Corporation Nation

Most Americans know corporations run the nation and long ago ceased to be good citizens. U.S. Corporations have endorsed a sociopathic stance of short term profits as their objective exclusive to all others. Profits above people is now the norm. Dr. Ralph Gomory, who contributes to this site and Dr. Richard Sylla have dismantled the U.S. corporation and even put it back together again in an essay published by American Academy of Arts & Sciences. The essay gives a historical narrative of the U.S. corporation, touching upon major historical events which shaped these business entities into the conglomerates we know today. The authors also propose solutions and describe options to channel business behavior to be more in concert with America. We need to structurally redefine and realign the U.S. Corporation.

Excerpted below is the abstract of their paper, Stewarding America: The Corporation.

The United States from its earliest years led the world in making the corporate form of business organization widely available to entrepreneurs. Starting in the 1790s corporations became key institutions of the American economy, contributing greatly to its remarkable growth. This essay reviews the evolution of corporations across several eras of the country’s history. The most recent era is marked by a shift away from a stakeholder view of corporate interests and purposes to one dominated by profit and shareholder-value maximization. We strongly question whether this shift has been beneficial to the country as a whole. If our assessment is correct, there is a need to find ways of inducing corporations to act in ways that produce better societal outcomes. We therefore explore ways—including some suggested by the history of U.S. corporations—in which corporate interests and the public interest might become better aligned.

TDR

Great corporations exist only because they are created and safeguarded by our institutions; and it is therefore our right and our duty to see that they work in harmony with those institutions.

–Theodore Roosevelt, First Annual Message to Congress, 1901

 

 

Questions about the actions and purposes of American corporations have been with us as long as corporations themselves. Both the questions and the answers to them have varied widely over time. The Occupy Wall Street movement that began in New York City in September 2011, spreading thereafter to other cities, raised or reiterated some of the basic questions about how well these American institutions work. The questions being raised today cover a wide range of issues.

Why, during the ongoing financial and economic crises that broke out beginning in 2007, did large financial institutions and industrial firms teetering on the brink of failure–often because of their own misguided strategies and decisions–get bailed out by the federal government? Why did the government seemingly do much less for homeowners facing foreclosures on houses now worth less than the mortgage debt incurred to buy them, perhaps because they had lost their jobs in the economic downturn and could not afford the mortgage payments due?

Why do the profits of American corporations and the compensations of their executives stay high and even rise in some cases while jobs disappear and both economic growth and median family incomes stagnate? Why does the judicial branch join in to strengthen the influence of corporations, financial and nonfinancial, as with the Supreme Court’s Citizens United decision in 2010? That decision granted corporations relatively unlimited free-speech rights to spend corporate funds in electoral politics.

It is not the first time in U.S. history that people have wondered whether ours is a government of the people or a government of the corporations, by the corporations, and for the corporations. Such fears are as old as the republic. They were present in the 1790s, when the United States began to lead the world in the development of the corporation as the most dynamic form of modern business enterprise. They arose again in the financial and economic crises of the late 1830s and early 1840s, after state legislatures had created thousands of corporations. In the decades around the turn of the twentieth century, when many corporations became very large, the fear of corporate power resurfaced, leading to antitrust laws and federal regulation. The crises of the Great Depression led to further restraints on the financial and economic powers of corporations.

If there is any surprise about the current crisis, it is not that worries about corporate power and its abuse are once again being raised, but that so little is being done about them in comparison with the reforms of the 1840s, the Progressive Era, and the New Deal. Could we be witnessing the ultimate triumph of the corporation, one in which corporate rights and privileges vastly outweigh corporate social responsibilities?

Americans have always viewed corporations with mixed feelings. On the one hand, a corporation with limited liability and endowed with a long life is an attractive vehicle for numerous investors to pool their individual capitals, receiving tradable shares of the company in return. Pooling of capital makes possible large, long-term investments that can achieve economies of scale and scope in the production and distribution of goods and services that are beyond the capabilities of sole proprietorships and partnerships. Indeed, one of the less appreciated reasons for the rapid rise of the U.S. economy in the nineteenth century in comparison to other nations was the relative ease of obtaining a corporate charter in America.

On the other hand, inherent in the corporate form are problems of conflicting goals. Will the managers of corporations manage them in the interests of the shareholder-owners? Or will the managers act in their self-interest? Will corporate managers take into account the interests of employees, customers, suppliers, lenders, and the polity that made the corporation possible?

