Despite all the laws and regulations that apply to corporations, which for the most part are designed to make corporations more responsive to the greater good, corporations have wreaked great harm on our environment, their workers, their customers, the general public, and other corporations. Despite all the rules, capitalism has been allowed to run pretty much rampant.
The problem is not that the laws and regulations are not enforced, although that is partly true. The problem is more that the laws and regulations are weak because of the strong influence corporations have on both Congress (this is true of Democrats as well as Republicans) and those responsible for regulating.
But the more basic, functional, aspect of the problem is that the context has always been corporate interest v public interest. Corporations are structured in such a way that their only interest is the bottom line, how to constantly increase their profit and so please their shareholders. That is the source of the problem. And that is what must be reformed.
People will say that it is the nature of the beast for corporations to be concerned solely with their bottom line. That is certainly true for the beast as it has been formed. But there is nothing inherent in the idea of a corporation or capitalism which makes it inimical to factoring in a concern for the public good. The essence of capitalism is that control of the means of production and the distribution of products lies in private hands; that will remain unchanged.
My point is that we must rethink what a corporation is. What is its function in our economy and society?
Corporations, all business models, are a creature of the law. Corporations are allowed the benefits of incorporation because they provide something of value … they are critical to the economic health of the country and of their workers. They also thus meet a societal need.
So from a governmental/societal perspective, corporations exist to enhance the greater good. Unfortunately, as we have seen repeatedly ever since the industrial revolution, corporations have been mostly intent on making money and so have done much that harms, that is not in keeping with the greater good. Often with full knowledge.
The answer to this conundrum is to reform the laws under which corporations are organized by restructuring their governance. The goal of this effort should be to make consideration of the greater good … the public interest as well as worker interest … an integral part of the corporate decision making process.
I propose that this reform have four primary elements:
- By law, the primary mission of each corporation should be to enhance the greater good. To do that, it must be successful and prosper, and so the goal of the corporation to prosper and make money for its shareholders would not be altered by any of the proposed changes. It would, however, be tempered by this new context, by these changes. No longer would the only factor be impact on the bottom line. Now there will be other important factors to be considered.
- By law, Boards of Directors should include a stated percentage of directors (perhaps 25%) who represent the interests of the greater good and the interests of workers.
- By law, all management decisions, whether regarding products, or methods of manufacturing, or personnel, must include a consideration of the impact of the decision on their workers and the greater good. Any decisions directly impacting workers should be arrived at with worker participation. This will engage corporations in a more healthy, long-term perspective, rather than the short-term one resulting from the current emphasis on stock price.
- By law, there should be a public ombudsman in the hierarchy of each corporation that sees that the law is followed not just in spirit but to the letter.
Most people currently involved in the management of corporations and most shareholders, as well as the broader market, will most likely not react kindly to these proposed changes. They would involve both a major change in corporate culture as well as a reduction in the financial benefits that accrue to those running and investing in corporations.
But with the passage of time, with the emergence of a new generation of business leaders, these changes will become such a part of the corporate method that it will be hard to imagine that it was ever otherwise. This is the rational way to manage a business if it is to be not just productive but a good citizen of a reformed society.
If we are to reduce not just the inequality that is present in America but insure that corporations are working towards a goal that includes the greater good, then this reformation has to take place.
