“The corporation’s… legally defined mandate is to pursue, relentlessly and without exception, its own self-interest, regardless of the often harmful consequences it might cause to others.” – Joel Bakan, The Corporation, pp.1-2.
Trains, trainers, ideas of beauty, swimming pools, drinking water, gas, electricity, time off, food, medicine, old age, blenders, politicians, computers, mobile phones, genetics… From our basic needs to social values, from the natural world to political structures, all are increasingly controlled, or mediated, by profit-driven corporations. Entrenched within modern society as the primary providers of essential goods and services, corporations are the dominant economic form of the present day. We are taught to believe that they are the most efficient providers of goods and services, and that without them, our society and economy would not be able to function.
Yet, for all their dominance and visibility, the fundamental structure of the corporation and the mechanisms utilised in corporate operations, which underlie much of the corporate abuse we read about so frequently, are often shrouded. Corporations are institutions with specific legal structures that determine the parameters of their behaviour, their business policies and areas of activity. It is a legal structure that directs the corporation towards destructive, exploitative and corrupt activities; a ‘personality mix’ that Joel Bakan, author of The Corporation, has described as ‘psychopathic.’ This legal structure and mandate help explain why corporations have come to rule ever greater areas of our lives, exercise ever great dominance over the political process, and control ever greater areas of our natural world.
The corporation’s legal structure ensures that limited accountability and responsibility for corporate crime are taken on by directors, shareholders and the corporation as a whole. Three elements are particularly decisive in this: corporate personhood, limited liability and the ‘fiduciary duty’ of directors.
Corporate directors and the profit motivate
Corporate directors are bound by the ‘fiduciary duties’ of common law. These are ‘duties of faith’, most importantly to ‘act in good faith in the best interests of the company as a whole.’ This means acting in the interests of the shareholders, as they are the ‘owners’ of the company, whilst the directors and employees work for them. ‘Shareholders’ interest’ is almost always interpreted to mean profit maximisation and the ability to pay shareholders ever greater dividends on their investment. ‘External’ factors, such as environmental protection or social benefit, which might be detrimental to profit maximisation, are not supposed to be considered by directors when managing the company, except when that might benefit the company itself, as with Corporate Social Responsibility and other philanthropic activities. Shareholders have the right to hold directors legally accountable for failing to make a profit.
The 1985 Companies Act includes a brief note that suggests directors “should have regard to the interests of the company’s employees in general as well as to the interests of the members.” However, there is no case law from the UK to show directors actively considering and prioritising other interests, such as the rights of employees or environmental protection, when these considerations would diminish profits. The fact that the employees of the company are considered, in legal terms, separate elements to be treated on much worse terms than the ‘owners’, or the shareholders, is problematic in itself and has played out in a raft of abuses perceptible around the world.
A corporation is, in the eyes of the law, instituted as an individual person separate from its shareholders. A corporation exists beyond the individuals who hold its shares, can take legal action in its own name rather than in the name of its directors or shareholders, and its assets are owned separately by the company rather than by the shareholders and so can not be used to pay shareholder debts or vice versa.
As a ‘legal person’, a corporation enjoys many of the rights accorded to the citizens of a country, such as the ability to lobby government. Because such ‘political’ behaviour of corporations occurs within the context of their immense economic power, it is all too often amplified to the point of drowning out the political presence of public, non-corporate persons and organisations. This legal structure, which creates an equivalence between ‘ordinary citizens’ and their corporate counterparts, therefore becomes highly problematic.
The legal structure of the corporation as a person is flawed when we further examine the question of accountability and responsibility for corporate crimes. It is the corporate whole, viewed legally as a single individual, which holds responsibility. However, as an artificial person, existing only on paper, the only recourse to punishment of a corporation is monetary: an artificial person cannot be imprisoned or shamed into altering their behaviour.
Case law highlights the irrationality of the law on the point of corporate personhood: utilising the status to a corporation’s advantage, but denying its full conclusions when it would damage a corporation’s ‘freedom’ to act and deny responsibility for the consequences. So, for example, as an artificial person, a corporation is not deemed capable of having intent and cannot, therefore, be found guilty of crimes such as ‘murder’. However, a corporation can sue people in civil courts for defamation –because it can be ‘aggrieved.’
A company can be found guilty of manslaughter, but this is dependent upon whether or not a ‘controlling mind and will’, a director or senior manager, of the company is found guilty of manslaughter. If there is no individual person deemed responsible for the actions of the company as a whole, manslaughter cannot be applied as a crime to that company. This often means it is difficult to apply the concept of manslaughter in cases where a company’s core business is harmful overall, for example with an arms or fossil fuel company.
Shareholders and limited liability
Incorporation draws a ‘veil’ between the corporate person (the company) and its owners (the shareholders), who are protected from liability for the company’s debts or any civil or criminal acts committed by the company. Only if an individual shareholder was personally involved in committing a crime or incurring a debt can they be held responsible. Dealing with a company’s debts often boils down to a choice between employees and shareholders’ feeling the impacts. Limited liability means that shareholders are protected, whilst employees face wage cuts, redundancies and worsened working conditions.
