Democracy and Corporations
By Robert C. Hinkley
4 January 2023
Happy New Year everyone.
Left alone, some people will use their freedom to infringe on the lives and rights of others. The origination of the modern democracy gave hope to the idea that the peace and public interest could be preserved by a system of laws enacted by the elected representatives of the governed—a government by the people, of the people and for the people.
The assumption was that when the peace was disturbed or public interest harmed, the violator could be prosecuted or, if no law was broken, a new law could be passed making sure it would be prosecuted the next time. Punishment made future violations less likely. Laws enacted by duly elected leaders could provide security for all.
When the modern democracy was invented in the late 18th century, people’s ability to harm the public interest in any significant way was non-existent. Protecting the public from severe harm was not difficult simply because the capacity of people to cause it was relatively insignificant.
Now, the situation is different. A new kind of citizen has been introduced, the modern corporation. These organizations involve large numbers of people acting collectively backed by billions in capital. They employ the latest technology. They act not just locally, but globally. Many can do more damage in one afternoon than a human being can do in a hundred lifetimes.
Finally, they are politically powerful, capable of delaying and frustrating democratic government from passing new laws necessary to make them stop their destruction of the public interest. The original assumption upon which democracy was founded (i.e., the public interest can be protected from severe harm by a system of laws enacted by the people’s elected representatives) no longer applies. Consequently, the destruction of the environment and other elements of the public interest by big companies continues and democracy fails to uphold its promise.
We can no longer presume that a law can always be passed to make corporate destruction stop. The combination of companies capable of causing severe damage and government incapable of making them stop puts the world in a perilous situation. There is only one solution.
No government sponsored organization should ever be allowed to inflict severe harm on the public interest. Corporations wouldn’t exist if the corporate law enacted by the state didn’t provide for their organization and allow their operation.
They should be prohibited from causing severe damage to the environment, human rights, the public health and safety, the dignity of employees or the well-being of the communities in which they operate from the day they are organized. It should be part of their design. Existing law should be amended to require company directors to cease and desist any such behaviour whenever it is discovered.
This only sounds like a radical idea because we have lived so long with the mindset that the economy comes first. “We need the jobs. Who cares if the industry in which we work destroys the planet or kills millions of people each year?” Please take a minute to consider how silly this is.
At best, it is a bad trade which favours the haves at the expense of the have nots. At worst in could doom human existence. At its essence, it means mankind should serve corporations rather than the other way around.
Far from being radical, changing the form of the corporation has happened before. When first conceived, the government (i.e., the Crown) kept companies on a very tight leash. They could lose their charters if they behaved badly. This remained true when the American democracy was formed in the late 18th century. Their purpose, size, duration, and ability to own other companies were strictly limited.
The law was only changed to encourage the unbounded pursuit of self-interest (i.e., profit) when the Industrial Revolution began to take hold nearly a century later. It can encourage companies to continue their destructive behaviour. When it does, it makes corporations the only citizens that government encourages to be poor citizens. Remarkably, this change is still in place today.
Circumstances have now changed again. What might have made sense more than a century ago doesn’t any longer. Companies are bigger, more destructive, and politically more powerful than before. Accordingly, a change to their mission is again necessary.
The state should never encourage poor citizenship. Government must make it clear that severely destructive corporate behaviour no longer acceptable or permitted.
Directors should be required to never allow their companies to go over that line. When companies do so unknowingly, they should be required to make it stop once the harm becomes apparent.
The effect will be to redefine normative and acceptable corporate behaviour. It will recognize that profit and protecting the public interest from severe harm are not mutually exclusive and, of the two, protecting the public interest has priority. It’s the only way government by the people, of the people and for the people will succeed.