Getting a Grip

admin September 26th, 2007

(Frances) How many times have I heard progressives I admire, in trying to get a grip on what’s wrong with our world, repeat this claim: The problem is that corporations are legally required to serve only the short-term profit interests of  shareholders.

The much-admired film The Corporation says that corporations are legally required to behave like “sociopaths.” (Which evoked a big, approving laugh when I saw the film!)

I strongly disagree. Corporations are each chartered by a state and their charters require directors to serve the interests of the corporation, which is not the same thing as the immediate profit of shareholders. In fact more and more corporations are adding wider purposes to their mission statements.

Alexandra Lajoux of the National Association of Corporate Directors told our staff that “recent thinking is that the duty of the corporation is to the corpaoration as a whole, not just the stockholders but the creditors, the employees, even the communities in which they work, i.e. ‘the whole corporation.’” The crisis of corporate irresponsibility is that, of course, so many corporations are ignoring this broader view of corporate interest an still driven by desire for immediate gain.

But repeating the myth that corporations are legally required to behave badly is a huge mistake. It takes corporations off the hook. They can say, oh, but we’re just following the law!

Yes, we can and should take the next step and alter corporate charters explicitly to include “do no harm” clauses as well as challenge the ridiculous notion that corporations enjoy constitutional protections equal to real human beings–and Americans in some surprising localities are doing just that, as I recount in Getting a Grip. But no legal barrier prevents citizens now from altering corporate behavior.

That’s why I wrote the following letter to Business Week Online in response to an interview with former labor secretary Robert Reich about his new book, Supercapitalism. (His title itself is really unfortunate—for most Americans would assume that supercapitalism is just what we need in this competitive
era.):

“In his BW (9.10) interview, Robert Reich further confuses the debate over the social responsibility of businesses. ‘Don’t believe for a minute that a company is going to sacrifice profits for the sake of social goals,’ says Reich. Wrong. It’s not illegal for companies to give priority to social benefits even at the expense of maximizing profits, and some do. Moreover, as research increasingly links business success and social responsibility, some smart businesses are energetically adding social goals.

Finally, Reich argues that corporations respond only to the profit motive and to  control by government, so they are therefore not “social institutions.” Of course corporations are social institutions, in that they are shaped every day by the choices of purchasers and engaged citizens.

In rightly emphasizing government’s essential role, Reich belittles the increasing power of citizens now shaping corporate behavior through their choices about purchases, investments, and shareholder actions.”

Frankie

• Frances