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  • Robert Hinkley

Earth Day: Time to Begin an Election Day Discussion

Here’s is the problem in a nutshell. Big corporations which are destroying the public interest won’t stop voluntarily and governments can’t make them stop through regulation.

There’s only one solution.

April 22, 2022—The corporate law tells corporate directors they must always act in the best interest of the corporation. Until now, no one has questioned whether there should be limits on this obligation. The Code for Corporate Citizenship (Code) stands for the proposition that there should be. Here’s why it’s necessary.

In a liberal democracy, the governed may engage in any behaviour that isn’t specifically prohibited by law. The system is based on the premise that human beings can be ruled by a system of laws. For the most part, the governed will self-regulate their behaviour and not seriously harm the public interest.

When they do cause harm, their elected representatives (i.e., the legislature) will pass laws prohibiting the abusive behaviour. In this way, the abuse will be contained and the governed will be protected, satisfying the purpose for which the government was formed.

When it comes to corporations, this system doesn’t always work. Big companies combine the efforts of thousands of employees backed by billions in capital. They have tremendous capacity to harm the public interest. Think about the emission of greenhouse gases that cause global warming and the deaths of more than 8 million people each year from the use of tobacco products.

The companies responsible for this destruction didn’t decide to go into businesses that would harm the public interest. Rather, they became successful and then developments in science and technology revealed the damage they were causing.

Current law requiring directors to always act in their company's best interest, makes them loathe to stop its abusive behaviour despite the damage it is causing. They reason, how can (i) stopping a legal and profitable business and (ii) writing off billions of assets, be in company’s best interests?

Instead of stopping, they take steps to preserve the status quo. They lobby to frustrate the passage of new laws or regulations which would curtail or stop the company’s behaviour. They deny their behaviour is destructive. Sometimes they commission fake science to misinform the public and its elected officials. They threaten to move to another jurisdiction (where the laws are less restrictive), causing a loss of local jobs. As these strategies prove fruitful, delay and legislative frustration mounts and the destruction continues.

The irony of this situation cannot be overstated. Companies formed under the auspices of government (the corporate law), end up destroying the public interest that government was originally formed to protect.

Worst of all is that people lose hope. They see their elected representatives powerless to curb corporate anti-social behaviour. They begin to question the benefits of government and with it, democracy itself.

Here’s is the problem in a nutshell. Big corporations which are destroying the public interest won’t stop voluntarily and governments can’t make them stop through regulation.

There’s only one solution. There must be certain results that, from the date of their organization, corporations are prohibited from causing, irrespective of whether the law at the time specifically prohibits the behaviour causing them.

Thinking about a list of such outcomes in the abstract might seem difficult. How do we know in advance what elements of the public interest big companies might destroy in the future?

But we can take some guidance from history. How about the environment and the warming of the planet to a point that poses a danger to hundreds of millions of people (if not, everyone on the planet)? How about the public health and safety and the deaths of millions of people every year from tobacco use? How about employees and the violation of human rights in third world sweatshops?

The Code identifies five elements of the public interest which directors should always be obliged to protect, irrespective of their duty to act in their company’s best interest. It would change existing law to provide directors also have a duty to prevent serious harm to the environment, human rights, the public health and safety, dignity of employees or welfare of the communities in which the company operates.

Today is Earth Day. Regarding the environment, the emission of significant quantities of greenhouse gases by the electric power industry and motor vehicles is without question causing serious harm. All credible experts say the time for remedying this problem is running alarmingly short.

Australia has a parliamentary election next month. The United States has elections to state legislatures this coming November. Every candidate for these offices should be asked whether they will support the Code and require corporate directors to protect the environment from serious harm.

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