2 April 2007Robert C. Hinkley
Government in the liberal democracies of the developed world is based on an experiment undertaken in the last half of the 18th century. That experiment theorized that the public interest could be protected under a system of laws enacted by the vote of the people’s elected representatives.Under this system, people are free to do as they please as long as no law has been passed restricting their freedom. Laws are not passed restricting freedom until legal behaviour damages the public interest to the point where it makes another law necessary.
This system relies on the assumption that extensive harm cannot be done to the public interest before a law can be passed prohibiting the offensive behaviour. In the late 1700s this assumption may have been true. Today it is not. The modern corporation can legally do more damage to the public interest in one afternoon than a human being can do in a lifetime. Problems such as global warming, third world sweatshops, big companies walking out on small towns for greener pastures elsewhere and nearly five million deaths each year from tobacco, are attacks on the public interest that show government does not always have the will to make corporations stop. Indeed, by granting corporate charters, governments in some sense authorize these attacks rather than making them cease.
If big corporations can keep government from fulfilling its purpose, we should understand why and then change one or the other–either give government more power to deal with corporations than it needs to deal with people or make the corporation more respectful of the public interest. Changing the corporation is the better choice.
The liberal democracy was designed more than 100 years before the creation of the modern corporation. It was not designed to govern large institutions dedicated to the pursuit of self-interest. This is why government has so much trouble governing corporations today.
Although companies only act through their people–directors, officers and employees–these people must obey a rule which government sets down for all corporations. That rule makes profit the corporation‘s only goal.
Many say this causes companies to put greed above the public interest, but this analysis only polarizes. What really happens is really more subtle than that. A company goes into a particular business and finds itself successful. Eventually, a huge amount of shareholders’ money is invested in the business–sometimes billions of dollars. Then, a hidden adverse side effect of the company’s products or operations is discovered.
The law provides that corporate personnel must react to this discovery in a way that protects the financial interests of the company. To do this, a number of strategies are employed to frustrate calls to make their behaviour illegal. The first of these strategies is usually denial. Eventually, however, the truth comes out and corporate personnel must employ other measures to protect their company’s assets. Usually these measures include trying to keep government from passing laws that would restrict the company’s ability to carry on business as usual.
It should come as no surprise that modern corporations are highly successful at this. The environment, human rights, the public health and safety and the welfare of our communities are all elements of the public interest that government should be able protect. Today, liberal democracies in all parts of the world are continually frustrated in fulfilling this purpose by a small minority of large corporations which make money through means that harm the public interest.
It is no secret how this happens. Companies use their right to free speech to lobby and finance the election campaigns of politicians. They threaten job loss and economic ruin if they are forced by new laws to change their ways. They crank up their public relations machines to entice people to vote against each other and the public interest. Their task is made easier in today’s globalized world where jobs in one state or country often create damage in another.
The inconvenient truth is that a system of government of the people, by the people and for the people is well down the road to becoming a government of the corporations, by the corporations and for the corporations. Ask yourself these question “do you believe governments can protect the public interest from today’s big corporations or not? Do governments control companies or do companies control government?”
Some despair that nothing can be done. But Al Gore makes a good point, there is a long way between denial of the problem and despair that it cannot be solved.
A system of government designed to protect both the public interest and freedom cannot cope with powerful institutions dedicated to the furtherance of their own interests. We shouldn’t expect it to do what it was never designed to. However, rather than deny or despair, we should recognize another not so inconvenient truth–profits and protection of the public interest need not be mutually exclusive.
The rules establishing corporations can be changed. Profit should remain the goal, but its pursuit should not come at the expense of the environment, human rights, the public health and safety or the welfare of our communities. Making this change will give people at work the flexibility to respect the public interest that today is missing. When it is made, the modern corporation will be more compatible with our system of government and the public interest under a lot less threat.
Robert C. Hinkley is an American corporate lawyer who lives in Mosman, NSW. His email address is [email protected].
