Demands for Corporate Responsibility
Don't Go Far Enough

Dennis Fox

1996

Politicians and pundits from Democratic Labor Secretary Robert Reich to Republican commentator-turned-candidate Pat Buchanan are pushing corporate responsibility. Suddenly it's become reasonable to expect corporate executives to do something when their decisions harm workers, communities, and the environment. This new populism is a welcome development, at least when it's divorced from Buchanan's racism and jingoism. Unfortunately, it does not go nearly far enough. Instead of just proposing a few more regulations designed to ease the victims' suffering or asking corporations to be better citizens, when Buchananism fades we should reexamine the very existence of large business corporations.

There's nothing natural about corporations, and nothing new about calls for corporate responsibility. After the Revolutionary War, the newly independent American states recognized the dangers of concentrated wealth and power. When state legislatures approved corporate charters, they placed strict limits on corporate size and even on the length of time corporations could exist. And they required corporations to serve a public function. Making profits for shareholders was not the primary concern. When small corporations did cause harm, shareholders had to pay part of the damages.

Things have changed, and not for the better. In the nineteenth century, judges who believed in an alliance between Big Government and Big Business made the common law more corporation-friendly. These business-oriented judicial activists even announced that corporations were "persons" with constitutional rights. In the twentieth century, newly respectable corporate persons used their wealth to shape legislation in their favor. The result? Legislatures no longer require corporations to meet a public need. Corporate power and wealth are essentially unrestricted, crossing international borders at will. Workers and the public have little control over the decisions that affect them the most.

But, the economists tell us, at least the economy is strong. Work (often done elsewhere) generates profits for shareholders and corporate executives alike. This bizarre diagnosis of economic health may make sense to traditional economists, but I've never understood why the rest of us should buy it. True, we pay less for the products corporations churn out, if we still have jobs that let us pay for anything. But when corporations destroy communities and encourage environmentally destructive consumerism, shareholders receive dividends, not bills for the damage.

Can we make corporations more responsible? Not easily. For one thing, it may be unconstitutional. If corporations are persons, too, then how can the government tell them how to behave? The government can require us to follow the law, but not to behave "responsibly." A strategy to force corporate persons to behave more responsibly than human persons has a lot to overcome. Corporations have had a century and a half of precedents to fend off intrusions on their "personhood." The Campaign to Curb Corporate Power advocates a constitutional amendment to establish that corporations shall no longer be treated as legal persons. That would help, but the politicians who pass constitutional amendments aren't likely to follow the new populism that far.

There's a more significant problem: Requiring corporations to take into account the effects of their actions violates the public's belief that government should not butt into "private" business. We forget that capitalism developed before we had big corporations to kick us around. Two hundred years ago people understood the difference between the neighborhood grocer earning a living and vast concentrations of wealth controlled from distant places. That distinction has been erased in the popular mind. The belief that Walmart and McDonalds and AT&T have the same rights as individuals because they are "privately owned," despite the obvious differences of size, organization, and motivation, shows the power that comes from the ability to create legal and political ideology.

Ironically, when corporate executives claim for the corporation the free speech rights of real persons, or the right to buy other corporations, or to sell out their workers and abandon their communities, they win. But when they reject calls for social responsibility by claiming that shareholder profit is the corporation's only legitimate goal--because corporations are not "really" persons--they also win. Not a bad scam, if you can get away with it.

There's another complicating trend: Some defenders of the corporation increasingly claim that many corporations already are responsible. Ben & Jerry's Ice Cream and the Body Shop are mentioned frequently in these discussions as companies that are good for workers, customers, communities, and the environment. All that we need, supposedly, is greater realization by the rest of corporate America that socially responsibility is both inevitable and good for business.

This sounds good, but there's less to it than meets the eye. There's little evidence that voluntary social responsibility will become widespread. Most corporations do just fine without it. Corporations that make a point of acting responsibly tend to be smaller companies controlled by their founders. Once they grow, they junk the constraints responsibility forces upon them, as when Ben & Jerry's decided last year to abandon its relatively egalitarian wage structure to attract a Fortune 500 CEO. Appealing to the corporation's conscience makes little sense, since--again--the corporation is not really a person. It doesn't have a conscience.

Which is not to say there can't be a lot of window dressing. Corporations donate money to community causes, pay for public television, give workers a voice in establishing the work flow (at least the workers they don't fire). But this does little to reduce corporate power. And as Paul Hawken noted, even if every corporation on the planet adopted the environmental policies of Ben & Jerry's and the other corporate stars, the environment would still collapse. Environmentally friendly consumption is still consumption.

The bottom line is that even an ideal socially responsible corporation would retain too much power over our lives. A responsible corporate society would still reduce individual power and create cultural homogeneity. It would still transform the social and political landscape along with the physical landscape. And it would still create a society based on consuming. The socially responsible corporation would still perform cost-benefit analyses based on its own evaluation of costs to others and benefits to itself. And it would still be filled with managers and workers legally obligated to do what is best for the stockholders rather than what is best for the public, or even for their own conscience.

So what about the prospects of corporate reform? There's a long history of efforts to rein in corporations, mostly focused on exposing and punishing corporate crime rather than on limiting corporate power. Corporate lobbyists kill most legislative reforms, and in the last couple of years the Contract with America has made life for corporations even better. Thus, although occasional reforms might ameliorate some of the more blatant corporate abuses, reforms tend to go no further than necessary to dampen short-term public protests. They do little to reduce the influence of corporations on American life.

Although minor reform is not enough, extensive reform might be, even within the confines of a capitalist economy. We could make corporations accountable for preventable but unintended harms to workers and the public. We could hold shareholders liable for harms done by their corporations. We could make state chartering of corporations meaningful, with democratically devised restrictions on corporate power. We could reduce corporations in size and scope, and put them under community control. And we could recognize the obvious distinction between immense corporations and small businesses.

If these reforms were effective, American society would be very different. That difference would be good for most real persons, even if not for corporate ones.