The Problem

Communities, consumers, the environment and the corporation’s own employees are increasingly forced to bear the adverse costs of corporate decisions. Although efforts to fight the negative effects of corporate rule have grown over the years, so has the number of battles. In order to be effective, therefore, the focus of organizing efforts to hold corporations accountable must evolve from attacking the various symptoms of unrestrained corporate power to changing the very foundation of corporations. We have to address what corporations are, not merely respond to what they do. 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 are fictitious entities that exist because we passed the laws that created them. It is these governing laws that must be changed if we are going to change corporate behavior and stop these problems at their source.

In every state in America, the corporate law provides that corporations should have only one purpose – to act in the best interests of the corporation and its shareholders. This translates into making decisions solely on the basis of maximizing profits and increasing stockprice. This provision drives everything a corporation does. The current legal structure results in the dictum that corporations maximize stockholder profit within the confines of limited liability, a dictum which not only gives managers, stockholders, and workers the excuse to behave badly, but also encourages them to do so

The effects of this law are that:

• The corporation becomes dedicated to the pursuit of its own interest.
• The corporation’s obligation to protect the environment or other elements of the public interest is limited to obeying other laws that fail to address the cause of corporate misbehavior and which often leave plenty of opportunity for corporations to continue externalizing their costs.
• Corporate behavior tends to include minimal compliance with the law, lobbying to make compliance with the law less burdensome, jurisdiction shopping to avoid laws that protect the public interest, and aggressive interpretation of what the law allows.
• Though usually legal, corporate behavior often results in significant damage to the environment, human rights, public health and safety, the diminishment of the dignity of the corporation’s own employees and the welfare of the communities in which corporations operate.
• Corporate managers and employees are disempowered from protecting or promoting the public interest while absolved from the damage their companies cause to the public interest in the lawful pursuit of profits.

Ninety five percent of Americans say they agree more strongly with the second sentence than the first:

1. Corporations should have only one purpose – to make the most profits for their shareholders – and pursuit of that goal will be best for America in the long run.

2. Corporations should have more than one purpose. They also owe something to their workers and the communities in which they operate, and they should sometimes sacrifice some profit for the sake of making things better for their workers and communities. (Business Week/Harris Poll organization poll; Published in September 9, 2000 edition of Business Week.

Why shouldn’t the law in all 50 states reflect this opinion of 95% of the people? Why shouldn’t corporations -- which have all the rights of citizenship and are indeed our most powerful citizens -- have some obligation to the public interest (i.e. responsibilities of citizenship)?