Re-Programming the Corporation
Updated: Mar 19, 2021
By Robert C. Hinkley
19 March 2021
The idea of the corporation was conceived many centuries ago. Imagine if that hadn’t happened and, until today, there were still no corporations. If they were first being established up today, how would you set them up?
Legislatures of long-ago designed companies with one purpose—to make money. They instilled that purpose by requiring the people in charge of corporations (directors) to always act in their company’s best interests, even if doing so resulted in harm to the public interest.
Think about that for a moment. The law created an entity with no conscience or obligation to look out for others, our environment or our communities. Worse still, it told their management its job was to protect the company and its assets no matter what.
Without breaking the law, big companies every day do more harm to the public interest than the average human being can do in a lifetime. Think climate change, third world sweatshops, employees being paid less than a living wage, social media companies using algorithms that result in our communities being torn apart, tobacco killing millions of people a year, etc.
There’s been a lot of talk about how this behaviour should be stopped, but so far very little success at stopping it. Maybe it’s because corporate managers are totally focussed on protecting the company and not at all focussed on being good citizens. Maybe it’s time to even this up.
How companies make money is important. They can make it while damaging the public interest or they can make money while preserving the public interest. The latter is preferable to mankind even if it is more expensive for the company.
Corporations didn’t spring forth from the Earth after a good rain. They only exist because a law passed by men (there were no women legislators back then) said they could exist and designed how they would operate.
The corporation is a little bit like HAL, the computer in 2001: A Space Odyssey. It was HAL’s job to operate the spaceship on the way to Jupiter. There turned out to be a programming flaw in HAL that made the computer more important than the astronauts’ survival. As a consequence, HAL started killing them.
The law programs corporations in a similar way. The duty of directors to always act in the company’s best interests puts the survival of the corporation ahead of the protection of our environment and our communities. This is a programming error.
So, if you were a legislator today and had the chance to re-program the corporation, how would you do it? Would you want them to make money even if they were destroying the public interest or would you prefer a change where making money did not come at the expense of the environment, human rights, the public health and safety, dignity of employees or welfare of the communities in which they operate?
This isn’t an academic question. Right now, in the spring of 2021, the European Union (EU) is considering the very same issue. See Blog--European Union Looks to Improve Corporate Behaviour(www.codeforcorporatecitizenship.com.)
The key to better corporate behaviour is to bring more balance to the instructions the law gives corporate managers. Corporations wouldn’t exist if governments didn’t pass laws to create and operate them. Government’s job it is to protect the public interest. Entities it creates (corporations) should not be programmed to attack it.
The 27 member states of the EU should decide to make it clear our planet and mankind’s survival comes first. That is, that the corporate pursuit of profit should not come at the expense of the environment, human rights, the public health and safety, dignity of employees and welfare of our communities.
I call this concept the Code for Corporate Citizenship (Code). It would prohibit any corporate behaviour which would harm one of the protected elements of the public interest, regardless that the behaviour in question might technically be legal.
Re-programming the corporation in this manner will take away the excuse directors currently have to ignore the public interest. Instead, it will require them to respect it. Among other benefits, this shift could eliminate the cause of climate change and make all companies socially responsible. Let’s see if we can get it done. At the very least, it’s worth a try.