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 Seeing corporations in a different light
There are five ways to approach the question of corporations. Only three are ever discussed with any frequency. The remaining two, whilst being the most radical, tend to be ignored or unrealised, says Dan Bennett.
1. Pro-Corporation – The approach of those running corporations and their supporters is that corporations should be given total freedom - those running corporations should be entitled to take whatever actions and whatever risks necessary to make a profit.
Giving the corporation all the rights of a real person allows any business activity to be undertaken. Limiting the liability of the corporate person allows the taking of entrepreneurial risks that no real person could afford to take. This method produces the maximum profit. Any interference with the corporate form would hinder profit making and therefore harm society.
2. Liberal – Liberals recognise that the limit on the liability of those running corporations (directors and shareholders) allows them to take risks not just with capital but also with public welfare. It recognises that the complexity of corporate structures and the limits on their liability tends to put them beyond the law. This means that much of the cost of pollution, congestion and destruction caused by corporations are not borne by the corporations at all but by those individuals whose economic, social and cultural environment the corporation has entered. As corporations are not real people living amongst communities, they do not restrain their behaviour to avoid offending their neighbours.
Further, the corporate aim of maximisation of profit does not necessarily provide the benefits the public requires, as disposable products are created and scarce resources are plundered. The profit incentive of the corporation is often in direct conflict with the wider public welfare.
Liberals seek amendments to company law: e.g. imposing duties on directors of corporations to take into account environmental, social and cultural concerns when making their decisions. They also concentrate on consumer boycotts, hoping that the actions of consumers will replicate the role that neighbours play in ordinary society.
3. Socialist – Socialists recognise that the liberal approach, whilst restraining corporate behaviour to some extent through consumer boycotts, cannot deal with the wider effect corporations have on non-consumer groups such as environmental neighbours, local producers and anyone who did not want to buy the product in the first place. They recognise that the power of the boycott lies only in the hands of those with sufficient resources to be able to consume. Accordingly, the victims of corporate abuse rely on the support and patronage of those with purchasing power.
Socialists recognise that additional directors’ duties will not help as the corporation retains the right to freedom of action and outsiders will not be permitted to interfere with its activities.
Socialists see the alternative as state ownership of production to ensure that business is run for the benefit of society.
4. Democracy – The problem with state ownership of the means of production is that it replaces directors with bureaucrats who similarly have little interest in public welfare and little accountability. Those bureaucrats, whilst having all the powers of directors, have even less restraint on their activities. Further, it becomes impossible for anyone who wants to produce anything to do so freely and places the livelihoods of those who were independent and free from interference in the hands of the state. It becomes difficult to decide what should be put in public ownership and what should not.
This fourth approach recognises that corporations are the creations of the public, who recognise the need for certain business activities to be protected from crippling debts. Historically, this was how the canals and railways were developed - as no individual could take on the capital risk involved. Those corporations were considered as creations of the state to advance the public good, and they could accordingly be prevented from taking actions that would harm the public. Today this approach would make corporations subject to human rights law rather than entitled to its protection as virtual ‘people’.
Real people could complain that corporations were infringing basic civil, political, economic, social and cultural rights and demand that such infringement cease. This view of corporations recognises that profit-making business can be for the public good but only if it is not allowed to harm the public welfare. Rather than allowing the rights of the corporate people to compete with and trump the rights of real people, instead corporations would have no human rights but could simply operate where and how the public allowed.
5. Anarchy – This view recognises that a considerable problem with corporate activity is the absence of responsibility of those running the corporation. The corporate form allows (and in many situations obliges) the directors of the corporation to put profits before public welfare. And it may always be the case that where there is an opportunity for profit but also a risk to public welfare, the shield of the corporation allows its directors to take that risk.
The only way to re-establish the link between action and responsibility is to abolish the corporate form. Business and "free trade" can continue but only where those taking decisions and acting upon them are held individually responsible. Such a change would make it impossible for the large transnational companies to continue as the directors and shareholders would be unable to remain responsible for such wide ranging and costly risks and big business would disappear. However, small "business" – people making things and providing services – could still operate for profits.
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