=======================Electronic Edition========================
RACHEL’S HAZARDOUS WASTE NEWS #388
—May 5, 1994—
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
==========
The Back issues and Index are
available here.
The official RACHEL archive is here.
It’s updated constantly.
To subscribe, send E-mail to rachel-
weekly-request@world.std.com
with the single word SUBSCRIBE in the message. It’s
free.
===Previous
Issue==========================================Next
Issue===
THE CORPORATION–PART 1
Anyone who reads beyond the daily newspaper must be aware that
the environment is in deepening trouble worldwide. For example,
year after year, Lester Brown and his colleagues at the
Worldwatch Institute in Washington, D.C., quietly catalog the
world’s deteriorating environmental conditions: [1] clean water
growing scarcer, forests dwindling, marine mammals declining,
indigenous human populations disappearing, the oceans’ fisheries
collapsing, protein shortages emerging, productive topsoil
diminishing, contamination by pesticides and industrial chemicals
steadily growing, species loss accelerating, chronic diseases
rising throughout the industrialized world… And this short
list only brushes the surface.
Increasingly, citizens are searching for root causes of the
world’s environmental decline, seeking pressure-points where
focused attention might make a fundamental difference. Here we
examine the legal entity called the corporation.
Corporations are legal fictions created by law to engage in
business for the purpose of returning a percentage on investors’
capital. This legal purpose requires that sufficient growth must
occur each year (on average) to produce a surplus that can be
returned to investors; and it requires that costs must be
“externalized” (passed along to outside parties, such as workers
or the general public) to the extent possible. As a former Ronald
Reagan economist, Robert Monks, has said, “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.” [2]
Individuals who make decisions for corporations are not free to
do what they personally believe is right. They must do what will
externalize costs and promote sufficient growth to provide a
decent return on investment. If corporate decision-makers make
decisions contrary to these narrowly-and legally-defined
corporate goals, they can be sued by shareholders for breach of
fiduciary trust. Suppose Dow Chemical, or DuPont, decided to use
a significant portion of its assets to reverse environmental
damage. How long would it be before they found themselves in
court for breach of fiduciary trust? These corporations are
chartered to pump out chemicals profitably; legally, that is
about all they can do.
A corporation’s narrow financial purposes strictly limit the
range of decisions possible within corporate culture. The legal
framework of the corporation strongly favors decisions that
foster short-term gain over decisions that protect public trust
resources upon which humanity depends for sustenance, such as the
oceans or the atmosphere.
Finally–and this is the most important aspect of the
corporation–individual investors and managers are legally
protected from liability for the corporation’s actions. Indeed,
limiting individual liability was the purpose for which the
corporation was invented. Furthermore, as a matter of U.S. law,
since 1886 corporations have been accorded many of the rights and
Constitutional protections of an individual, without the
responsibilities of an individual. [3] In addition, of course,
modern corporations have perpetual life, and can accumulate
assets and influence on a scale that no individual could ever
hope to acquire. Many international corporations have annual
budgets larger than the annual budgets of many developing
nations. (See REHW #467, RHWN #308 and #309.)
Because corporations cannot feel pain when the corporation hurts
someone or damages the environment, the fundamental constraint on
human behavior (personal pain) is missing from the corporate form.
This is a point worth emphasizing. It is principally through
pain that humans learn to control themselves and civilize their
behavior. A baby tries to crawl through a solid door; the
resulting bump on the forehead teaches something fundamental
about limits imposed by the external world. Later, the baby
wants someone else’s ice cream cone, takes it, and gets
punished–a painful but important lesson on the limits of
personal behavior. As we grow, we develop an individual
conscience; antisocial behavior begins to hurt us because we feel
guilt and remorse. Thus do we learn to control our selfish
impulses.
Corporations cannot feel pain. After they grow to a certain
size, no penalty or fine can effectively hurt them. They simply
pass the cost on to shareholders and customers. Even if a
handful of executives are put in jail, the corporation itself
goes on, largely untouched.
You can think of a corporation as a smiling giant that has
perpetual life, cannot feel pain, must constantly grow larger
(doubling in size every decade or so), must deposit its excreta
in public places and do everything else it can to make its
neighbors and compatriots pay all its costs of living. Its legal
form requires the corporation to spend billions hiring armies of
