=======================Electronic Edition========================
RACHEL’S HAZARDOUS WASTE NEWS #309
—October 28, 1992—
News and resources for environmental justice.
——
Environmental Research Foundation
P.O. Box 5036, Annapolis, MD 21403
Fax (410) 263-8944; Internet: erf@igc.apc.org
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NEW STRATEGY FOCUSES ON CORPORATIONS
Whenever we fight for clean drinking water, or clean air, or a safe
workplace, we are likely to find a corporation on the other side of the
issue. The goal of a corporation is, first, to survive, and, second, to
return a profit to its shareholders (its legal owners) and if the air has to
be fouled to accomplish these goals, then the air will be fouled. The
Business Council for Sustainable Development (a private group made
up of the heads of major corporations such as DuPont and Dow
Chemical) acknowledges that this is so: “Today, for instance, the
earth’s atmosphere is providing the valuable service of acting as a
dump for pollutants; those enjoying this service rarely pay a reasonable
price for it,” they say.[1] This is an example of corporations
“externalizing” their costs. By using the air as a free dump, a
corporation passes the costs of waste disposal along to the public while
the profits from dumping fill the corporate treasury. This is standard
business practice.
During the last 200 years, corporations have evolved into huge
organizations wielding trillions of dollars to achieve their goals. In
theory, corporations are held in check by the marketplace. If they do
something bad, they will incur penalties that hurt their profits.
However in practice, society has found no effective way of imposing
penalties on corporations, so society today has lost control of corporate
behavior. Instead of effective control, we have the concept of
regulation.
In their 1991 book, POWER AND ACCOUNTABILITY, Robert
Monks and Nell Minow [M&M], argue that corporations thrive under
regulation: “The ultimate commercial accomplishment is to achieve
regulation under law that is purported to be comprehensive and
preempting and is administered by an agency that is in fact captive to
the industry,” they say.[2] In other words corporations WANT
regulation. Regulation limits their liability and in many cases shields
them from competition. Notice how tobacco companies claim that the
warning label on cigarettes absolves them of liability for lung cancers.
Corporate polluters WANT a permit system that regulates their
emissions; such a system LEGALIZES the dumping of poisons into
air, land and water. The large waste haulers FAVOR regulations that
require double liners and leachate collection systems in landfills; such
regulations drive the small waste hauler out of business, thus limiting
competition. From a corporate point of view, the best regulations are
those that appear to cover everything, can’t be set aside or undercut by
other regulations, and are administered by an agency that is captive to
the corporate community.
It is not difficult for corporations to capture a regulatory agency. (See
RHWN #210, #289.) Who will staff the agency?
Often an “expert”
from the regulated community. Even the most vigorous opponent of an
industry soon becomes coopted; perhaps he or she wants to expand the
agency’s jurisdiction or budget, for which industry support is needed.
Perhaps he or she wants a job with industry when the administration
ends. Perhaps all the information coming into the agency is prepared
by industry itself.
As Robert Monks says, “When Nell and I worked with the Presidential
Task Force on Regulatory Relief, during the Reagan Administration,
we found that business representatives continually sought more rather
than less regulation, particularly when it would limit their liability or
protect them from competition.” [M&M pg. 131.] Regulation was
supposed to make corporations accountable, but corporations have
turned regulation into a shield against accountability.
It is this ability to mold the environment to its own purposes that
causes Monks and Minow to say, “Despite attempts to provide balance
and accountability, the corporation as an entity became so powerful
that it quickly outstripped the limitations of accountability and became
something of an externalizing machine, in the same way that a shark
is a killing machine–no malevolence, no intentional harm, just
something designed with sublime efficiency for self-preservation,
which it accomplishes without any capacity to factor in the
consequences to others.” [M&M pg. 24.]
Several things happened during the past decade to make a bad
situation worse.
When Michael Milken and his associates discovered that “junk bonds”
could raise enormous amounts of money easily and quickly, this paved
the way for “hostile takeovers” by “corporate raiders.” As Monks and
Minow describe it, “Corporations are ideally suited for self-
preservation, which is the definition of the externalizing machine.
When they saw what Milken was doing, corporate management
proceeded to do whatever was necessary to protect their capacity to
direct enterprises, and they found that protecting themselves from
raiders meant protecting themselves from shareholders and squeezing
any semblance of accountability out of the system.” [M&M pg. 47.]
Since corporate raiders gained control by buying shares, corporate
management protected its turf by taking control away from
shareholders. This protected corporations against hostile takeovers, but
it also insulated management from accountability to shareholders.
