Corporate Bashing II

Corporate bashing for sport just isn't Green. (See my previous post, A New Approach to Corporate Bashing ) But it is pretty irrefutable that the corporate structure is at the root of much -- but not all -- that is wrong and unwholesome about doing business in America.

I take it -- and I hope you will too -- as an unwritten part of the 10 Key Values that complaint without being part of the solution, or at least proposing and enabling solutions, isn't enough.

Grassroots democracy means that the grassroots not only gripe about what doesn't work, but help create a structure or institution or rule that does. What can we, a few simple Green grass-rootlets, do about a corporate world run amok?

First, A Reminder: The Two Big Rules of Corporate Behavior, Oversimplified

1. Limited Liability

Corporate shareholders, officers and employees have limited liability for the debts and bad acts of their corporations.

2. Profit for the Shareholders is The Only Legitimate Business

As protection for minority shareholders, one of the corporate rules that has evolved is that corporate managers and majority shareholders must, in essence, pursue only profitable activities. That is, a corporation simply may not do something because it would be nice to do it, or to benefit the majority over the minority.

This way, a majority shareholder couldn't control a company to, say, buy raw materials from another company also owned by the majority shareholder, and pay stupidly high prices for raw materials; or buy a house for the majority shareholder's uncle Larry -- all with the minority shareholder's money.

Now wait! you say, corporations give money to charity all the time! Yes they do: Giving to charity or doing a very public good turn is justified as good public relations, and as a one of many ways to increase corporate "good will" and thus sales and cash profits. Without that justification, good corporate deeds are essentially illegal.

The problem is, now some minority shareholders would rather sacrifice some company profit in order to make money without destroying the ecosystem.

Or if some shareholders think it would be good to earn enough to make a modest living themselves, while providing a good non-exploitative living for their employees too, a minority of greedy shareholders could sue to block such a plan. Bottom line: Unless a profit case can be made for that practice, it can't be imposed by the company.

The Practical Effect of Still Further Oversimplification

The over simplification of these two concepts in practice within corporate America leads to a pretty bleak place: Corporations exist to make profit only and every activity must exist to secure more profit. Although some "good" acts are done, they must have a positive impact on profits, making corporations seem cynical and crass.

Make a product that kills 200 people a year? Sure, if company losses due to those deaths out-value (in cash costs, not mere humanity) the profit to be made from the product.

But isn't that murder, to knowingly kill 200 people? Not necessarily. Remember Rule 2: Individual shareholders and managers are not responsible for corporate bad acts, for the most part. (This has started to change, actually, but please bear with the oversimplification. )

So: Making a product that kills 200 people is profitable, and killing people will not have personal consequences for the actors, and only minor financial consequences for the company -- so a dangerous product gets made.

Now it is not quite that simple in practice; there are many rules that restrict specific situations where, say 200 product units out of 200 killed people. And we have some health and safety regulations that must be met. But consider cigarettes: A legal product, used correctly, cigarettes kill more than a few folks, yet somehow no one goes to jail.

One More Oversimplification: An Accounting Principle

Money, goods, services have book value; a better world does not.

If destroying a forest to get the timber does not have direct economic costs to the company, then it does not need to be accounted for on the company books.

Now see oversimplifications 1 and 2, above: Non-responsibility and the profit requirement essentially demand that as many costs as can be shifted should be shifted off the books and on to the public.

Farming trees costs money and reduces shareholder profit; all the inputs get paid for in cash, on the books. Logging in old growth forests costs less; no ongoing tree-farming costs, and the government conveniently allows timber cutting leases at rates that usually assure that loggers make a profit -- again without accounting for the environmental, secondary effects of the choices. As a profit-required company, where spending shareholder equity on a personal moral choice can get you sued, which should you do? Go with the most profitable, of course.

Similarly, health care costs due to tobacco related diseases do not fall to the producers of tobacco, so they are not accounted for by the company. (This was, in part, the strategy of suing tobacco producers for user deaths -- convert the deaths into understandable language.)

On a less highly-charged front, the cost of disposing of wasteful or environmentally unsound products or packaging are likewise passed on to the society at large. The company doesn't have to find landfill space, or account for the environmental damage of using so many resources in one-use packaging.

What's A Green To Do? Change the Rules!

These three modern elements seem to me to account for a significant portion of all the corporate bad acts in the world. (The final factor is simple greed, but without these enabling rules greed would have less easy and ugly negative consequences.)

There are a number of proposals floating around to change the rules on just these points; and since most corporate rules are set by states, not the feds, it is entirely feasible to jigger a state's corporations code to create a new creature: The Ethical Corporation.

Delaware did it long ago: For decades it has been known as a state with rules friendly to corporate majorities, and thousands upon thousands of "Delaware Corporations" exist that have never been to Delaware other than as a mail drop at a service bureau or law firm.

One last caveat, though. The new ethical-corporation would have to be voluntary at first.

Ecorp: The "Fair Trade" of Corporate Structure

The howls over a sudden shift to a mandatory ethical corporate structure would be so shrill, so panicked -- so desperate -- that the idea would likely die aborning. And one can set aside any cynical ideas over the emptiness of corporate souls. All persons resist fundamental change to some degree, and if the change suggests that one has been morally bankrupt in a lifetime of business activity, the natural resistance to change will be even greater.

And so we might create an additional, purely voluntary, class of corporation, the e-corp or Ethical Corporation. There could even be two forms of e-corp, those allowed to be Ethical Corporations, all or some of the time, and those required to follow a transparent e-corp structure.

As people realized that they could buy products from certified ethical corporate actors, or invest in such companies, the market could easily begin to correct the unfortunate trend line of two centuries of corporate behavior.

Do I have the detailed proposal? No. Perhaps you have some ideas and can email or comment. Being part of a workable solution, even a first step solution like the Permissive Ethical Corporation, is far more helpful than breast beating and teeth gnashing over "corporate evil."