talented specialists in law, public relations, media
manipulation, and the science of persuasion, all aimed at making
the corporation appear as nothing more than an ordinary concerned
citizen. This smiling colossus is a frightening alien indeed.
We have many thousand such creatures among us now. Legally
prohibited from sharing in the milk of human kindness, and
increasingly free of social (regulatory) constraints because of
modern “free trade” legislation (NAFTA and GATT –see RHWN #303,
#304, and #305), corporations are now poised
to transform the
planetary ecosystem on a scale and at a pace unimaginable just 30
years ago.
There seems little doubt that the majority of corporate
decision-makers are well meaning people, as individuals.
Nevertheless, the need for constant growth (on average), and the
need to externalize costs, combined with an enforced freedom from
personal responsibility and liability for the corporation’s
actions, add up to a corporate culture that is prone to cut
corners, shrug off responsibility toward its neighbors, and
exhibit behavior that could only be called, at best, selfish and
antisocial and, at worst, sociopathic.
Humanity is clearly endangered, and we face two hard paths:
business as usual, or real change adopting pollution prevention
with its attendant dislocations. Down the one path very likely
lies the eventual destruction of our species. Down the other, at
least a hope of salvation.
Naturally corporations will not sit by while fundamental controls
are imposed upon their behavior. It is their nature that they
must fight to retain their present privileges. They have to.
Corporate managers are not bad people. On the contrary, they
are, most of them, good people. But they are ethically
imprisoned by the corporate form. Even if a majority of
decision-makers inside American corporations agreed that they
were destroying the planet, industry would not be able to make
the needed shifts. Existing incentives are simply all wrong.
Now, therefore, the time has come to liberate our friends and
compatriots trapped inside the ethical perdition of the corporate
form. They know what is right, just like the rest of us. Like
the rest of us, they understand some of what must be done. Yet
they are powerless to do the right thing and make the needed
changes.
We could liberate our compatriots from the corporate form by
providing corporations with at least two key changes, to give
them real incentives to curb their own worst tendencies: [4]
One: we could remove from corporations the Constitutional
protections of a natural person (for clearly they are nothing
like one).
Two: we could revoke the corporate charters of those that insist
on doing major harm. “Three strikes and you’re out,” is the
current phrase advocated for individual criminals, and it could
be applied to corporations. Three felony convictions and you
lose your corporate charter. The corporate charter is the paper,
issued by state legislatures, that bestows upon any corporation
the privilege of doing business. Denying a corporation the full
Constitutional protections enjoyed by a natural person is only
logical. Natural persons can go to jail or face fines that bring
ruin. But corporations cannot go to jail or even be effectively
fined. Corporations cannot feel embarrassment, guilt or remorse.
To restore to corporations some human dimension, they could be
denied the Constitutional protections of the individual citizen.
Legal historian Carl Mayer suggests a new amendment to the U.S.
Constitution, as follows: [5]
THIS AMENDMENT ENSHRINES THE SANCTITY OF THE INDIVIDUAL AND
ESTABLISHES THE PRESUMPTION THAT INDIVIDUALS ARE ENTITLED TO A
GREATER MEASURE OF CONSTITUTIONAL PROTECTIONS THAN CORPORATIONS.
FOR PURPOSES OF THE FOREGOING AMENDMENTS, CORPORATIONS ARE NOT
CONSIDERED “PERSONS,” NOR ARE THEY ENTITLED TO THE SAME BILL OF
RIGHTS PROTECTIONS AS INDIVIDUALS. SUCH PROTECTIONS MAY ONLY BE
CONFERRED BY STATE LEGISLATURES OR IN POPULAR REFERENDA.
The second reform –allowing for revocation of the corporate
charter –would permit corporations to mold their behavior in
response to a real threat of capital punishment, counterbalancing
the short-term need to externalize costs and make a profit.
Charter revocation spells corporate death. Such a threat would
give everyone in the corporation an enormous incentive to check
corporate crimes and harms before they got out of hand.
Outfitting corporations with a perpetual threat of death would
concentrate the minds of management, shareholders and workers
wonderfully, providing a strong, continuing incentive for ethical
behavior. Such a perpetual threat would humanize and civilize
the corporate form, which in recent years has arguably emerged as
our most rogue and dangerous institution.
                
                
                
                
    
–Peter Montague, Ph.D.
===============
[1] Lester R. Brown and others, STATE OF THE WORLD 1994 (New
York: W.W. Norton, 1994); Lester R. Brown and others, VITAL SIGNS
1993 (New York: W.W. Norton, 1993).
Descriptor terms: global environmental problems; corporations;
liability; corporate reform; nafta; gatt; personification; fines;
personhood; penalties; u.s. constitution; bill of rights;