Issue #26, Fall 2012

The Stakeholder Strategy

Changing corporations, not the Constitution, is the key to a fairer post-Citizens United world.

But the final and most important reason to make companies more pluralistic is to make corporations more reflective of democratic norms and principles. Corporations have immense power over our lives, and not only because of the goods and services they sell, the jobs they provide, and the financial gains they contribute to our retirement funds. They also dominate our political world—and here John Bonifaz and his colleagues are correct—because they have access to lawmakers that few individuals can match.

We could address the errors of Citizens United from the constitutional side, but that would certainly be a long shot. The Constitution of the United States is one of the most difficult to amend in the world. A more viable option is to address the errors of Citizens United from the corporate side. Essentially, we could take the Court at its word, and seek to make corporations themselves more like “associations of citizens.” This too may seem a long shot. In a sense it is—if only because it would require a profound change in how we conceptualize corporations, from pieces of property owned by a sliver of the financial elite to collective enterprises benefitting from the contributions of a variety of stakeholders. But once the conceptual change takes hold, the legal adjustments are straightforward and much less demanding than a constitutional amendment. A national corporate governance law would require a vote in Congress followed by a presidential signature. In fact, a national law need not be the first step. As described above, many of these changes could take place one state at a time. States would just have to resist Delaware’s dominance and assert the authority to govern the corporations based in their own jurisdictions.

As the governance of corporations begins to take account of the interests of their stakeholders, the public voice of corporations would reflect the voices of those myriad stakeholders. Corporate involvement in the political process would be less of a concern, because it would be more reflective of the range of stakeholders contributing to company success. It would be less “them” and more “us.” There is nothing inherently undemocratic in corporate speech, unless corporations themselves are undemocratic.

Citizens United recognized the corporate right to speak in the American public square. Currently, that poses a major problem for our democracy because corporations amplify the voices of a tiny number of the financial and managerial elite—the notorious 1 percent. If companies gave voice to a more diverse and pluralistic set of interests, the fact that corporations speak would not undermine democracy. On the contrary, corporate speech would reflect it.

 

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Issue #26, Fall 2012
 
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Greg Jemsek:

The logic of this "paradigm shift" is well laid out in this article. However, like so many opinions expressed by progressives, it avoids dealing with the more contentious obstacle of getting a recalcitrant congress to even consider such a change in perspective. People in general would benefit, but would the 1%? No, and their lobbyists still control the game. The assumption of good will on the part of corporations themselves, and on the part of our government, is what is flawed here, despite the clear and interesting perspective put forth.

Aug 26, 2012, 9:11 PM
notta lackey:

I disagree with the premise of this article. The actual need is for corporate democracy. Let them stay in Delaware. Just have a 500% Federal income tax surcharge and a maximum salary of $50,000 for publicly traded corporations that don't have free elections. Just do like political elections. If your group has some threshhold of shares, you can petition to put somebody on the ballot. Just like in politics, the petition size should be a small percentage of the electorate.

In addition, at the meeting, the top executive pay contracts are also voted on. Right now the CEOs for practical purposes select the boards. The above would reverse that, unless the selfish clod wants to work for 50k.

And we also need the corporate personhood amendment. The "person" part of corporatedom was originally to allow limited liability. We need something that can limit liability to get investors, but it was a legal fiction. Legal fictions have their place, but they should never be expanded because they are fiction.

Sep 1, 2012, 1:34 PM
notta lackey:

I disagree with the premise of this article. The actual need is for corporate democracy. Let them stay in Delaware. Just have a 500% Federal income tax surcharge and a maximum salary of $50,000 for publicly traded corporations that don't have free elections. Just do like political elections. If your group has some threshhold of shares, you can petition to put somebody on the ballot. Just like in politics, the petition size should be a small percentage of the electorate.

In addition, at the meeting, the top executive pay contracts are also voted on. Right now the CEOs for practical purposes select the boards. The above would reverse that, unless the selfish clod wants to work for 50k.

And we also need the corporate personhood amendment. The "person" part of corporatedom was originally to allow limited liability. We need something that can limit liability to get investors, but it was a legal fiction. Legal fictions have their place, but they should never be expanded because they are fiction.

Sep 1, 2012, 1:35 PM
noirswann:

This article supports muzzling free speech. So what if big money is behind and spends it on political self interest? You must think American citizens are idiots and cannot be trusted to hear information that may mislead them. Phooey! Free speech for all, regardless of source, money or not.

Sep 1, 2012, 3:54 PM
Robert Schmid:

This article proposes some very good and effective ideas. However, I still feel the evolving notion of corporate personhood presents a danger. As long as the corporate shield stands alongside the notion of corporate personhood, these entities will be able to act without regard for responsibility to their communities. One or the other has to go or be weakened. If corporate personhood must stand, then it must easier to pierce the corporate veil.

