Let's Change The DNA Of Corporations
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
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
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 firstname.lastname@example.org.