Let's Change The DNA Of Corporations

By John Karvel, July 29th, 2002

Why is it that in the law corporations have the single purpose of making a profit for the shareholders? Isn't it obvious that there are more stakeholders that make up the corporate community? Analysis shows that employees are really the major contributors to creating wealth. The communities in which corporations operate have much to gain or lose, depending on how responsibly the corporations there operate. And the environment, our environment, has everything at stake.

Under current law when we go to work we check our conscience at the door and enter a feudal castle. For example, what if a manager said, "We could pay our employees a living wage, not the minimum wage, and still have a good profit"? It would be out the corporate door for her. What if a CEO looked into his grandchild's face and took the position, "Let's have our company reduce polluting emissions beyond what is required by law even though the new equipment required would reduce our profits from 20% to 18%"? Out the door for him. What if the Board of Directors said," We don't want to merge with your company, even though the merger might raise the price of our stock, because you will close the plant on which our town is dependent"? It is lawsuits against them. And why is all this? Because our laws say that maximizing profit is what corporations are about. We have a lopsided system under which we are crying all the way to the bank.

In actuality corporations are human communities. The problem is that they are not democratic communities. They are more like the fiefdoms of old where the wives (employees) transfer their rights and property to their husbands (shareholders) upon crossing the marriage threshold. And those who do not own stock (the environment and communities in which the corporations operate) are so powerless that it is ok to destroy their air, soil and water. The stock market may be on the verge of crashing and according to the latest UN and World Wildlife Fund reports our planet is on the same edge. I believe that to save ourselves and our planet we must transform corporations by recognizing in the law that corporations are complex human communities composed of multiple stakeholders.

Delightfully, once we wake up to, or from, the nature of corporations, the system isn't that hard to change. Here is a simple and eloquent solution that will certainly open some doors:

Every corporation that operates in our country receives its permission to do so by coming into existence under the corporate charter law in a particular state. Let's just change what they are permitted to do. Let's pass a new section of law that supports Socially Responsible (SR) companies. Directors and Officers will have an affirmative duty to all stakeholders and the public interest. Employees and representatives of the public interest will be on the Board of Directors. Directors will be protected from shareholder suits when they consider other stakeholders and the public interest.

Socially responsible investors and consumers will know where to put their money and SR companies will be protected from hostile takeover.

As Robert Hinkley, a corporate securities lawyer of 22 years and former partner in the New York law firm of Skadden, Arps, Slate, Meagher & Flom LLP, says, "It makes no sense to endlessly chase after individual instances of corporate wrongdoing, when that wrongdoing is a natural result of our system's design. Corporations abuse the public interest because the law tells them their only legal duty is to maximize profits for shareholders. Until we change the law of corporate governance, the problem of corporate abuse can never fully be solved."

The American people are ready for and want this change. A 2000 Business Week/Harris Poll showed that 95% of the people surveyed thought that corporations should have more than the one purpose of making a profit and "should sometimes sacrifice some profit for the sake of making things better for their workers and communities." A new SR corporate charter would make it possible for conscientious CEO's, CFO's, Directors and Employees to do just that.

When you look at the sky, or your child's face, or think of our beautiful planet, don't you experience awe and wonder and amazement? Let's change the law so that we can bring that joy to work and feel good about ourselves and how we live on our planet. Let's use our democratic political system to make a democratic conscientious economy. Let's change the DNA of corporations.

*John Karvel is on the coordinating group of the grassroots organization in Minnesota seeking to enact a New Socially Responsible Corporate Charter (C4CR.ORG). He can be reached at johnkarvel@c4cr.org.