I have been asked to speak on corporate responsibility and gladly accepted the offer. Any discussion of “corporate responsibility” presents critical contradictions. In order to analyze these contradictions, one must first build a foundation of definitions so we are all speaking in the same terms.
The first term is oxymoron: “a rhetorical figure in which incongruous or contradictory terms are combined as in “a deafening silence” and ‘a mournful optimist”. As we shall see, any discussion of “corporate responsibility’ deals with contradictory terms, or an oxymoron.
In “the Devil’s Dictionary”, Ambrose Bierce famously defined a corporation as “an ingenious device for obtaining individual profit without individual responsibility”. Kate Jennings, NYT, 7/14/02. The corporation is a legal device to absolve all responsibility while reaping huge profits.
The purpose of this discussion is to bring a new and more truthful frame of reference to the role of corporations within our society. The standard economic analysis is that corporations are organized to produce a product or provide a service. The state sanctions incorporation to increase efficiency of that process.
There is considerable evidence that this rationale has little historical validity. Whatever modicum of reality previously existed, it is lost in today’s economic environment. Enron, for instance, became one of the largest corporations in the world with no basic product to create.
Today corporations marshal resources and allocate power and influence. Corporations today are entirely public and political, using their accumulated wealth to control governments legislatively and judicially. Elections are predetermined and resources are deployed more for control of the population than for production of commodities or services.
The entire foundation of classical economics is based on the premise that money is neutral and circulates to allocate products and services. Even high school economics classes will concede that money is the repository of power and influence and that realization sets the basis for defining the public/political role of corporations today and therefore public responsibility of corporations.
The definition of responsibility includes the following:
1. Legally or ethically accountable for the care or welfare of another;
2. Involving personal accountability or ability to act without guidance or superior authority;
3. Being the source or cause of something;
4. Capable of making moral or rational decisions on one’s own and therefore answerable for one’s behavior;
5. Cable of being trusted or depended upon, reliable.
6. Based upon or characterized by good judgment or sound thinking.
7. Having the means to pay debts or fulfill obligations.
8. Required to render account, answerable.
Corporations deny accountability to their employees, to the government, to the environment, and more importantly any requirement of good judgment. They only accept responsibility for making maximum profit and nothing else. Profit, however, is created wealth. Profit is created by the labor of employees within the corporation. It is that extra money value created after all employees and all expenses are paid. Once created, it becomes a resource for the allocation of political power. Corporations are given a state charter in order to facilitate the efficient creation of this profit. It is a state created privilege. In order to round out the parameters of this discussion one other definition is necessary. That is, privilege:
1. A special advantage, immunity, permission, right, or benefit granted or enjoyed by an individual, class, or caste;
2. Such a right or advantage held as a prerogative of status or rank and exercised to the exclusion or detriment or others;
3. The principle of granting or maintaining privileges: a society based privileges.
Interestingly, the dictionary includes the final definition as an option to buy or sell stock, including put, call, spread, and straddle; to grant a privilege, to free or exempt.
A corporation is a creation of the state. It is granted an enormous number of privileges and exemptions by the state, including to name a few among hundreds, the right to act as an individual, the right to sue, the right to run a business without individual responsibility for its actions. Unfortunately, the corporation is a creation of individual states, particularly the state of Delaware. Even though all major corporations function internationally, the privileges and immunities of that operation arise out of incorporation in one of the smallest states in the country.
One of the first reform measures that must be promulgated is that all corporations must be incorporated by the federal government. The state of Delaware is subject to the political influence of these large institutions that then protects the corporate charter and absolves individual responsibility. Once created by the state of Delaware, the corporation is given the privilege of functioning under the legal fiction that it is an individual with individual rights but not individual responsibility. Having created that fiction, corporations appropriate the privileges of individual action but repudiate individual responsibility except to make maximum profit. In the case of Enron and numerous other corporations, even that responsibility is abdicated.
