presidential candidates inspiring little heat, with the exception of Ron Paul and Huckabee.
I think the next election will twist the MSM Conventional Wisdom into knots.
RJD: True.
And as a result of our decadence, we sow the seeds of the next plutocracy.
dplayful@bellsouth.n December 9th, 2007 2:53 pm
Hello cruxpuppy.
"You are right on the point: We have to take control of the Federal Reserve, which is a quasi private-"public" organization, as a major starting point. The control of the actual money and the sociopathic "money men" who control it begins there."
As an optimist, I don't think we're that far off. It's very possible this sub-prime debacle could easily destroy fiat currencies since many of the largest global financial institutions are hemorrhaging from the sub-prime debacle.
United Bank of Switzerland, one of the most conservative in the world just wrote down $10 Billion. Who knows how much more will be written down in the near future? It's a major banking crisis; the likes of which this globe has never seen before.
The article is a great discussion vehicle and presents a very clear blueprint for new regulation of corporate charters.
LibertyPimp offers the only way to deal with this issue within the context of our current system and while improbable in that context it may not be impossible.
grannyt gives us the vision of what is presumably the common goal of most of us who post on CD. This vision is possible to live currently and presents a chance to change reality in the future. By becoming the change you wish to be, you also ignore the "system" in place. If enough people ignore that system it CAN become illegitmate and obsolete. While this takes time it has a distinct possibility of success.
Daniel David, on the other hand espouses working within the system as the only method to make change. He proposes continued collusion with the rigged political system by supposedly electing "liberals" to political posts and allowing them to direct the path of empire to a more humane and less imperial stance. He apparently has "faith" that the system can be resuscitated and places the rest of us in a category of delusional dreamers and mere activists operating outside of reality.
Unfortunately, his reality seems to be based on Stephen Colbert coined "truthiness". His "faith" in the system to correct itself calls up a quote used most recently in Al Gore's Nobel acceptence speech. The quote by George Orwell "Sooner or later a false belief bumps up against solid reality...", fits Mr. David's enthusiasm for our current political system. His faith in politics as usual must be held up against the reality of our present situation.
Sorry Daniel, more Republicrats in politics is no answer and plays into the hands of the empire by legitimizing the current system. We truly need a tidal wave scale shift in government that can only be accomplished by the people and if the people cannot be rallied to take action (this may well be the root of the problem), and continue to act like sheep (no offense to actual sheep intended) we will be left to live our lives as best we can in a manner so well expressed by grannyt.
Sorry for the double post, but I don't know how to get rid of the first one.
I think we need to approach the problem with a completely different mindset. We don't need "dramatic cultural and institutional transformation to reduce aggregate consumption," as Korten says, even though that sounds like a really good idea, at least to those satisfied by superficiality. The term transformation is starting to be used as a replacement for reform. What we must institute is a complete replacement, a systemic alternative, for a system which bestows status and assigns worth on consumption.
We don't need to "achieve an equitable distribution of economic power" which also sounds like a really good idea, and is just as superficial. What we need to do is remove the perceived power and adulation we grant to economies--which basically equates to mammonism. Putting this level of focus on economies assumes that capitalism is the best, indeed only, way to support and assure entrepreneurialism--which best thrives in an unregulated free-market. It takes for granted that everything we build is a benefit; giving any of these shiny toys up would be a sacrifice of such magnitude that all meaning would be removed from life, so nothing must stand in the way of production. It shares much with other forms of economic determinism such as Marxism. It is part of the cultural confusion between standard of living and quality of life, which is only possible in a culture based on Enlightenment values of dualism, a mechanistic universe, and reductionistic science.
The first concept--aggregate consumption--we must approach with the concepts of ecological carrying capacity and quality of life. How much stuff do we really need, is it really making us happier, does it degrade and impair our life support system, and if so--in fact, if and only if--how many people can be provided with this stuff without diminishing resources, diversity, or replenishment rates.
Equity--meeting everyone's needs--will arise through the community, social, and environmental relationships that meet our natural expectations for fulfillment. The quest for economic power is not built into our genes, it is built into our stories. Putting the economy on equal footing with personal, social, and environmental needs underlies much of the problem. People don't tend to seek power of any sort when their needs are being met. What most people seem to prefer are the opportunities to develop their own potential and enjoy their lives with family and friends.
Even the terminology Korten has chosen is suspect. There can be no such thing as a "private-benefit" corporation in an interconnected and interdependent universe. Nor can it exist within the natural confines of sustainability. Shareholders and life are intrinsically at odds. There is no legitimate reason to legally protect its right to "aggregate and concentrate virtually unlimited economic power".
We do indeed need a new economy designed to honor and nurture that which contributes to life, and Korten does point out the aspects it will have, such as decentralization, self-organization, and adherence to natural systems principles. But Korten seems to want to protect the primacy of markets.
Markets, and private ownership as exemplified by the piratization of the commons in 15th century Tudor England, is a direct outgrowth of dominator hierarchies, and this is the message we need to face. The Earth does not belong to humans, humans belong to the Earth.
