In our society, those entrusted with control of a corporation are bound by a fiduciary duty to the stockholders. This duty is paramount and cannot be ignored to suit the personal morals or conscience of those who exercise the control; any attempt to follow personal conscience over stockholder rights might potentially be regarded a a breach of fiduciary responsibility.
“A fiduciary must not put himself in a position where his interest and duty conflict.”
—Wikipedia
As a consequence of this rule, corporations often behave in a way that favors the survival of the company at the expense of individuals. (Although, as Greenspan alluded to in his shocked near-apology in October 2008, there are nuances even within attempts to do well by the company, since issues like short term vs. long term success can matter.) But no matter how you slice it, employees are necessarily way down on the list of concerns that a company has, because a company is worried about its own survival first, not about its employees’ survival. Corporations, by design, care primarily about one thing: themselves and their own survival; all other considerations are secondary.
It’s a curious and controversial aspect of law that corporations are also permitted to operate as legal persons This gives them some of the rights of human beings, sometimes called natural persons to distinguish themselves from—well,—other kinds of persons. For example, legal persons are able to own property, enter into contracts, and be involved as parties to lawsuits.
It seems like almost the stuff of science fiction, having people who are not really people. Humans often express a reasonable and well-placed concern about the concept of human-like entities moving in and among us, but without ethics, morals, or scruples. It’s the reason Isaac Asimov suggested his Three Laws of Robotics, a set of rules he felt should be incorporated (pardon the pun) at a low level in all robots, assuring their ethical participation in society.
The Three Laws of Robotics
A robot may not injure a human being or, through inaction, allow a human being to come to harm.
A robot must obey orders given to it by human beings, except where such orders would conflict with the First Law.
A robot must protect its own existence as long as such protection does not conflict with the First or Second Law.
But, unfortunately, corporations are just very clever robots (with full access to human intelligence but explicitly forbidding the application of human ethics). And there is no notion of Three Laws that applies to corporations.
Indeed, corporations seem in many way more analogous to human sociopaths, that is, persons exhibiting dissocial personality disorder. Perhaps we could borrow from the metaphor of legal persons and say they are legal sociopaths. Among humans, we generally fear and revile sociopathic behavior. But for some reason we tolerate it in corporations.
According to Wikipedia, the World Health Organization maintains a classification of diseases that describes the disorder this way:
Dissocial Personality Disorder
Callous unconcern for the feelings of others and lack of the capacity for empathy.
Gross and persistent attitude of irresponsibility and disregard for social norms, rules, and obligations.
Incapacity to maintain enduring relationships.
Very low tolerance to frustration and a low threshold for discharge of aggression, including violence.
Incapacity to experience guilt and to profit from experience, particularly punishment.
Marked proneness to blame others or to offer plausible rationalizations for the behavior bringing the subject into conflict.
Persistent irritability.
The WHO’s ICD-10 description notes that this includes amoral, antisocial, asocial, psychopathic, and sociopathic disorders, but not conduct disorders or emotionally unstable personality disorder.
Now I’m not medically trained, but it wouldn’t matter anyway. We’re talking metaphors, and the metaphor is going to be imperfect. I think the high level point is that this is the set of disorders that isn’t about being compulsively unable to control oneself, but is instead is about thoughtfully (some might even say rationally) planning and executing on actions that prevailing social norms would normally forbid.
The usual explanation one might expect from a corporation is that the so-called prohibition is in fact not legally forbidden, and therefore is allowed, perhaps even encouraged. (For more on this disturbing line of reasoning, see my essay, “Whatever Should Be, Should Be,” about the perils of the world “should” as a term of specificational requirement.) This fits in perfectly with the item “Gross and persistent attitude of irresponsibility and disregard for social norms, rules, and obligations.” After all, if you don’t believe that social norms are a rule or obligation, it’s easy to see how “incapacity to experience guilt and to profit from experience” can result.
I sometimes find myself wondering how the world would be different if there were a Three Laws safeguard built into corporations. Something like:
The Three Laws of Corporations
A corporation may not injure a human being or, through inaction, allow a human being to come to harm.
