15 August 2024
There’s an old Wall Street adage that goes, “You can make money as a bull. You can make money as a bear, but when you’re a pig, you get slaughtered.” It means that, when you take a position in a stock or bond, you can get into trouble if the position is too big, or you hold it too long. There’s another saying that “the most important four words in the English language are—up to a point.”
Both can be applied to the way business is conducted. It’s interests have been pushed too far for too long. If it isn’t tempered soon, the Earth and mankind may end up getting slaughtered.
Capitalism involves the aggregation of money in institutions (e.g., corporations, LLCs and limited partnerships) for the purpose of making money for investors. Putting money together in these institutions funds the development of new technologies and economic growth. These are good things. However, sometimes these institutions are discovered causing severe harm to the environment or another element of the public interest.
Companies don’t start out to make money this way. When they cause great damage, it usually builds up gradually. By the time the severity of the harm is realized, the industry involved has billions of dollars invested. Stopping the harm is difficult because it will entail writing off the value of these investments and often require the development of new technology.
This is where big corporations sometimes become pigs. They continue to pursue profits in ways they know have become severely destructive. While they’re not yet doing anything illegal, they lobby elected officials to delay and frustrate the enactment of new laws which would require the closure or modification of their businesses.
But it’s not just companies and their directors who become pigs. So do the politicians who go along, and those who do not make their elected representatives change the law to stop the continuing harm. They rationalize maintaining the status quo which is working well enough for them personally. They are all enablers.
As a consequence, greenhouse gases continue to build in the atmosphere. Other harms (e.g., millions of people dying every year from tobacco) get worse as well.
As these problems grow, something much worse happens. People begin to give up hope that the problems will ever be solved. This leads them to lose faith in the idea that their government can protect them, or that it even cares about them. They begin to give up on democracy and look for other solutions.
Stopping the harm requires letting go of the thinking that there is nothing more important than the economy and that, to further it, corporate abuse of the public interest is sometimes necessary. At least with regard to abuse that causes severe harm, this is nonsense. It isn’t true.
Indeed, it is incompatible with liberal democracy which must first enact laws that protect the public interest and the wellbeing of all. The economy can be a part of that, but it should be a minor and secondary consideration not the first and only one.
Institutions that allow capital to be aggregated are useful—up to a point. That point is reached when the institution or an industry is discovered causing severe harm to the public interest. No business should be allowed to go that far. Companies must understand, from the day they are organized, that if they are discovered causing severe harm to the environment or other elements of the public interest, it must cease regardless of the adverse financial consequences it may suffer.
Only government can make this happen. The law in every jurisdiction which now provides managers must act in their company’s best interests must be changed to include a proviso that any such action must no longer result in severe harm to the environment, human rights, the public health and safety, the dignity of employees or the wellbeing of the communities in which the company operates.
These 29 words, a Code for Corporate Citizenship (Code), will put a stop to a significant portion of greenhouse gas emissions and have the potential to save the Earth from impending environmental disaster. By making corporate directors more cautious with the public interest at every board meeting, it also should eliminate numerous other corporate abuses.
Companies can do both: make money and not cause severe harm. The continuing existence of those that cannot, can no longer be justified. Changing the law in this manner will both reform and re-invigorate capitalism, not eliminate it. The Code will merely modify it to be less destructive and more humane.
Enactment of the Code will mark an evolutionary step in the way business is conducted. It will show people that their protection and the protection of the public interest has priority over the profits of big companies. This will go a long way towards restoring community as well as hope in democracy and the future.
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Photo by Jack Hinkley. Sculpture by Marguerite Derriicourt commisisoned by The Corporation of the City of Adelaide.
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