With their new-found control over everything, corporate managers
began to pay themselves higher and higher salaries. Between 1973 and
1975, CEOs’ [chief executive officers’] after-tax pay averaged 24 times
that of the average manufacturing worker. By 1987 to 1989, the
differential was 157 times the average manufacturing worker. But
taxes for CEOs declined from 50 percent to 28 percent, while worker
taxes increased from 20 percent to 21 percent.” [M&M pg. 166.]
One consequence of high salaries in business is that smart, aggressive
people are drawn into the corporate world, rather than into
government or education, thus further consolidating the power of
corporations. When the education system deteriorates, corporations
educate workers and potential workers for their own purposes; this
may provide loyal workers but it seems unlikely to produce well-
rounded citizens ready to question the proper role of corporations in a
free society.
Directors of corporations have never provided an effective check on
the behavior of management. Directors are selected by management,
paid by management, and informed by management. As compensation
expert Graef Crystal says, boards are typically “ten friends of
management, a woman and a black.” [M&M pg. 77.] Generally
speaking, boards of directors are captives of management. They
provide little or no accountability.
Corporations now dominate our political life. There are 40,000
registered lobbyists in Washington–75 lobbyists for each senator and
representative. A run for federal office costs anywhere from $10
million to $150 million, and most of this money comes from corporate
PACs (political action committees). So every politician who gets
elected is beholden to corporate interests from day one. As Senator
Barry Goldwater has said, “PACs set the country’s political agenda and
control nearly every candidate’s position on the important issues of the
day. [M&M, pg. 124.]
Corporate crime is rampant. One study of America’s largest 500
corporations in 1982 revealed that 23 percent of them had been
convicted of a major crime or had paid more than $50,000 in penalties
for serious misbehavior during the previous decade. And of course
those statistics merely describe the ones who got caught.
“Why do corporations engage in criminal behavior? It has to be
because, at some level, they find that the benefits outweigh the costs.
Or, more likely, management finds that the benefits accrue to the
corporation, while the costs are borne elsewhere–the externalizing
machine at work,” say Monks and Minow. [M&M pg. 133.]
Corporate greed and abuse of power seem to have worsened during the
1980s, but it has been obvious to some people for a long time that
corporations exert an unhealthy influence over many aspects of
American society. As W.H. Ferry said in 1959, “As the most important
single factor in the lives of most Americans, the corporation should be
required to make affirmative contributions to freedom and justice as
our distinguishing values.”[3]
Yet control of corporations has never been the focus of the
environmental movement, the women’s movement, or even of the labor
movement. Activists have focused their attention everywhere but on
the corporation, the key institution of modern life. As Richard
Grossman and Frank T. Adams say,[4] “What passes for political
debate today is not about control, sovereignty, or the economic
democracy which many Americans thought they were fighting to
secure.
“Too many organizing campaigns accept the corporation’s rules, and
wrangle on corporate turf. We lobby congress for limited laws. We
have no faith in regulatory agencies, but we turn to them for relief….
“How much more strength, time and hope will be invest in such dead
ends?” they ask.
To gain control over corporations, examine the corporate charter,
Grossman and Adams argue (see RHWN #308). The corporate charter
is granted by state legislatures; without a charter, a corporation ceases
to exist. The charter says a corporation must obey the law, serve the
public good, and do no harm. Corporations that fail to comply can lose
their right to do business.
Grossman and Adams suggest a wide range of controls that might be
exerted through the corporate charter, among them:
–corporate owners and officers must be liable for harms they cause;
–charters must be reviewed annually and corporate officers show that
all corporate harm has ceased;
–the corporation is an artificial creation and must not enjoy the
protections of the bill of rights;
–no corporation should exist forever.
It is a curious fact of history that the environmental movement has
never focused its attention on the corporate charter as a means of
controlling corporate behavior. Now that seems likely to change.
–Peter Montague, Ph.D.
===============
[1] Stephen Schmidheiny and others, CHANGING COURSE
(Cambridge, Mass.: MIT Press, 1992), pg.9.
[2] Robert A.G. Monks and Nell Minow, POWER AND
ACCOUNTABILITY (N.Y.: HarperCollins, 1991), pg. 131. Hereafter
cited as M&M.
[4] Richard Grossman and Frank T. Adams,
TAKING CARE OF BUSINESS: CITIZENSHIP AND THE CHARTER OF
INCORPORATION (Cambridge, Mass.: Charter, Inc., 1992). For a
copy, send $4.00 plus a self-addressed, stamped envelope containing
52 cents postage to: Charter, Inc., P.O. Box 806, Cambridge, MA
[22140.]22140.
Descriptor terms: corporations; business council for sustainable
development; corporate charters;