I'd also like to briefly respond to a point that RichM made in regard to mainstream Americans "waking up" or taking the red pill. People do need to be re-educated (or perhaps more accurately, educated instead of trained). And the energy pumped into keeping people brainwashed
However, it's not going to take an equal amount of time or energy to reverse the effects of the brainwashing of corporate propaganda. In fact, it will take very little of either. As shown in a few wilderness therapy studies, culture is only three days deep. That's how long it takes to shake off the stress and depression of our lifestyles after being emerged in a wilderness experience. This is also how long it takes to return to those same stress levels upon one's return to "civilization." Other studies show that withdrawal symptoms from television last about 2 weeks for heavy users.
The study that holds the most promise, though, for change agents who can become so easily disheartened when noticing that the world keeps getting crazier, is from the field of operant conditioning, or radical behaviorism. The classic study that pretty much put the final nail in the coffin of B. F. Skinner's strict behaviorism model was done in the early 1960s by Breland and Breland. They showed that any animal very quickly loses learned or forced behaviors that are unnatural as soon as the stimuli are removed, and this occurs even quicker the closer the animal is to their natural environment.
People don't need to read "serious leftist political critique" or understand what socialism means to realize that healthy, mutually supportive relationships are what a fulfilling life are based on. And the only thing they need to do to come to this realization is turn off their TVs, don't read any mainstream press, and spend a couple of days in the most natural area they have access to while in the company of a few friends or family members.
Yes, David Korten is great, insightful, highly knowledgeable, and a visionary.
I started reading him ("When Corporations Rule the World") a dozen years ago, and although corporations now DO rule the world, it's not for lack of trying by Korten to inspire and educate people against this take over by the global corporatist Empire disguised behind the façade of 'Vichy America'..
In 1995, no one knew about the corporate empire's sly weapon of 'negative externalities'. I learned from economist Korten and was inspired to write articles on early internet about these negative externalities being a hidden and unrepresentative corporate tax on America.
From these posts today it is clear that many CDers are fully attuned to the dangers of unchecked corporate imperial crimes with negative externality costs on our society and environment --- so Korten has enlightened the debate and fight against corporatist Empire.
Today, even major banks and investment funds are warning of the downside effect on the 'market valuations' of dirty corporations that pollute and cause global warming, and are projecting lower valuations as these negative externality crimes are regulated in settlements against their phony profits ---- as was done to the cigarette companies.
EG. "The UBS and Lehman Brothers reports concur that climate change represents a classic market failure where company valuations neglect to take into account negative externalizations--in this case, predominantly the emission of carbon dioxide CO2, the primary greenhouse gas (GHG)."
http://www.socialfunds.com/news/article.cgi/2237.html
The Ponzi 'economics of empire' which IS the global corporatist Empire behind this façade of 'Vichy America' has always depended as its seminal, unaccountable, and hidden economic strategy on 'gaming' the known market failure of negative externality cost displacement.
While historical empires could brutally use overt imperialism to directly loot the resources of other societies in order to support their hierarchical pyramid of wealth and power-elite, beyond about 1900 and the decline of the British Empire it has become necessary for economic empire to more guilefully create the centralized wealth of empire.
The favored vehicle for manufacturing and centralizing this economic wealth of empire has been corporatism (or 'private-benefit' corporations, as David Korten describes them), and the specific methodology has been to employ the well known 'market failure' of negative externalities to build a 'one-way faux profit pump' --- that pumps private profits to the imperial elite by simply pumping (or evacuating) costs onto society.
The first generation of private-benefit corporations using such one-way profit pumping and cost dumping was industrial capitalism --- which manufactured falsely profitably industrial and consumer products by hiding and dumping 'social costs' on society, customers, government and the environment. But as hidden costs, like river pollution and cancer in smokers' lungs was noticed and legal/regulatory pressures pushed costs back onto polluting industrial private-benefit corporations (and their imperial owners), a less physically detectable method of the empire's faux-profit-pump was developed.
This second (and current) generation of private-benefit corporatism, to feed the empire's Ponzi economy, dumps and hides not the negative externality costs of any physical manufacturing process, but rather the ethereal 'debt bombs' created by the new alchemy of turning not lead but air into gold ----- finance capitalism.
In the service of private-benefit corporations, private-benefit hedge funds, and the even more obviously named private-benefit private equity funds, this new alchemy of finance capitalism does not exist for the claimed purpose of actually financing passé industrial capitalism, but merely exists for the Ponzi function of aggregating wealth and power inward toward the economics of empire, and exporting / externalizing the negative costs of 'debt bombs' --- which now appear to be the premier, and perhaps only, export product of 'Vichy America' throughout the global corporatist Empire.
But beyond this gloomy sounding truth, there are definite signs of progress against the apparent juggernaut of the global corporatist Empire cureently controlling our own country and most of the world.
Korten's latest "Great Turning" (along with "Multitude" by Michael Handt and Antonio Negri) points the way to an enlightened overcoming of this current empire ---- not by 'hanging it with its own rope' as I suggested, but by raising the consciousness level of all people.