I just saw an interesting film, The Corporation, that suggests that many corporations (which legally have the same status as "persons" in the USA) could be clinically diagnosed as psychopaths. While I felt the film was a bit heavy-handed, there were many points that were quite thought-provoking. For example, one point the film made was that many corporations are now global, but governments are national, and thus many corporations are out of the jurisdiction of any governing body. Furthermore, the film makes the point that because corporations are motivated only to maximize shareholder value, they have no incentive to be "responsible persons" in society, and in fact, they have every incentive to try to "externalize" costs by cutting corners, offloading problems and waste onto the public, and cheating if they can get away with it. So rather than obeying laws and being good citizens out of some sense of morality or ethics, they do so only if and when the risk of getting caught is greater than the chance of getting away with it. There are also some interesting stories in the film about some organizations and how they are attempting to change to become more sustainable. In any case, I think this film is worth seeing -- it certainly informs the debate and is highly thought-provoking.
Seeing this film reminded me of a blog posting I wrote last year, On the Separation of Corporation and State. Perhaps this concept should be proposed as a new Constitutional Amendment? The question is how could it be structured so as to be effective and not merely symbolic? Another question I've been thinking about: Is there a way to add feedback to corporate revenues such that they benefit or suffer due to additional factors such as their environmental impact, social impact, etc.? For example, could corporations be rewarded or penalized financially by an independent body for various good or bad behaviors? To some extent governments have attempted to do this with various taxes and tax-credits. But for the most part, I'm not sure the effect has been pronounced enough. Ultimately it has to be a strong enough effect that investors will start to worry about these factors and consider them when making investment decisions. They should think "Is this company good to the environment?" not just because it's a warm fuzzy thought but because it could really impact the value of the company's stock in the future! The problem is how to administer such a penalty-reward system, and also all the potential legal challenges that might arise? It may simply be impractical.
Still, there is a problem that everyone recognizes -- large multinational corporations answer to nobody yet affect everybody. They are not democracies -- neither their employees nor the people in the communities and biospheres they impact have significant voting power over their behavior. Even their shareholders don't have equal voting power -- only the large shareholders really have impact on decision-making. It's strange that America is both the champion of Democracy and Capitalism -- because while these two systems support one another, corporations are anything but democratic in structure! That may have been tolerable in earlier times when corporate influence was much smaller. But today, corporations are perhaps more powerful than democratic governments. Is it time to take another look at this issue?
Democracy and capitalism are both in the process of breaking. Democracy is breaking because it was not designed to handle such large populations (in other words the Electoral College system, and much of the rest of our present form of Democracy, are obsolete in the face of larger populations -- the effect that an individual can have is less than before in my opinion when it was practical for everyone to speak directly with their Representatives), and because it was not designed to withstand corporate influences (modern day independent capitalist corporations with legal status as "persons" did not exist when our republic was designed). Capitalism is broken because it lacks checks and balances such that it will destroy the marketplace if left unchained. We can already see this taking place, for example in the drastic depletion of global fisheries due to unrestrained over-fishing. This will happen not just with fish, but with every natural resource, given enough time. Capitalism is simply not designed to be sustainable -- that was never considered to be a risk when capitalism was originally conceived of -- back then the world seemed to be a very big place with virtually unlimited resources. Today as the world becomes smaller and populations become larger, resource constraints are an increasingly important issue.
While individual corporations may realize their livelihoods depend on certain resources and may control their behavior accordingly, they cannot control what other corporations, perhaps in entirely different industries with different goals, do. Thus corporation A may need resource X and take care to preserve it, but that may not stop corporation B from destroying or damaging resource X in the process of working with resource Y. Since corporation B is only interested in resource Y, it has no incentive to preserve resource X, and in fact, if destroying resource X makes it able to leverage resource Y more cost-effectively it will do so. This is a fundamental "bug" in the way capitalist systems are designed presently. It really needs to be fixed.
There does not seem to be an effective feedback loop -- there is nothing to really balance these organizations anymore, yet they are increasingly powerful. The simplistic hope that "the market will sort it out" has not led to a solution and doesn't show any sign of doing so -- in fact we just see Tragedy of the Commons taking place on a global scale. Of course we could get rid of the Tragedy of the Commons by simply making everything into private property -- but I wouldn't want to live in such a world. Rather than take such drastic measures, why not find a way to moderate the behavior of corporations instead? Then we can have a Commons, something which I think is essential to a free society.
Given that governments are becoming weaker than global corporations, we have two choices. One would be to somehow try to restore the balance of power between governments and corporations (with what, a world government? And who would be its citizens -- corporations, nations, or individuals, or all of the above? And if so, who would have the voting power in such a structure?); the other option would be to acknowledge that a fundamental shift has taken place -- maybe corporations ARE the new governments?