Sep 2, 2012, 10:45 AM
DavidK:

The easiest way to deal with the problem is a simple law that restricts the right to make campaign contributions to any candidate to persons who are eligible to vote in the election in which that person is a candidate. Corporations may well be legal people, but they don't have the right to vote.

Sep 11, 2012, 3:51 PM
Ronin:

Flawed logic and premise.

Shareholders may be owners but it doesn't follow that management can speak for them or needs to speak for them.

All shareholder are free to speak outside their role as shareholders and, at the very least, their right to speak would not be abridged by preventing corporate campaign donations.

Shareholders own companies as investments, not to have a say in what the corporate management - a dozen people maybe - seeks to say politically. And corporate entities don't exist to exercise speech.

Sep 13, 2012, 3:36 AM
KONNIE:

i would rather see an amendment stating that only VOTERS FROM THE DISTRICT can contribute to a campaign for an elected office in that district. Therefore if only a human person can submit a ballot to be counted, it eliminates corporate/cpac money. If it restricts that donation from coming from outside any given district there can be no outside influence. The office of President would be the only national office where money could only be donated by VOTERS across the country. Seems pretty straight forward to me. Issue ads are a different matter, FCC regulations could address these and almost assuredly shut them dowm with taxation, must have identification of group responsible, and equal time back in the mix.

Sep 13, 2012, 7:50 AM
LaoShur:

Wouldn't it be MUCH easier to LIMIT contributions to $100 per 'INDIVIDUAL"?!

Sep 13, 2012, 7:50 AM
Brian Cooney:

Excellent article. Our system of corporate governance is abysmally anti-democratic. The recommended changes in corporate governance would be a great first step. Ultimately, it seems to me that the only kind of corporate governance consistent with democracy is for the default firm to be a worker cooperative with statutory obligations to stakeholders other than employees (e.g. the local community). We know from the cases of Mondragon and John Lewis Partners that such a model is viable in a free market economy.

Sep 13, 2012, 10:03 AM
Sanford Lewis :

Interesting perspective. But "a CEO who lies at a shareholder meeting will go to jail" WAY overstates the situation. In my experience as a lawyer who represents socially concerned shareholders, CEOs lie at shareholder meetings all the time, and seldom face any accountability.

Sep 16, 2012, 11:26 AM
Gary Brumback:

Ending corporate personhood will absolutely NOT end America's own worse enemy, her corpocracy, or collusion between powerful corporations along with their allies and "our" government. There are numerous other ways in which corporations can influence politicians. Moreover, even if corporate personhood were ended (and a Cconstituional amendment is only but also the most difficult means to do so), corporations and their lawyers would easily find loopholes (most likely ones inserted by crafty lawyers).

Mr. Greenfield and readers, the corpocracy is ruining America. It must be ended. The only way to do so is to know it out with "two-fisted democracy power." It's a metaphor that carries quite a punch. To see what I mean go to www.uschamberofdemocracy.com

Sep 22, 2012, 9:18 AM
Laura Lee:

One thing that would need to happen for a paradigm shift to occur is for the news media to cover the other stakeholders as intently as they cover the numbers going up and down in the Dow. Right now business journalism is nearly synonymous with writing from the perspective of management and capitalists. Some sort of dow-like measurement of how decisions affect other stakeholders that news people could follow and easily report on would be a good start.

Dec 7, 2012, 11:12 AM
B Lab:

Mr. Greenfield makes an excellent point regarding the need for corporate governance reform. In fact, 13 states have already taken action and passed Benefit Corp Legislation.
Benefit corporations are a new kind of corporation legally required to: 1) have a corporate purpose to create a material positive impact on society and the environment; 2) expand fiduciary duty to require consideration of the interests of workers, community and the environment; and 3) publicly report annually on its overall social and environmental performance using a comprehensive, credible, independent, and transparent third party standard. This offers business more freedom in defining success and provides legal protection for those looking to pursue a corporate purpose other than maximizing profits for shareholders.
While 15 other states are moving forward with similar legislation in 2013, the real question is what will happen in Delaware. As Mr. Greenfield correctly points out, "the only jurisdiction that matters for most companies is Delaware". It is up to this state, and us as consumers, entrepreneurs and investors, to see that the governance of corporations evolves and takes account of the interests of stakeholders. This way all businesses will have the freedom to compete to be not only the best in the world, but the best for the world.

Jan 3, 2013, 11:41 AM
ZZMike:

The idea is really quite simple. If corporations do not have the same rights a persons, to vote (though they do have the right to enter into contracts, and to buy and sell property)...

then neither should unions have the right to "engage in political speech and campaign spending."

I would be more than happy to curtail the right of corporations, just so long as an equal curtailment applies to unions.

Then perhaps more of their dues income could go to what the unions claim is their primary effort: making things better for their memebers, rather than being funneled into Democrat coffers.

"... We can redistribute financial wealth ..."

"Redistribution: is nothing more than legalized theft; an imposition of communism (communal wealth)

Jul 20, 2013, 8:24 PM

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