Limited liability also means that shareholders need only focus on the profitability of the company. This is further compounded by the fact that the largest shareholders in the world are institutional investors, such as pension funds and other companies, both of which have their own profit-making obligations to fulfil. (For more on this, see Corporate Watch’s report on corporate law and structures.)
All three elements of a corporation (directors, shareholders and the company, or ‘corporate person’, as a whole) prioritise profit-making above all else. Combined with the removal of liability and accountability for ‘factors’ outside of this ultimate consideration, this structure means that the impacts of a corporation’s activities on workers, the public and the environment are considered by the corporation as ‘externalities’ separate from its ‘core business’. From the devastating ecological impacts of a coal mine to the deadly health impacts of cigarettes, ‘negative externalities’ are public relations issues to be avoided or ‘managed’, rather than decisive factors influencing business decisions. Thus workers, communities and the environment, as sites from which profit is extracted, are left saddled with the impacts of corporate activity, and with little recourse to justice.
Fighting against corporate dominance is about more than attempting to hold corporations accountable for where they transgress in a strictly legal sense. The legal system is not a satisfactory political or social process through which the public can determine what is in their best interests; it can only attempt to prosecute narrowly defined offences. For example, extracting and burning coal is not a crime in itself, even though it is incredibly harmful. Only doing it in certain ways or breaching certain regulations may be deemed an offence by different legal systems. Hence, the Corporate Rule project goes beyond this legal examination of narrowly defined corporate crimes and explores, sector by sector, the processes, structures and networks of power by which corporations in the UK and beyond can be said to rule: What aspects of our lives do they rule? What mechanisms do they use to rule? And what is the impact of that on the environment and the social and political organisation of society? This is done through topical articles, essays and case studies, as well as reading lists, links, quotes and other useful resources.
Economic power and ‘endless’ growth
The constant pursuit of profit has another, cumulative effect that shapes our economy and our social and cultural values. The competitive search for ever-greater returns requires either constant innovation (new or cheaper products) or expanding markets (new demand for those products). To retain their value, profits need to be ‘re-invested’. And this is partly why corporations are able to rule ever-greater areas of our lives. Things once considered basic rights, such as water or health, are transformed into commodities promoted within a competitive market and sold back to ‘consumers’. The provision of ever-increasing quantifies and types of ‘consumer goods’ requires an ever-greater control by corporations of natural resources. Areas of land, minerals, water and other previously un-owned commons are seized, privatised and sold, irrespective of claims made by those who live there and use the land or resources. The Environment section of this website examines the structures and mechanisms that enable corporations to control natural resources for their own benefit, while externalising the environmental and social costs of their doing so onto poorer countries and sections of society.
To stimulate demand for consumer products, corporate advertising departments and PR agencies create new consumption desires and new conceptions of ‘need’, mediated through the corporate media and press, advertising billboards and other communication channels. New ‘markets’ are thus opened up and new consumption patterns are established. The Consumer Goods section of this website explores the connections between corporate interests and various aspects of ordinary people’s lives as they go about fulfilling their material and other needs, in the supermarket, organic food shop, at the ‘local’ bank, low-price department store and so on.
This corporate-driven economy sits within an economic-political ideology (capitalism) founded upon the myth of ‘endless growth’, which opponents have long argued is unsustainable in the long run, both in terms of the physical limits of our planet (as one with finite resources and finite capacity to ‘soak up’ pollution) and in terms of society’s capacity to absorb the increasing commodification of social values, experiences and needs.
Like the state’s monopoly over the ‘legitimate’ use of force, corporations need to establish a monopoly over the use and sale of resources in order to maintain their growth and profit-making levels. Monopoly in economics is explained by the concept of ‘economies of scale’, also known as companies’ return on sales. A firm with large economies of scale is able to produce large output with the lowest average costs possible, which ensures the maximisation of its profit margins. Many ‘mature’ industries tend to show greater concentration of market share in the hands of a small number of large companies, which exert enormous economic power. The food, drugs and arms industries are classic examples of this kind of industry structure.
Large economies of scale not only pose a barrier to other (smaller) firms entering the market, but also enable the monopolist firm to afford re-investing parts of its ‘supernormal’ profits in process and product innovation, giving it further advantage over potential competitors and maintaining its monopoly position. However, this is only true as long as further profits can be made; if innovation is unlikely to generate the same or higher level of profit, the monopolist firm has no incentive to innovate. In other words, under the current economic system, the main drive for technological innovation, particularly innovations that require a great deal of investment and research, is profit. Human prosperity and welfare are, at best, a by-product and, at worst, a barrier to be overcome. New technologies then become another tool in the hands of large corporations to maintain their dominant position and impose their profit-driven agenda. The Technology section of this website tries to demystify these mechanism using various case studies and in-depth articles on a range of new technologies, from nuclear and GM food to nanotechnology and geoengineering.