The fact of individual state incorporation is, by itself, a renunciation of “corporate responsibility”. For corporations with budgets larger than most countries in the world to establish their charter in Delaware or any other state is a statement: no responsibility. After all, these corporations’ budgets exceed that of counties and states. Even that minimal constraint, if it can be called that, is now avoided as more and more accounts are established in the Cayman Islands or elsewhere, all designed to eliminate responsibility for any action.
As stated earlier, the license to assert privilege must at least be a national charter reviewed annually or at least every 2 years. Then, the struggle will be to make it a serious review. In fact, what is required is a world court that would monitor international activity. But one fact is clear: current legal arrangements are designed to remove all corporate responsibility.
The corporation, as a creation of the state, is a political entity, not a private person. It is an amalgamation of individuals functioning as a group where no one individual bears any responsibility for his or her actions. As a political entity, the corporation could be held answerable to the following groups: 1) consumers, 2) employees, 3) shareholders, 4) communities, and 5) the state. Because of the size of its political and social and economic activity, the corporation must also be held accountable for its impact on the environment. It must also be held responsible for the impact of its products on individuals even though not consumers and on neighborhoods where it functions.
As we all know, the entire state, national, and international matrix is designed to absolve the multinational corporation of all legal, financial, moral, economic responsibility for its activities. Individuals are forced to bear the entire responsibility for corporate activity in all spheres.
When it comes to the consumer, the law has successfully implemented the commercial principle of caveat emptor-that is, the buyer beware. Under established contractual principles, when two individuals enter a contract for sale, the seller is bound by the claim of quality for the product. That responsibility, however, is too much for corporate commerce to bear. The law allows a seller of an automobile to sell a car on credit, then sell the paper. As soon as that paper is sold, responsibility for the quality of the car is eliminated, but responsibility to pay the note continues regardless of defects in the product. The same is true for the corporation that buys mortgage commercial paper.
If one examines the day-to-day commercial transactions that occur in this country, the consumer is absolutely powerless vis-à-vis the individual purchase. The only power is to refuse to patronize the store of manufacturer. That is an abstract power that only exists when consumers band together and use a cohesive organization to counter the already state sanctioned power of the corporation.
Of course, the corporation assumes no responsibility to its employees except to pay as little as possible and to exploit as much work as possible. Except in the union context, all employees are “at will” employees and that means the employee can be fired for any reason or no reason at all. Only through unending social struggle have workers been able to limit discharge in cases of racial, sexual, or age discrimination. Even in those cases, the corporation can avoid legal responsibility if it can give an economic reason for its discharge. In other words, maximum profit spares the corporation of all responsibility.
Kate Jennings describes the personal impact of this legal structure in the New York Times, July 14, 2002, page 15:
“I make these observations as someone who worked for much of the 1990’s as a speechwriter at two major Wall Street financial services corporations. Until then, I’d had no experience of closed societies and rigid hierarchies; perforce, to survive I had to turn myself into something of an anthropologist.
“One paradox was hard to miss: When I crossed the thresholds of those downtown skyscrapers, I went from a one person, one-vote democracy-messy, noisy, infuriating, but democratic-to a netherworld where fear was the primary management tool and dossiers, censorship, misinformation and various forms of surveillance were standard practice. To me, corporations seemed not merely autocratic but totalitarian; the engines of America’s fabled democratic society are anything but.”
The only way to fight against the autocratic and irresponsible actions of public corporations is through collective actions. The legislation of the 1930’s protected the right to organize and unions were able to establish a modicum of protection for workers on the line. Very quickly, the corporate structure retaliated with the passage of Taft-Hartley which weakened and eventually immobilized union strength.
Likewise, the civil rights movement established a prohibition against race discrimination, which was quickly crippled with the Bakke case. In the same way, the women’s movement stood on the shoulders of the civil rights movement and established legal protection. Soon, the movement was able to protect against age, national origin and handicap discrimination. In each case, however, the corporate structure retaliated and sabotaged both the intent and purpose of the legislation. In that way, it could shield itself from responsibility for social ills.