A corporation must obey orders given to it by human beings, except where such orders would conflict with the First Law.
A corporation must protect its own existence as long as such protection does not conflict with the First or Second Law.
It sounds a bit harsh, and in fact I doubt all possible consequences of every action could be so thoroughly worked out. Even a modest start, replacing “human beings” with “its employees” would be a big improvement. That wouldn’t fix everything, but it would be a big step forward over what we have now. Among other things, that would mean that employees could freely contribute to the success of their company knowing that that company had their best interests at heart. In the modern world, that’s not the case. It’s not just that it’s unlikely. It’s that it’s not even allowed by law.
Of course, the more pragmatic among us might suggest the even simpler idea of removing the notion of “legal personhood” from the law in the first place.
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It will be interesting to see the conversation that ensues hereafter.
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I had the vague impression the Japanese system used to offer more balance (some sort of responsibility to employees) and that the US system somehow won out in a kind of meta-market of how to do business, but I'm not sure about that. Does anyone reading along know the history of that and want to enlighten me/us? Am I just imagining that this was so? I don't want to be spreading misinformation, so I emphasize that I'm not sure about this. But I don't have infinite time for research so I hope that by asking some dumb questions I can elicit some useful answers.
Agree with your thesis. Your ideas are very similar to those posed in the book Gangs of America (see: http://www.amazon.com/Gangs-America-Corporate-Disabling-Democracy/dp/B001NGNQ9W/ref=sr_1_1?ie=UTF8&s=books&qid=1233581081&sr=1-1) .
I think the case referred to is most likely First National Bank v. Bellotti, regarding an absolute ban on corporate campaign contributions in Massachusetts. It did not hold that such contributions couldn't be regulated the same as money given by individuals, just that a state couldn't ban them completely.
The Supreme Court line-up that voted to strike down the law (thus recognizing that individuals who come together in corporate form don't give up 1st amendment rights) consisted of the following: Stevens (still on Court, liberal), Potter Stewart (a leading advocate of civil rights) and Harry Blackmun (author of Roe v. Wade), plus Lewis Powell and Warren Burger. So three out of five deciding votes came from judges normally viewed as liberal, and in Blackmun's case very liberal.
To some extent, I regard the Three Laws approach more of a discussion point than a serious suggestion; the actual laws are not implementable because computing the direct and indirect consequences of any action is impossibly complex. So there's no real danger of execution here. If it came to a vote, I'd be there to vote against such a law in at least the literal form proposed here. And yet the notion that this set of issues needs to be addressed is clear, so engaging it for the purpose of discussion seems absolutely worthwhile. Sometimes practical solutions come from compromise. But one doesn't start with compromise. Justice, for example, is almost certainly an unachievable ideal in the general case. And yet discussing it as if it were achievable is often quite useful.
The history of the 14th Amendment seems to include an intent on the part of the giant corporations of their day, the railroads, to write a provision into law that would extend "personhood" to themselves. In fact, the case that broke this open, Southern Pacific vs. Santa Clara County (http://reclaimdemocracy.org/personhood/fourteenth_amendment_hammerstrom.pdf) was not decided on the issue of equal representation as the amendment was written, but a court clerk wrote into the headnotes that it was, and thus began the sordid history of "legal persons" hijacking "natural persons" rights.
Every one of us was taught about the Boston Tea Party, yet very few understand why the colonists did what they did. The world straddling East India Company was given special importation rights by King George after they gave him shares in the company. That allowed them to monopolize the trade into the colonies. Colonists feared this to the point that Jefferson wanted a "freedom from monopolies" clause in the Bill of Rights. Our first Revolution turned on the point of overpowering, soul-less corporations sucking the economic lifeblood out of the country. Will there be a second? Rated, as always Kent. Excellent work.
Any change in the for-profit law would miss many large businesses such as healthcare institutions and agricultural cooperatives that are organized as non-profits, and the non-profits would resist any change just as hard as for-profit businesses would. As someone who's been involved in two statewide efforts to amend a state constitution, I can tell you that you need massive popular support to collect the signatures, get out the vote, etc. This may be an issue that would generate that kind of enthusiasm, but given American's enthusiasm for using corporations when they start businesses, I think there'd be pushback. People sometimes forget that general corporation laws were a Progressive Movement cause; before state general corporation laws you had to go to the legislature to incorporate (or in England, the king or queen). General corporation laws enable everybody to obtain limited liability for payment of a fee and observance of fairly minimal requirements--it's very democratic.
