by Robert Hinkley
"Corporations are people, my friend... of course they are. Everything corporations earn ultimately goes to the people. Where do you think it goes? Whose pockets? Whose pockets? People's pockets. Human beings my friend."—Mitt Romney
It’s true that corporations have no ability to act for themselves. They only act through people; their officers, directors, employees, lawyers and agents. However, the important question to ask is “do corporations behave like people?” Because if they don’t behave like people, our nation faces a serious problem it wasn’t designed to handle.
Our form of government was created in 1788 with the adoption of the US Constitution. This was a time when there were only a handful of corporations in existence (and none of the modern variety which have no obligations to protect the public interest). As a consequence, there is no mention anywhere in the Constitution of the word corporation.
This means that our government governs people and corporations the same way—through the passage of laws enacted by our elected representatives. Until such laws are passed, both people and corporations can harm the environment and other elements of the public interest to the extent they have the capacity and inclination to do so. Sometimes the passage of effective new laws can take a very long time. Sometimes such laws never get passed.
The public interest is exposed while our leaders decide what should be done. However, people are unlikely to take advantage of this situation. They generally have little capacity or inclination to engage in behavior that harms the public interest. Modern corporations, on the other hand, have plenty of both.
Protection of the public interest in our democracy depends upon citizenship. It depends on citizens voluntarily stopping behavior that is harming the public interest even when no law prohibits it. When good citizens realize they are harming the public interest, they stop. They don’t wait for the law to make them stop. They don’t lobby to keep the law from making them stop. They simply stop.
People generally stop. Modern corporations too often do not.
While companies don’t start out with the intention of plundering the public interest, it sometimes becomes evident that their now successful business is doing great harm. This is when their citizenship is tested. Almost universally, companies fail this test when large amounts of money are at stake.
When it becomes evident a citizen is harming the public interest, he, she or it has two options: recognize the obligations of citizenship and stop (the citizenship option) or take advantage of the rights of citizenship and get involved in the legislative process to delay or frustrate the passage of new laws which will prohibit their destructive behavior (the political option). Most human beings choose the former. Corporations choose the latter.
There are several reasons why people choose the good citizen option and corporations choose the political option. Most have to do with the differences between people and corporations. People generally develop a sense of right and wrong. None of us has a compelling need to harm the public interest. Corporations, on the other hand, have no conscience. The people that work for them do, but they have to follow rules that rarely result in a collective conscience. Moreover, at times companies have a compelling need to harm the public interest—when future profits and/or their survival depend upon it.
Lots of people are saying our government is broken. A huge reason for this is they see that government is unable to protect the public interest from corporate anti-social behavior.
Because our Constitution contains no special provisions for the government of corporations, protection of the public interest depends upon corporate citizenship just as it does on individual citizenship. Indeed, it depends on corporate citizenship more. A big corporation has the capacity to do more harm to the public interest in one afternoon legally than the average human being can do in a lifetime.
In the case of modern corporations with huge amounts of money invested in factories, processes and products that harm the public interest, that citizenship is not present. The reason for this has to do with state corporate laws that say, so long as corporations are operating in accordance with existing laws, corporate directors must act in the best interests of the corporation and its shareholders.
These laws encourage corporate managers to continue harming the public interest in the pursuit of their company’s own interest (profit and survival). It’s time to start thinking about changing these laws. The law should balance the duty of directors to act in the company’s best interest with safeguards that will ensure protection of the environment and other elements of the public interest.
In Iowa Mitt Romney argued that “Corporations are people.” New Hampshire is the next stop on the trail to selecting a GOP nominee for president. Two debates are scheduled between now and primary day; one Saturday hosted by New Hampshire's ABC affiliate WMUR and the other Sunday morning, a joint effort by Facebook and NBC's 'Meet The Press'. Isn’t it time all the candidates for president from both parties were asked whether they too believe corporations people?
Robert C. Hinkley is a former corporate law partner in two of America’s largest law firms. He is also the originator of the Code for Corporate Citizenship, a 28 word modification in the corporate law to the duty of directors designed to improve corporate behavior. His recently released book: Time to Change Corporations: Closing the Citizenship Gap, can be purchased through Amazon.com where it is available both in paperback and for Kindle users as well.
