Can the Corporation Survive?

Posted on October 16, 2007 by Dave Pollard
corporationMy 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:

  1. The purpose of the corporation is to harness private interests to serve the public interest.
  2. Corporations shall accrue fair returns for shareholders, but not at the expense of the legitimate interests of other stakeholders.
  3. Corporations shall operate sustainably, meeting the needs of the present generation without compromising the ability of future generations to meet their needs.
  4. Corporations shall distribute their wealth equitably among those who contribute to its creation.
  5. Corporations shall be governed in a manner that is participatory, transparent, ethical, and accountable.
  6. 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 weremeant to make a living.
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16 Responses to Can the Corporation Survive?

  1. Cris Bennett says:
    October 16, 2007 at 20:21

    1. Current corporations, and thus our nations, are run by an oligarchy of greedy, psychopathic individuals. It may be that their ruling position results from the system of market ‘rationality’ which ranks corporate power, but the end requirement is the same: we’ll get nowhere without purging these individuals. Unfortunately, violent means are inevitable because these monsters won’t give up power peacefully (just look at Iraq: billions being made out of the slaughter of millions).2. ‘Natural Enterprises’. Sounds ‘nice’, and you’ll sell books to the woolly classes who buy books on meditation from shops to which they’ve driven in their Urban Assault Vehicles (offsets purchased, naturally). But is there a single NE existence proof?3. Out of interest, why do you so rarely interact with your readers in the comments? Just lack of time? These comments are robust, perhaps to the point of rudeness, but I’m being speedy and am more interested in any replies than I am in my own opinions. Cheers.

  2. Cris Bennett says:
    October 16, 2007 at 20:50

    For anyone willing to comment here, I’m most interested in (2) above. Are there any instance proofs of something approximating NE’s really existing? Here in Australia, we have some things that look like it on the face of it, but when you look closer, you see that they are never really self-sustaining, but tend to rely on being self-bankrolled by wealthy baby-boomers. You know — they’ve made their money doing something disreputable, and are engaged in a bit of retirement self-exculpation (to do so, they generally pay over the odds for land in gorgeous spots, thus driving the poor locals out, but that’s another story …).

  3. Dave Pollard says:
    October 16, 2007 at 21:06

    Cris: Natural Enterprises have, as my book explains, seven characteristics that differentiate them from traditional enterprises. I have found 12 companies that have at least four of the seven characteristics. Between them they have them all covered. I haven’t found a company that has all seven, but I expect they exist. My hope is that the publication of the book will surface them. As for your Question 3, yes, it is just lack of time. I read every comment, and value them immensely, but to answer just a few would justifiably piss off those I didn’t answer. I’ve concluded that ‘real’ conversations are more valuable than the clumsy conversations that blog comments allow, and I try to squeeze in as many of those as I can. My hope is that by the time I retire and have time to respond to all the comments on my blog, the tools for online conversations will have vastly improved.As for question 1, you may be right, but my instincts say otherwise. Purging individuals rarely solves anything, as the purging of Saddam Hussein has demonstrated pretty well.

  4. Cris Bennett says:
    October 16, 2007 at 21:32

    Well, I’ll keep an eye out for the book. The eye will be sceptical, admittedly, but it’s what I read with. Fair enough on the time point. I’ve noticed lately quite a few bloggers being explicit about scaling back their online activities, and it often seems to be a result of the ‘debate’ being of too poor a quality to offset the time involved. Also online stuff can be a very poor representation of individuals. I know I post little, but more when I’m angry, for example, than when at some peace (when I’d rather read or listen to music). Probably hence point (1) above. I’m not really advocating a literal purge, but given what I know about the corporate types I’ve had to work with, I think there’s a truth hidden in that bit of intemperance. Perhaps we could find an island to stash them away on. The UK, perhaps.

  5. Dale Asberry says:
    October 17, 2007 at 08:04

    Cris, check out Piedmont BiofuelsEven better, go there. Meet them. They’ve already spun off one activity (coop garden) into it’s own ‘business’ and they collaborate with several others such as Solar Energy International and The Abundance Foundation. These guys and gals are building a natural community… maybe even a community of communities.As for Korten’s 6 points, they’ll never work. A “rules” based system is unnatural, only congruent systems with built-in negative feedback loops can succeed.

  6. Dale Asberry says:
    October 17, 2007 at 08:11

    oops, badly formed tag…The Abundance Foundation. These guys and gals are building a natural community… maybe even a community of communities.As for Korten’s 6 points, they’ll never work. A “rules” based system is unnatural, only congruent systems with built-in negative feedback loops can succeed.

