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  • Robert Hinkley

Why Big Companies Do So Much Harm

23 May 2024


Something must be done soon to stop greenhouse gas (GHG) emissions by the big companies whose business is dependent upon the burning of fossil fuels (e.g., electric utilities and motor vehicle manufacturers). Speaking as a corporate lawyer of more than 40 years, I believe the blame for the climate crisis falls on a law that encourages business not to stop the damage it’s inflicting, and instead, encourages it to continue. 


This law is the duty of directors in the corporate law of every jurisdiction. It requires the people who run companies to act in their company’s best interests in all circumstances—even if it results in severe harm to the public interest continuing. In effect, this law dedicates the corporation to the unbounded pursuit of self-interest.


Here's an example of how it works. If you’re a director of a company that legally operates several fossil fuel burning electric power stations, you can’t say it’s in the company’s best interests to shut down those stations and write-off the billions of dollars of investment they represent. So, directors do what they can to deny the damage caused by GHG emissions and continue to operate.  


The duty of directors has been around since well before the time big companies acquired the size and technology which now allows them to cause severe harm. Now that they have acquired size and modern technology, how they are organized needs to be re-thought.


In a democracy there’s problems with the unbounded pursuit of self-interest, especially when the pursuer is a big company or industry that is politically powerful. When the pursuit is found to be causing severe harm to the environment (or another element of the public interest), big companies will first try to hide the harm, then deny it, and eventually, interfere in the legislative process to delay and frustrate new laws to stop it. 


The climate crisis shows us how effective this can be.  All it takes is good marketing and the clever manipulation of the electorate to allow politically powerful companies to block proposed new laws and continue their destructive ways.


This is where we find ourselves now with the emission of GHGs by the fossil fuel industry and its customers. The world has been trying to stop GHG emissions for more than 30 years without much success. Business won’t stop emitting GHGs and government seems powerless to make them. This is somewhat ironic given that corporations wouldn’t even exist if there wasn’t a government enacted law allowing for their creation and operation.


Businesses which severely harm the public interest should never be considered a vehicle for advancing the common good. Allowing them to destroy the environment to further the economy is a dead end, not the way forward. 


The answer to the crisis and other corporate abuses of the public interest lies in changing corporations to make them better citizens. Businesses should be prohibited from causing severe harm from the day they are organized. This means changing the duty of directors to make sure acting in the company’s best interests doesn’t include continuing to cause severe harm to the environment or another element of the public interest (e.g., the public health and safety).


Companies already have all the rights of citizenship.  They should also be subject to at least its minimal obligations (i.e., obligations to protect the environment and other elements of the public interest from severe harm). 


This isn’t too much to ask.  The overwhelming majority of companies don’t inflict severe harm. Changing the law will not affect them except to make them more cautious to ensure they don’t inflict such harm in the future. 


For the few that are already causing severe harm, however, we, the people who inhabit this planet, need to tell them they must stop.  They should be given a short period to change their behaviour or, if they won’t or can’t, be consigned to history.


All corporations should have a duty to (at least) not cause severe harm to the planet or the public. Imposing such duty should not be all that difficult.  The duty of directors is essentially the same everywhere. They must act in the company’s best interests. The change required is the same. Simply add “but not at the expense of severe damage to the environment.’’  I call these eleven words the Code for Corporate Citizenship (the “Code”).


Every candidate running for office this November should be asked:


Should corporations have the right to severely damage the environment until the government can pass a law to make them stop, or


Should the law be changed to include the Code, requiring all directors to make their companies stop inflicting such damage whenever it is discovered?

This is a simple question, the answer to which should not depend on the party of the candidate, whether they are right or left or progressive or conservative. Government should never have created institutions capable of causing severe harm which would not stop when the harm is discovered.  


If their response is other than the law should be changed (e.g., "It's a complicated question"), tell them you’ll be voting for someone else.


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