Saturday Links for the Week — September 8, 2007 — The Anti-Corporatist Edition

corporationEnding the Personhood of Corporations:

Corporate Crime Reporter has a fascinating review of Robert Reich’s new book Supercapitalism. It’s good to see a mainstream politician (Reich was Clinton’s Secretary of Labor) who gets why corporations are inherently pathological, and what to do about it. Excerpt:

Companies cannot act with criminal intent because they have no human capacity for intent. Arthur Andersen may have sounded like a person but the accounting firm was a legal fiction. . . how can any jury, under any circumstances, find that a company ëknewí that ëitsí actions were wrong? A company cannot know right from wrong. A company is incapable of knowing anything. Nor does a company itself take action. Only people know right from wrong, and only people act. That is a basic tenet of democracy.

As I’ve reported before, the courts made a huge mistake decades ago when they gave corporations ‘personhood’, the rights of persons under the law without commensurate responsibility (their liability is limited by law). When you give anyone (or anything) rights without responsibilities you are asking it to behave irresponsibly.

I agree completely with Reich that corporations should have no standing whatsoever under the law — they are fictions, constructions of convenience that were designed for one purpose, the raising of money for collective enterprise. They were never designed or intended to be lobbyists or litigants, or to do anything other than hold and disburse collective moneys in accordance with the needs of the enterprise while protecting investors from financial liability beyond the amount of their investment.

On the one hand, that means that they should not have any legal standing in court — no right to sue or to hear ‘their’ arguments. As non-persons they should not be allowed to disburse funds or to lobby for political purposes.

The quid quo pro, as Reich argues, is that they should not be allowed to be sued, nor should they pay taxes. You don’t sue the corporation, you sue the executives, the directors, and (to the extent they vote for measures that cause injury) the shareholders. Since the corporation is a fiction, a financial holding instrument, no one should be allowed to hide behind the corporation, and corporations as non-persons should not be allowed to indemnify anyone from litigation. When any decision you make exposes you to direct personal liability for the consequences of that decision, you’re going to act responsibly in making that decision.

Likewise, corporations should not pay taxes. Today, corporations act as tax shelters, because corporation taxes are lower than personal taxes. Stripped of its personhood, corporations would not be able to shelter shareholders from tax, because the income would flow through to the shareholders and be taxed in those individual shareholders’ hands. It then makes no difference whether profits are distributed as bonuses, share options, or dividends, or are retained in the corporation for reinvestment. The individuals, real people have earned the profit, and they should pay tax on it. Corporations were designed to be, and should be, completely transparent.

The removal of personhood, of identity to corporations has other implications as well. What happens when the executives, directors and shareholders need to decide between two courses of action, one of which will benefit the shareholders and the other of which will benefit the employees or the community or the environment? Today, executives and directors can be sued or dismissed for failure to resolve such conflicts uncompromisingly in favour of maximizing profit accruing to shareholders. The argument is that it is ‘unfair’ for executives and directors to be liable for balancing conflicting needs and wants. Yet we all have to do this every day of our lives — e.g. we balance our personal needs and values against those of our employer and those of our employer’s customers, which are often in conflict. Why should executives and directors be treated differently?

I believe every corporation should have a charter, developed and approved by shareholders, that stakes out their collective philosophical position and guides directors and executives in their actions. If it says damn the employees and the environment, let’s ravage the planet and offshore all the jobs to Asia to line shareholders’ pockets, that’s up to them. As investors, community members, and members of watchdog agencies, we will then be able to determine whether we want to ‘take any stock’ in such a corporation, and how much attention we should be paying to the actions of that corporation’s people and, when necessary, suing them personally for violation of the law. If the charter says social and environmental responsibility are paramount, and rank ahead of the financial interests of shareholders, then shareholders will have no cause to complain if short-run profit growth (and share price) suffers in the interests of creating longer-term sustainability.

This is all about personal responsibility for one’s actions, including one’s actions as a so-called ‘agent’ of a corporation, and as someone who gives their money to those who run corporations, in the knowledge that that money can be used in a variety of ways, ways that have consequences. It includes the responsibility to be informed and to take an active part in understanding what those consequences are.

(a tip of the hat to Common Dreams, in my view the best aggregator of what’s happening that’s important in the world)

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6 Responses to Saturday Links for the Week — September 8, 2007 — The Anti-Corporatist Edition

  1. Doug Alder says:

    Reclaim Democracy is a good resource on restoring citizen control over corporations

  2. Mike says:

    Yeah, I read that piece on common dreams and was initially confused. Remove liability from corporations? Once I understood though it all seems a splendid idea.

  3. Mike says:

    I have long believed that we need to deconstruct corporations; one thing I would add to what you’ve written is that corporations should be chartered with a limited lifespan (say 20 years) after which they must be dissolved. Way back in history this is how things were. It also creates the opportunity for legal process to impose a “death penalty” on a corporation where appropriate (Bhopal, Love Canal) in addition to legal measures against the people “behind” the fiction.

  4. Cindy says:

    problem is, evil people are rewarded with bonuses. CEOs who ‘manage’ their ‘responsiblities’ by selling off properties, laying off people (almost always those that make the least money and needed the income most) etc. etc., and at the end of the year, they would be awarded with huge bonuses for saving money for the corporations. Look at present days hedge funds managers. What do they do? Breaking up well-managed corporations, and pushed up share prices … all for the interests of their pockets (and their croonies) WITHOUT the slightest thought given for the outcome of their actions of how many people would lose their jobs…

  5. Ken Hirsch says:

    There’s no limitation on corporate liability, there’s a limit on *shareholder* liability.And the corporate tax is lower than personal income tax, but that’s largely irrelevant since the corporate tax is *in addition to* the personal income tax, not *instead of* it. Any salaries, bonuses, or dividends are fully subject to taxes.

  6. Julie says:

    Here is an interesting look on personal ethical behavior, or lack thereof from HBS: Why We Aren’t as Ethical as We Think We Are: A Temporal Explanation,Paper Released: August 2007Authors: Ann E. Tenbrunsel, Kristina A. Diekmann, Kimberly A. Wade-Benzoni, and Max H. BazermanExecutive Summary: * All individuals have an innate tendency to engage in self-deception around their own ethical behavior. * Organizations worried about ethics violations should pay attention to understanding these psychological processes at the individual level rather than focus solely on the creation of formal training programs and education around ethics codes.

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