Ralph Nader proposed national corporate law in one of his campaigns, but as with corporate law generally (yawn), it didn't get many people excited.
The legal fiction that corporations are "persons" is one of the roots of corporate evil in our society, and the idea that expending money is equivalent to speech is another
We badly need something like Isamov's three laws to control the amoral rapacity of non-human "persons"
And thus, the Republican Party funding mechanism was born. Ok, I added that part, but thats kind of what happened!
(I feel bad for leaving just a rah rah rah! comment, but... the discussion has already covered everything I'd ask or wonder about, so... rah rah rah!).
Also, we already make a distinction between killing for malicious reasons (murder) and for benevolent reasons (self-defense, to include wars sometimes).
Kudos - excellent post.
Rated.
It is akin to the delusion that permitting the greediest bastards on the planet unfettered access to the economic engine will somehow through the magic of "the market" result in the greater good. Even a lifelong Randian acolyte like Greenspan has been shown the error of that folly.
Organian, I haven't seen it but will try to find it. Thanks!
Without claiming to be an economic historian, I think you're basically correct.
But to add a few details ... This wasn't just a US/Japan thing. Even in the US, the ecosystem of corporations is an evolving battlefield. A generation or two ago, an employee might expect life-long employment at a place like GM, or IBM. Which is partially why it made sense to tie things like health care and pensions, to employment.
The new (US) model is lots of startups, and a kind of "serial monogamy" for employees. Work at one company for a few years, then move on to another one. There's currently some chaos, because health care and pensions haven't fully converted to following the employee, instead of the company (e.g. 401(k) plans, etc.).
As to your regret that "Japan-style" lost: you should consider that, while employees got more security that way, it also meant (1) that the leadership of the huge corporations had enormous power, and was difficult to dislodge; and (2) lots of good new (startup) ideas got suppressed, because they didn't fit into Big Company mold at the beginning.
Japan-style lost out, because those companies were run for the glory of the top executives, not even for their shareholders! They weren't really run for their employees (or the general citizens of the country).
I don't think those two are "at odds" quite as much as you suggest. It is likely in the long-run profit interest of corporations, to act in caring ways towards their employees.
But you're certainly correct, that if a conflict arises between profits and employee benefits, that the legal responsibility of the corporation's executives is to choose profit.
I just think you've gone too far to assume that means employees must therefore be exploited.
The case that jumped to my memory was the one referenced by Tim4change, the Supreme Court decision in Southern Pacific v. Santa Clara County. Readers might be interested also to know (I am paraphrasing this from an account I heard via Thom Hartmann on an Air America Radio affiliate) that the court clerk in that case engaged in an act of supreme dishonesty and betrayal, having been told by the great Justice Oliver Wendell Holmes, before he died, that it was NOT his view that corporations could be imputed the rights of persons. Holmes died soon after, and the clerk added the famous note under Holmes' name to the 1886 decision (handed down without oral argument!), as a deceitful attempt to give legitimacy to the hotly contested notion that corporations could be legal persons.
As others are saying here, unscrambling that egg by now, is a daunting idea. My own thought along these lines, thanks to an imaginative law school professor I knew, would be to expand the scope of the Environmental Protection Act to create an additional legal duty of corporate "persons," one that would not negate the duty to make a profit, but merely add an additional one to be balanced against it: The duty not to adversely impact the economic and social environment outside the corporation (such as when announcing mass layoffs). As in 'natural' environmental cases, there could then be a demand for an environmental impact study which would automatically require the corporation to cease its activity while a study takes place.
One small amendment to the EPA and it would be law.
The other potential problem with it is that it could create a balance or it could create the kind of situation that politicians are in where they almost have more control when they have more masters because they can hide behind being overconstrained and claim that anything they try to do has at least someone who favors it...
Anyway, thanks for the thoughts (and the correction).