Inevitably these problems of corporate goals that have arisen throughout the history of the American corporation are still with us. Our essay outlines how they have been addressed in several distinct eras of U.S. corporate development. This history perhaps can inform how we might deal with them now.

We conclude by strongly questioning whether today’s dominant corporate goal–profit maximization–is beneficial to the country as a whole.

The entire essay has been made available by the American Academy of Arts and Sciences at this link.

The authors also examine a host of policies to improve the U.S. economy, trade and the role of the U.S. corporation. They even recommend the T word, tariffs, to deal with Chinese mercantilism and currency manipulation. By reviewing the history of the United States corporation, Gomory and Sylla make it clear it doesn't have to be like this. We don't have to be Corporate Nation. We need to develop new corporate forms and redefine the corporation legislatively. We need to align corporate interests with America's national interest and common good.

The Essay mentions President Eisenhower's farewell address, where he warned of corporate and military excessive power as a threat to the nation over 50 years ago. The Cassandran historic speech rings eerily across our vast nation as we did not heed his warning.

 

 

The American Academy of Arts and Sciences is publishing a group of essays examining Citizenship and the public good:

Recent polls suggest that American citizens have become increasingly concerned about their leaders and the efficacy of their institutions. At the end of 2010, 72 percent of Americans expressed dissatisfaction with national conditions. Sixty percent said they were disenchanted with partisan politics and wanted to see a renewed spirit of cooperation among their leaders. Most Americans seek a more coherent, collaborative, national conversation in which individual interests can be aligned with the greater good.

The American Academy will investigate the civic institutions that are critical for inspiring and modeling good citizenship. Through in-depth analyses of the government, the courts, the media, the military, corporations, and the education system, the Academy will develop a better understanding of the role of these institutions in the American democratic system and develop proposals to increase civic participation and public confidence in American leaders and institutions. The findings will serve as the basis for publications, national conferences and workshops, and a public outreach campaign aimed to encourage a renewed emphasis on stewarding American democracy.

Project essays will be included in a special volume of Dædalus, "On the Common Good," guest edited by Norman J. Ornstein and William A. Galston (forthcoming, Spring 2013).

Academia is examining, outlining the structural problems of our economy and proposing solutions. We can even obtain Congresional testimony of the problems with corporations being so disjoint to America. Perhaps we can achieve actual legislation to finally realign corporate entities with the national interest at the state and national level.

Meta: 

Comments

One idea the essay touches

One idea the essay touches on, in the last couple of paragraphs, is changing the priorities of corporations to serve stakeholders rather than shareholders. A good way to do that is to redefine capitalism, specifically to add new accounting practices that reflect associated costs. For instance, the costs of building a new coal plant should reflect the increased costs of treating people with lung disease brought on by the plant's emissions. We can't predict that increased cost exactly, but we know it's there, and we should be able to find a way to estimate it fairly. Naturally the associated benefits of corporate behavior would offset those costs, the trick is getting benefits to outweigh costs. That's why capitalism works (when it does work)--the rules are well defined, almost everyone follows them, and cheaters are punished.

There doesn't seem to be much discussion about this strategy (correct me if I'm wrong). You could sell it to the corporations by pointing out that it would increase profits. Benefits would go up for the successful, while those only interested in cutting costs would be seen for the sociopaths they are.

You must have Javascript enabled to use this form.

Strategy of corporations accounting: costs/benefits

Mr.Crown's ideas are oblivously reasonable to stakeholders. Thank you stating them. While you seem to be discussing on a policy level, an application came to my mind: That is, a formerly proposed "accounting" mechanism of a point-of-origin recycling principle. For example, an corporation utilizing coal in its production process, would automatically include the costs of recycling, or, neutralizing the harmful by-products, of coal, such as dust, sulfulic acid in the air, ...

Indeed, this re-cycling mandate could be costed into the R&D. Such technological information is probably already available, if adapted. Besides the element of coal, other ingredients of produced products could be recycled from the point-of-origin by embedding during the prod. process neutralizing organisms, or mechanical processes, that when the intended use of the product is completed, would netralize the toxicity of the product. Just thinking.

You must have Javascript enabled to use this form.

The corporate form and the reality of the social divide

The essay by Sylla and Gomory is stimulating and full of insights - but the focus on the corporate form leads to suggestions of modifying it, a non-starter.

