Despairing Globally, Hoping Locally
The promise of state-level action as an avenue for corporate reform
From the spring 2003 issue of Business Ethics
Despair is a word like a wound, so tender one hesitates to touch it.
It's a feeling one might hesitate to invoke, were it not so palpable
today in even the most casual conversations. There are many reasons
for despair: the inability to prevent war on Iraq despite massive protests;
the long drought in the economy; the seeming impossibility of genuine
corporate reform, even after the cataclysm of Enron. Lately it's the
war on people's minds. But it's despair I wish to speak to: that feeling
that our situation will never change, that our actions have no effect.
What I see is fresh reason for hope.
Beneath the radar of mainstream awareness, something remarkable is
arising. It's a promising new path for systemic corporate reform, not
at the federal or international level, but at the state level. This
may be the last place we think to look for corporate reform. But it
should be the first, since it is states that charter corporations and
have the power to redefine the terms of their existence.
This power of definition is one we rarely think to pick up. Much reform
energy recently has focused internationally, with protests against the
World Trade Organization and the World Bank. But those financial bodies
rebuff popular input the way a duck's back repels water.
In other cases, reform has focused on individual companies, urging
McDonald's and Burger King to treat animals more humanely, for example.
But there are countless policies at thousands of companies. Changing
one policy at a time is like shoveling a snow-bound driveway with a
Picture a simpler scenario: activists meeting in a church basement
in St. Paul - not needing a cast of thousands but numbering only
30. Rather than being tear-gassed and jailed, they drive to quiet meetings
with state legislators. Beneath their mild manner, these activists are
relentlessly, calmly, effectively working to change the corporate form
itself, at the level of DNA. Instead of taking a teaspoon to corporate
policy, they're redefining the framework that gives rise to all policies.
In a single elegant gesture, they aim to protect the public good in
multiple ways, for generations to come.
The state legislation they propose would change the nature of the corporation
itself, by redefining its purpose. Instead of chasing myriad bad corporate
outcomes like a million annoying flies, corporate purpose legislation
goes to the source, tackling social problems where they arise. It sweeps
out the larvae before they hatch, so to speak.
The vehicle for changing corporate purpose is directors' duties. And
the idea of working at this leverage point is catching on. No bill has
been introduced yet in Minnesota, but a group of legislators -
led by Rep. Bill Hilty (DFL-Finlayson) - is meeting to strategize
around several possible bills, including the Code for Corporate Responsibility
drafted by attorney Robert Hinkley. Activists are at the table. That's
the beauty of state-level work: ordinary citizens have voice.
Fundamental change may be coming within reach. In California -
where the state legislature is controlled by Democrats - corporate
purpose legislation was introduced Feb. 21 by Senate Majority Whip Richard
Alarcon (D-San Fernando Valley). While current law says directors must
maximize profits for shareholders, Alarcon's Good Corporate Citizen
bill (SB 917) says companies may not do so at the expense of the environment,
human rights, the public health, the community, or the dignity of employees.
The attorney general could bring civil action against violators. Under
certain conditions, directors would be personally liable.
It's hard to overstate how profoundly this could change corporate behavior.
Instead of rubber-stamping whatever actions fatten the bottom line -
keeping a dirty power plant open, or laying off 10,000 - directors
would be asking about impact on employees and the public good. They'd
be trying to avoid social harm, because their own pocketbooks would
be at risk.
Alarcon says his bill may not pass in a single session. "Most
significant changes in American law take some time," he said. "But
the discussion is as important as the end product."
Hilty agrees. He says the aim is to educate the public about the corporate
form as the source of social ills. "It is at the bottom of virtually
every major problem we deal with," Hilty emphasized. This is an
issue to which he's dedicating himself. And he hopes to coordinate bills
with Wisconsin, Iowa, and North Dakota, through the Midwest Progressive
Elected Officials Network. Alarcon has a similar commitment. "I
will make this part of my fundamental mission," he said.
California is a great place for this to start, with anger at Enron's
electricity price-gouging fresh there. But Democrats also control 15
other state legislatures, including Connecticut, Illinois, Maine, Massachusetts,
and Maryland (in Minnesota party control is split).
Something big may be stirring. Redefining corporate purpose would be
a significant step toward a more humane economy. As the Minnesota activists
remind us, at the state level democracy can still work. And in this
season of national and international despair, that's reason for hope.
Calif. Sen. Richard Alarcon, State Capitol, Room 4035, Sacramento, CA
95814; ph 916/445-7928; http://democrats.sen.ca.gov/senator/alarcon/.
Minn. Rep. Bill Hilty, 207 State Office Bldg., St. Paul, MN 55155; ph
651/296-4308; email firstname.lastname@example.org.
To become involved with the Code for Corporate Responsibility -- Minnesota
see www.c4cr.org or contact John Karvel at 651/645-2765; email email@example.com.
For more on these bills see the March BizEthics Buzz, our free email
newsletter (to subscribe send your email address to BizEthics@aol.com
and request that issue). Business Ethics is also sponsoring a School
for Economic Democracy July 18-20, 2003, at Potter's Farm near Duluth,
Minn., focused on state law as an avenue for corporate reform. Contact
BizEthics@aol.com or call 612/879-0695.