Here’s some extracts from Joel Bakan’s great book, The Corporation, The Pathological Pursuit Of Profit & Power (2004). The book accompanies the documentary film that covers the same territory. More analytical than Michael Moore’s stuff (which I also admire) it exposes the institutional nature of corporations and their reliance on the state.
“Corporations are created by law and imbued with purpose by law. Law dictates what their directors and managers can do, what they cannot do, and what they must do…… It compels executives to prioritise the interests of their companies and shareholders above all others and forbids them from being socially responsible – at least genuinely so.
In 1916 one of the co-founders of the Ford motor company, John Dodge, quit the Ford board and devised a plan with his brother to build their own car company. They hoped to finance the venture with the quarterly dividends from their Ford shares but were stopped by Henry Ford’s decision to cancel the dividend and divert money to customers in the form of further price reductions on the model T Ford. [Ford had decided that the profits he was making from the model T were obscene and unwarranted.] The Dodge brothers took Ford to court. Profits belong to shareholders, they argued, and Ford had no right to give their money way to customers, however good his intentions. The judge agreed. He reinstated the dividend and rebuked Ford [who had said in open court that “business is a service, not a bonanza” and that corporations should be run only “incidentally to make money “], for forgetting that “ a business corporation is organised and carried on primarily for the profit of stockholders”; it could not be run “for merely the incidental benefit of shareholders and for the primary purpose of benefiting others.”
Dodge v Ford still stands for the legal principle that managers and directors have a legal duty to put shareholders’ interests above all others, and no legal authority to serve any others interests – what has come to be known as “the best interests of the corporation” principle.
[But] the corporation was originally conceived as a public institution whose purpose was to serve national interests and advance the public good. In seventeenth-century England, corporations such as the Hudson’s Bay Company and the East India Company, were chartered by the crown to run state monopolies in the colonies of England’s Empire. During the eighteenth and early nineteenth centuries too, in both England and the United States, corporations were formed primarily for public purposes, such as building canals and transporting water. The modern for-profit corporation, programmed solely to advance the private interests of its owners, differs profoundly from these earlier versions of the institution. Yet in one crucial respect it remains the same; it is, as it has always been, a product of public policy, a creation of the state.
The state is the only institution in the world that can bring a corporation to life. It alone grants corporations their essential rights, such as legal personhood and limited liability, and it compels them always to put profits first.
Corporations cannot exist without the state, nor can markets. Without the state, the corporation is nothing. Literally nothing.
The question is never whether the state regulates corporations – it always does – but how, and in whose interests, it does so. Beguiled by the ‘natural entity’ conception of corporations, the notion that they are independent persons, we tend to forget that they are entirely dependent upon the state for their creation and empowerment.
[This means that a democratic state representing the interests of its citizens could regulate so that] corporations are reconstituted to serve, promote, and be accountable to broader domains of society than just themselves and their shareholders.
The challenge for now is to find ways [for the democratic state] to control the corporation – to subject it to democratic constraints and protect citizens from its dangerous tendencies – even while we hope and strive in the longer term for a more fully human and democratic economic order. Improving the legitimacy, effectiveness, and accountability of government regulation is currently the best, or at least the most realistic, strategy for doing this.”
The reason these ideas so clearly articulated by Bakan are so important is because they fatally undermine the TINA (there is no alternative) rhetorical narrative of the free-marketeers.
They confirm that there is nothing natural about corporations and that they are entirely man-made and as such can be reinvented and redirected if we have the political will to do so.
I Am Not A Number
Political and Philosophical Dispatches From An Individual Living In A Society