The corporation is a social institution with state sanction. By contrast, people’s movements have neither state sanction nor support. Lives are lost, careers destroyed for the benefit of a better society. No personal rewards are forthcoming. The corporation rewards the most selfish, the most aggressive, the most venal and often the most dishonest individuals within the structure. Then every corporation refuses to accept responsibility for the consequences of this social structure.
In my area of expertise, workers’ disability compensation, the corporate refusal to accept responsibility has a long and sordid history. In Michigan in 1912, the corporations pushed through a statutory scheme designed to shield the corporation for its negligence, and to eliminate the jury trial, an important social form of imposing responsibility. Arguing that all employees would have some coverage, however small, and the corporation would not have to face a jury for its negligence, the corporate structure again limited its responsibility for the injuries that it caused. The history of workers’ disability compensation is consistent, unending, relentless opposition by corporations for the responsibility for injuries caused by the pressure of commercial productions. They never kept their end of the bargain. As a result, thousands and thousands of workers were thrown onto the state welfare system.
The media in league with the corporate structure then battled every attempt to provide decent welfare coverage that might increase taxes. In Michigan, the corporate bosses put John Engler in power specifically to eliminate any responsibility for the damage caused by these companies. No taxes, no tort responsibility, no environmental responsibility is the mantra of the corporate program.
When it comes to the environment, all burdens are pushed onto the state and every corporation avoids any responsibility for the environment. Corporations rarely if ever pay for the damage to the environment caused by commercial activity. Environmental questions provide an effective focus for illustrating the corporate repudiation of responsibility. Taken as a whole, corporations deny all responsibility to the environment unless it makes money for them. That, in fact, is the opposite of responsibility; it is exploitation. If environmental safeguards make money then corporations will implement them. By contrast, if the government or governments require environmental protective devices, the corporate community fights for years with incredible tenacity to prevent the regulations and if regulated to limit or destroy the implementation of any regulatory program.
Whenever necessary, the corporations will turn to the state for protection. If a strike occurs, the state steps in to protect “private property” even though the property owned by a corporation is public not private. The state will always force workers to return to work if the power of the strike becomes more than the corporation can handle.
Corporations have huge lobby facilities to insure that all laws favor their profit making schemes. They create organizations to attack the courts and politicians who might interfere with their exploitation of every possible profit scheme. The political aspect of corporate irresponsibility is easily seen in the Bush administration, the corporate president. He was installed in power even though he did not win. He can fairly be called the Enron president because that corporation was a big reason he was able to seize power and his policies favor the schemes of the Enron corporate stratagems.
One of the first steps taken by the Bush administration was to withdraw from the Kyoto agreements and the reason given was that it might hurt business. Almost simultaneously, he eliminated all corporate responsibility for repetitive injuries. These moves illustrate how the corporate structure is not private but public and more importantly, political. The corporation is a public political organization designed to concentrate resources in the hands of a very few people.
The corporation functions as a political entity in order to organize society to maximize profit. The old model of the corporation as a privately owned business organized for the purpose of producing a product or providing a service is long past. As the head of General Motors Alfred P. Sloan said: “we don’t make cars, we make money.”
The dominant corporate organizations today are multinational. Money crosses borders at the rate of almost a trillion dollars per day all at the convenience of these transnational corporations. These corporations control and manipulate the governments in individual countries and states because they have the ultimate weapon: withdrawal of capital. They set up organizations such as the World Trade Organization and the International Monetary Fund to discipline countries that disagree with them.
Even small businesses function in totally political ways. The National Manufacturers Association and the Chamber of Commerce are some of the most politically aggressive and powerful organizations in the world. On a worldwide scale, these business organizations organize politically to implement their agenda which is to maximize profit. That is, to allow business to function without any responsibility except to make money.
