Corporate Values: A Response to an American President's Plan for Corporate Responsibility
In introducing his 10-point plan for corporate responsibility, George W. Bush observed that "the strength of [our] country depends on the values of its citizens." He could not be more right. However, the problem is most of America's most powerful citizens, its large corporations, have no values at all. This lack of values is in evidence every time a corporation makes money at the expense of the dignity of human beings, the welfare of our communities or the protection of our environment.
Citizenship in the United States comes in two forms: individual citizenship (referred to at the outset of the U.S. Constitution as "We the people") and corporate citizenship which has existed since 1886 when the Supreme Court decided corporations were entitled to constitutional protection as if they were citizens.
Corporate interests are now protected by the due process and equal protection clauses of our constitution. Large corporations and their trade associations use their right to free speech to lobby our elected representatives to the point where many say they control our government. Yet, most corporations have none of the values of citizens that the president spoke of as being necessary in order to keep America strong.
To understand why this is so, a brief lesson in corporate law is helpful. Each of our fifty states has its own corporate law allowing corporations to be formed and establishing the rules for how such corporations are to operate. Each of these laws has something in common with each of the others. Each says that the only goal of corporations formed in that jurisdiction is to maximize profits for shareholders. In effect, each state does something for corporations that it does not do for its individual citizens -- it dictates their purpose. This purpose, the pursuit of corporate self-interest, drives all corporate action. Every act carried out by a corporate employee can be traced back to this purpose established in the corporate law.
Unfortunately, the corporate laws of the fifty states do not go on to provide corporations with values, principals or standards that should be adhered to in pursuing the goal of profit. Consequently, unless self-imposed, corporations are devoid of such values. The problem with self-imposed values is that they are largely non-binding, can be subject to legal challenges from shareholders and are often ignored or quickly discarded in a world of hostile takeovers, mergers and acquisitions and fast moving, fast talking corporate executives.
In light of the president's observation, the lack of values in our large corporations is extremely troubling. The question is what to do about it.
Corporate citizens do not have values because we have not yet included them in the corporate laws. Such values can be imposed by simply changing the corporate laws to make it clear the pursuit of corporate profit should no longer come at the expense of various elements of the public interest including the environment, human rights, the public safety, the dignity of employees and the welfare of our communities. Until this happens, our country will continue to be run by citizens driven only by unfettered self-interest, citizens without values.
The president is correct, the presence in our citizens of values that show respect for our fellow human beings and the environment makes America strong. The absence of these values, especially in our most powerful citizens, tears at the fabric of our society and, eventually, will result in its undoing. Corporations have all the rights of citizenship already. Imposing some of the values and obligations of citizenship should be a top priority.
Robert C. Hinkley is a corporate securities attorney and a former partner at Skadden, Arps, Slate, Meagher & Flom LLP.