Economic power as political power
To secure control over resources and markets, and avoid possible barriers to profit-maximisation, corporations also endeavour to capture the political sphere. One of the ways by which corporations’ economic power is translated into political power is through interest groups and policy networks. These could be either formal, such as the Confederation of British Industry (CBI), the Institute of Directors and other industry and business associations and groups that lobby the government on behalf of companies’ interests; or informal ‘old boy’ networks that bring together, often behind the scenes, economic and political elites through personal ties as well as a shared social background and cultural outlook (class interests).
Proponents of liberal democracy argue that the main function of the democratic process is to reconcile the conflicting interests of different social groups in a society. In governance theories, this is sometimes referred to as ‘corporatism’ (especially in the 1960s and 1970s) or ‘associationalism’ (1980s and 1990s), to denote the inclusion of different, formally defined interest groups in the political decision-making process. However, the unequal power relation between business interests and social and environmental interests means that the former are, almost always, over-represented, both within the formal political apparatus and through informal, more shadowy, networks of power. Fundamental inequalities and injustices are obscured by terms like ‘social partners’, ‘shared governance’ and such like. In addition, increasing areas of economic governance are being delegated to ‘self-governing’ bodies that represent the interests of big business, ignoring the fact that their only, or ultimate, interest is profit-maximisation.
Whilst there are instances where investigative media reports have forced corporations to back up or revise their decisions or policies, these are the exception rather than the norm. In a great majority of their output, the mainstream media have turned into little more than vehicles for commercial propaganda and public relations management in the hands of big business. Commercial PR is presented as news and comment; as journalism, science and scholarship; as expert advice and public opinion. (For more on this, see Corporate Watch’s report on the PR industry.)
Mass media are important because they shape public opinion and set, to some extent, the political and economic agenda by mediating news from particular angles. And that is precisely why corporations have developed sophisticated strategies to control and manipulate media output. Indeed, PR has become integral to the business model of the modern corporation. All the major corporations across the world have in-house PR staff and many also use external PR agencies. And their aim is not only influencing, or manipulating, public opinion and government policies, but also protecting, repairing and enhancing the public images of corporations and their products. The Media & PR section looks at how mainstream and corporate media and PR companies are being used and utilised by corporations to advance their agendas and interests.
As part of this manipulation, a new strategy, known as Corporate Social Responsibility, has been developed by corporations over the last few decades in response to the ‘threat’ posed by increasingly successful anti-corporate campaigns. However, corporate social responsibility is a contradiction in terms because, as explained above, companies are legally bound to maximise profits to shareholders and prioritise their only duty to make money above all other considerations. This means that corporations can only be ‘socially responsible’ if they are being insincere. The real, undeclared purpose is to avoid regulation by pretending that they care about society and the environment. CSR has proved to be an effective strategy for bolstering a company’s public image, and it’s ‘business opportunities’: warding off critics whilst gaining legitimacy and access to markets and decision-makers. In addition, CSR enables business to propose ineffective, voluntary, market-based ‘solutions’ to social and environmental crises under the guise of being responsible. This deflects blame for problems caused by corporate operations away from the company and protects its interests, while hampering efforts to tackle the root causes of social and environmental injustice. More meaningful, long-term and structural means of dealing with corporate power and abuse are watered down, or attention diverted from them completely. (For more on this, see Corporate Watch’s report on CSR.)
Moreover, corporations’ non-profit and charitable arms (funding foundations and charitable trusts) often serve as the velvet glove of state repression against social justice movements. Through thinly disguised programmes and schemes, they utilise activists’ need for money to channel their energy into projects that pose no serious threat to the status quo. Corporate philanthropy helps diminish the effectiveness, or re-direct the attention, of attempts to limit or transform economic and political problems, whilst promoting a company’s business agenda.
Social Control and Militarism
To keep making their profits, corporations need us to keep working, consuming and not to resist too much. Social control – i.e. the mechanisms which control and/or limit people’s resistance to the status quo – is thus vital to enable corporate power. The Social Control section of this website explores the various different mechanisms of social control, from overt police repression to more subtle co-option of social movements, and from internet surveillance to propaganda.
The expansion of corporate power requires an increased militarisation of society to protect it. The arms traders profit from this militarisation and help to drive forward militarist policies. From new wars over natural resources to imperial interventions to crush popular uprisings the corporate-driven militarisation of national and international politics is gathering momentum. New invasions, occupations and interventions prompt technological developments that are changing the face of warfare and creating new oppurtunities for profit. The issue of corporations and militarism is explored in the Arms Trade and Palestine sections of this website.
Is there a way out?
With this question in mind, we have dedicated a section of the website to alternatives to corporate rule, in an attempt to dispel the myth that the corporate way is the only way to ‘successfully’ organise and structure our social, economic and political life. By showcasing examples of positive action, we aim to inspire as well as inform on the negative realities of corporate domination, hoping to stimulate debate and action, both on ways to fight corporate power and on ways to move beyond it.