IT'S TIME TO CHANGE A BAD LAW
The purpose of government is to provide its citizens with the security they cannot otherwise provide for themselves. In liberal democracies, governments act by passing and executing laws. Laws get passed when harmful behaviour surfaces and elected leaders determine it must stop. In this way, government contains abuse of the public interest and provides security.
Laws should never encourage citizens to harm one another. Any law that does, runs counter to the entire idea of government.
Nonetheless, at least one law does just that. As it currently stands, the duty of directors contained in the corporate law encourages anti-social corporate behaviour that harms people, the environment and other elements of the public interest. Let me show you how.
Businesspeople don’t usually start out to harm the public interest. They start a business and set up a corporation. Then, after the company has become successful and large amounts of money are invested, it discovers its operations or products are damaging the environment, the public health, our communities or some other element of the public interest.
The law says, directors must at all times “act in the best interests of the corporation.” Their lawyers tell them this means their priority is to protect the company’s assets (and the shareholders’ investment). Stopping the harm will cause the company to write off money it has invested in its manufacturing facilities and brands. How can this be in the best interests of the corporation or shareholders?
When the amounts are relatively large, it can’t. In this case, the law discourages directors from stopping the damage and encourages them to continue. The duty of directors is the only law I can think of that encourages a citizen to continue its destructive behaviour rather than restricting it. This should be changed.
Government should put everyone on notice that corporations are not to be used to harm the environment, human rights, the public health and safety, the dignity of employees or the welfare of the communities in which the corporation operates. When directors discover their company is harming the public interest, their duty should be to find a way to make the damage stop regardless of the financial consequences.
This may sound harsh, but it’s only because we are used to companies getting the own way and the economy taking priority over everything else. Why should it be that way? Profits and protecting the public interest are not mutually exclusive. We can have both.
The law should require companies to not operate at the expense of the public interest. Changing the duty of directors will cause the companies doing the most damage to change their ways. The change will send a message to all directors that our planet, our health and our communities are more important than their company’s earnings per share.
In a democracy established to provide security for everyone, that’s the way it should be.