  8. lugon says:
    October 17, 2007 at 08:22

    Sorry about the unexplained link – it’s about how some practices are sound both finantially and environmentally.

  9. melisa Christensen says:
    October 17, 2007 at 09:32

    When will the surge towards Natural Enterprise begin? Maybe only when we must. When we are hungry, I suppose we will have to find food, share and trade (build communities). When that time comes, hopefully we can use the model for natural enterprise to start things out right. I agree that changing the current model or bottomline of corporations seems impossible. They are straight on their way to using up all the resources they find of value. But when they run out of those, they can’t sell us community, love, and the instincts that we already have. This is we will have when they collapse. The “Natural” Enterprise will only happen when more people are forced into a lifestyle change and are forced to make sacrifices, when resources become scarce.

  10. george ruby says:
    October 17, 2007 at 09:32

    Most of the writer’s are correct, what startles me is that we as investor’slet the corporate idiot’s run the company without any check’s and balances.Remember, these are PAID EMPLOYEE’S that are there to do our bidding, but thatwere it stops, these greedy money hungry and power hungry individuals pay theBoard’s that are there to protect us and instead turn the board in the favorof management (WHAT MANAGEMENT) a bunch of thieve’s at best.How to protect against that is easy, eliminate the Boards entirely and replacethem with a vote by the employee’s and the stockholders (Minus Large Stockholders that have there own interest at heart. You will see a markedchange very quickly to the bottom line and a much happier, honest, truthfuland more productive corporation that will benefit everyone associated withthe entity.

  11. Cris Bennett says:
    October 17, 2007 at 17:31

    Thanks for the links everyone.Some comments:- Dale: “Even better, go there. Meet them.” Not everyone is from the USA. This is the global internet! We do, however, have similar things over here (Australia), more often connected with Solar energy. They’re all run by enthusiasts, on a shoe string, need various forms of financial support, and don’t make money. Those who support them are generally the baby-bommers I mentioned in the post above. None of this has much to do with even the potential real lives of most of us.I’ve had a bit of a browse around the Piedmont fuels site. They look pretty positive on the whole.- Dale: to quote from The Abundance Foundation’s FAQ: “Isn

  12. Dave Pollard says:
    October 17, 2007 at 19:27

    I’ve read all of Semler’s books. Here’s a good summary: Guardian Review.

  13. sageservice@gmail.com says:
    October 18, 2007 at 03:49

    I liked “The Corporation”‘s diagnosis of companies as acting pyschopathic. It got me thinking, and the real problem with these companies is their ability to influence politicians via their immense budgets. If they weren’t plying so much influence through there lobbies, perhaps the politicians would be slower to corrupt since less money would be involved.That jogged me into thinking, that it was this status as being an “individual” that allows companies to lobby legally. What if we took away that right?Obviously the courts or congress won’t do it, but if a well thought out strategy could be conceived to generate a grass-roots effort to bypass congress by amending the constitution via the 2nd method of having 2/3rds of the states request it – we could seriously cut the legal involvement of big business in running America. Granted 3/4ths of the states would have to ratify it, and it wouldn’t be easy, but given the current political environment, perhaps the time is right to try the “second method” of amending the constitution.In doing so, the American people could put both congress and big business back in their proper place: service. What do you think?See also this wikipedia page. It seems to me that the political climate, the war, the Internet and the active participation of thousands of bloggers like yourself make this a real possibility.

  14. lugon says:
    October 18, 2007 at 05:01

    Do try it out. There’s also a petition about pandemic flu with less than 200 signatures so far http://www.petitiononline.com/ai2007/ ;-(

  15. Stephen Hinton says:
    October 19, 2007 at 04:05

    The Natural enterprise could come about if it can convince people that when they enter into a transaction with them they are a) going to receive something that will promote their health or b) promote the long term sustainability of their own and their childrens/relatives’ living arrangements. As it is today, many fail to see the obvious, that in every transaction they enter into, they are a) potentially harming their own health and or b) encouraging a system which is depleting resources, damaging eco systems and is counter- sustainable from the point of view of their living arrangement.This would probably require massive changes in the way we think about organisations. This natural enterprise would not be a corporation in the current sense of the word, maybe niether a cooperative. The “consumer” would not be that, more a part-owner.Some experiments to expolore how such an arranegement could come about using money as it is currently set up can be found on Inventing for the sustainable planet under “units of trust”. http://porena.blogspot.com/2006/12/units-of-trust.html

  16. Caroline Rhoads says:
    November 4, 2007 at 02:34

    I have been into internet marketing for the longest time and never have I seen a blog a informal as this one….

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