Financial Daily from THE HINDU group of publications
Tuesday, Jul 05, 2005
Corporate - Insight
The Corporation: In relentless pursuit of self-interest
According to Noam Chomsky the book was "virtually begging to be written. With lucidity and verve, expert knowledge and incisive analysis, Bakan unveils the history and character of a devilish instrument that has been created and is nurtured by powerful modern states". "Unlike much of the soggy thinking peddled by too many anti-globalisers, The Corporation is a surprisingly rational and coherent attack on capitalism's most important institution," says The Economist.
As images of disgraced corporate executives are paraded on television screens, politicians and business leaders are quick to assure us that greedy and corrupt individuals, and not the system are to blame for Wall Street's woes. Despite such assurances, people are worried that the faults within the system run much deeper than a few tremors that the Wall Street would indicate. These larger concerns are the focus of The Corporation.
Bakan's vision of the corporation is clear. Its legally defined mandate is to pursue, relentlessly and without exception its own self-interest; it is a possessor of great power that it wields over people and societies.
Corporations today govern our lives, determine what we eat, what we watch, what we wear, where we work and what we do. Technological innovations in transportation and communication have greatly enhanced the corporations' mobility. With the arrival of the Internet, corporations are no longer tethered to their home jurisdiction. Corporations govern society, perhaps even more than governments do; and yet it is their power that makes them vulnerable. They raise mistrust, fear and demands for accountability from an increasingly anxious public. Corporate leaders are seeking to soften their image by presenting themselves as human, benevolent and socially responsible.
Business as usual: Despite displaying social responsibility, the corporation has remained a legally designated "person" designed to valorise self-interest and quash moral concern.
Bakan gives the example of Enron that once was the epitome of social responsibility and corporate philanthropy. The company pledged to put human rights, the environment, health and safety issues, biodiversity, and transparency at the core of its business operations, and it created a task force to monitor and implement its programmes. It only shows how wide the gap between its image and actual operations was, and that scepticism about corporate social responsibility is warranted.
The reasons for Enron's collapse can be traced to characteristics common to all corporations: obsession with profits and share prices, lack of concern for others, and a penchant for breaking the law.
The externalising machine: As a psychopathic creature, the corporation can neither recognise nor act on moral grounds.
Its structure is largely to blame for its illegalities. Shareholders cannot be held liable for the crimes committed by corporations. Due to limited liability the directors are traditionally protected as they have no direct involvement with decisions that may lead to a corporation committing crime. Executives are protected by the law's unwillingness to find them liable for their companies' illegal actions unless they have been proven guilty.
Democracy Ltd.: For 20 years corporations have fought to remove regulations that limit their freedom to exploit people and the natural environment. Through lobbying, political contributions, and public relations campaigns they have turned the political system and much of public opinion against regulation.
Without bloodshed, armies, or fascist strongmen, and by using dollars instead of bullets, corporations are now poised to gain freedom from democratic control.
A second kind of deregulation involves repeal of regulations. Laws designed to protect public interest from corporate misdeeds are being scaled back and are at times disappearing.
"The key to progress in the future is partnership," observes Pfizer's CEO. Bakan demolishes this view effectively.
Partners should be equals. One partner should not wield power and exert sovereignty over the other, or regulate the other. They should work together to solve problems and plan courses of action. Democracy, however, requires that the people, through the governments they elect, have sovereignty over corporations, not equality with them; that they have the authority to decide what corporations can do.
If corporations and governments are partners, we should be worried about the state of our democracy, for it means that government has effectively abdicated its sovereignty over the corporation. This view is poignant in the context of the Indian government advocating public-private partnerships in major projects. Deregulation rests upon the premise that corporations will respect social and environmental interests only if they are not being compelled by governments to do so.
No one would seriously suggest that individuals should regulate themselves, that laws against murder, assault, and theft are unnecessary because people are socially responsible.
Yet oddly we are asked to believe that corporates who lack moral conviction should be left free to govern themselves.
Corporations unlimited: The public sphere is under attack. Through privatisation, governments have capitulated and handed over to corporations control of institutions once thought to be inherently public in nature, like health and welfare, education centres and public safety.
The idea that some areas of society and life are too precious to be subject to commercial exploitation seems to be losing its influence.
These ideas may prove to be as dangerous as any fundamentalism that history has produced.
Reckoning: The corporation has failed to solve and has worsened some of the world's most pressing problems: poverty, war, environmental destruction and illness. Though the collapse of corporate capitalism is not imminent, people are becoming increasingly uneasy with the system.
What do we do now with the corporation? The challenge is to find ways to control it subject it to democratic constraints and protect citizens from its dangerous tendencies. Some of the suggestions by Bakan are:
Improve the regulatory system
Strengthening political democracy
Create a robust public sphere
Challenge international neo-liberalism
(The author is a former Executive Director of the LIC.)
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