Of course, we are having this discussion not because any dialogue was initiated the media, the corporate government or anywhere else. We are having this discussion because of Enron, Global Crossings, Adelphia Communications, Quest Communications International, Imclone, K-Mart, Tyco International, WorldCom, Arthur Anderson, and Xerox. The New York Times of July 21, 2002 in discussion of market implosion stated: Seven Trillion Dollars Gone.
The money is not “gone”. It is withdrawn from pensions, IRAs, 401Ks which have been emptied. This so-called correction represents blatant theft, for which there is no corporate responsibility.
The entire privatization/deregulation movement was designed to make this sort of theft possible without legal responsibility. It represented a method whereby social capital created by millions of work hours could be taken with minimal risk. A government employee would be legally responsible and more importantly would be watched where a system of check and control would minimize the loss.
The effects of these thefts are concrete. At the state level, we have experienced the bankruptcy not only of K-Mart, but also Harvard Industries, Reliance Insurance, Jacobson, Legion Insurance, Montgomery Wards, and these are simply the ones that I know of without any research. These involved theft or irresponsibility in every case, leaving communities and employees destitute.
The publicly held corporation is a socialized institution. The stock is held broadly. Previously, the management held a responsibility to shareholders to maximize profit. Even that minimal responsibility has been vitiated. Stock options and gigantic salaries for CEOs (crooked executive officers) allows socially created wealth to be concentrated in the hands of the very few. Whenever wealth might be shared as where worker pension plans own large sums of stock then that money is stolen or shifted to another place. That is the nature of corporate irresponsibility.
This discussion occurs not because of a responsible media that exposes the corruption. In fact, these media corporations have tried to hide or limit the effect of the scandal. The sheer size of the scandal has forced a public discussion not out of a sense of media responsibility but out of a necessity for damage control. Importantly, the media leases the airways which are owned by the public. Again, a public resource is being abused.
As I have said earlier corporate irresponsibility represents a big pile of dung and the media uses the airways to say that it does not stink.
The question now is what to do. One thing is clear: criminal charges are not going to solve this problem. We could propose that everyone who embezzles more than a million dollars would be subject to life imprisonment. I am opposed to the death penalty but this probably the only place where it might be a deterrent. However, it is not just the criminal activity of Kenneth Lay, Martha Stewart, Samuel Maksul, Andrew S. Fastow, Martin Gross, Bernard Ebbers, Dennois Kozlowski, Alfred Taubman, Diane Brooks, Jeffrey Skilling, Michael J. Kopper, etc. that is the problem.
The problem is structural problem. Corporations are not individuals as the law states. They are public institutions with public responsibilities and political accountability. Their responsibility is to their employees, to the communities where they operate, to the states where they trade, to the countries where they function, to the environment, and to their shareholders.
The entire legal structure must force then to accept that responsibility and eliminate the legal protection of these self-contained incredibly powerful public institutions, which now operate as dictatorships. They cannot be considered private individuals.
We must build a legal structure that looks not to criminal sanctions but instead to economic responsibility where control of the basic resources is democratically directed. The basis for corporate activity must be service to employees, communities, and government and shareholders, not maximum profit.
Another important step can now be taken. The public political corporate structure has created a social morality founded on the principle that greed is good. Whether it is Ayne Rand or Gordon Geiko, the zeitgeist of today’s cultural environment is that selfishness is not only necessary but also commendable as it keeps the economic engine chugging. Altruism, generosity and gentleness in this corporate culture are not signs of strength but signals of absence of resolve.
This same corporate culture, however, consistently grumbles that morality is missing in our daily lives. This society refuses to accept that greed and selfishness may be necessary evils within the human condition, but must be contained and punished, not rewarded and glorified. Currently, the most selfish and the most greedy, become the most wealthy and most powerful. We now know that this perspective destroys the very fabric of society.
We can and will build a movement where public concern and public commitment is not only recognized, but is also rewarded, where career sacrifice becomes a source of political strength.
Yours in Struggle,
Ronald D. Glotta
220 Bagley, Suite 808
Detroit MI 48226-1409
(313) 963-1320 (313) 963-1325/Fax