Corporations are not merely large organizations needed for modern production of goods and provision of services. They enable a handful of persons to profit immensely from the labor of most of us. The gap between these rich and the rest of us has reached an all-time high. In addition, the dynamics of making profit under capitalism no longer allow any other situation.

Yes, we need a different economic order, and while it must have large organizations to make things and provide services, they cannot be run for profit, no matter how regulated. No Rich, No Poor.

You must have Javascript enabled to use this form.

Marx and more

No one seems to want to mention Marx though he was right-on in many of his observations about capitalism.
One thing that Marx was wrong about was that he allowed himself to believe that capitalism was somehow other than a short-time phenomenon.
It is my sense that by now it is clearly visible that 'democracy' is not the domain of people as a whole, but has--over a fairly long period of time (a thousand years or so) been seized by 'corporate interests', which began as a 'democracy for princes only'. This is how we came to the Magna Charta, which in due course became modified into parliamentary government.
Direct democracy has been avoided by government ever since human beings were excluded from their true hideaway, the wood or the forest. The forest has suffered from deforestation exercised by corporate entities for the thousand years mentioned above. The consequence is the desert, the urban landscape, which practices a kind of rhetorical 'democracy' that never works and will never work until we figure out how to return to life in the wood.
Personally, I believe the study of how to reform corporatism ridiculous, another attempt to escape facing reality by academics who have learned well the methods of stealth that have concealed stealing for so long so well.

You must have Javascript enabled to use this form.

community service for Citi and Goldman Sachs

The general sway of this article evokes Galbraith's 'The Affluent Society' some fifty years ago. Of course, he recognised the importance of the 'corporation' as a provider of employment, and a source of growing affluence and living standards for the everyday American. Even as employers' and directors' bonuses continued to rise exponentially. What he felt was missing was a sense of collective responsibility for maintaining social and community standards.

Why don't we, as well as fining banks, impose a form of community service on them? They could be put in charge of a construction programme for a number of youth clubs, and meals-on-wheels services for the elderly and disabled. Their sponsorship of the scheme would be evident on all associated marketing material, boosting their relationship with the community. The review of their performance would be done through a ballot by those in receipt of the service, and other people living in the region.

You must have Javascript enabled to use this form.

Evidence of visa games, private equity control - Aspen Dental

It's madness, a simple search will reveal labor arbitrage, corporate/private equity control in corners you never thought to look into. Any industry, sector, it's all around. Looking for immigration games, and Aspen Dental comes up for a "Part-time Immigration Coordinator." Now, a search of dental assistants on indeed.com and other sites shows that they are just another job that is suffering from decreasing wages, despite all the schools claiming that it and other jobs are kicking ass with demand, demand, and more demand (all that matters to most of them is tuition and loan money, not the students)! But behind the scenes, oh, apparently the same industry is looking for foreigners to come in to take some jobs in the field, dentists, dental assistants. Why else would Aspen Dental need people from outside our borders? Not enough Americans available? Come on, it's a profession, it's regulated, so obviously approved labor arbitrage is on in full force. The private equity group that owns Aspen Dental is Leonard Green and Partners. A search reveals those private equity boys have had to face legal cases in Pennsylvania and other states. And despite the suits, they still conduct business as if nothing happened, whereas one or two lawsuits would cripple a small town dentist's or other person's practice, thus the inequity. Here's some of the information they posted regarding the part-time Immigration Admin Job ad:

"1. Assist attorney with determining case issues and planning case strategy for each individual;
2. Prepare appropriate forms regarding each individual’s immigration matter before the Departments of Homeland Security, State, Justice and Labor.
3. Review file on a regular basis, consult with attorney and prepare regular status reports to individual;
4. Assemble and organize all forms and supporting documents for attorney review and filing with USCIS;
5. Follow up with immigration seeking individual to ensure receipt of immigrant documentation and prepare information on maintaining lawful permanent residence and the responsibilities of having such status.

Education and Experience:
1. Associates degree or certificate program in paralegal studies;
2. 2-5 years of experience;
3. Experience with of immigration procedures, principles and practices;
4. Comprehension of legal communication principles and practices;
5. Awareness of local, state and federal laws and immigration regulations."

Private equity, working to get inside your mouth. Private equity involved in everything from health to finance, consumer goods, defense, etc. So, if all they care about is cutting costs and making $ for themselves, what fool would expect them to care about your teeth, health, or safeguarding our borders, jobs, or finances? Only suckers.

You must have Javascript enabled to use this form.

labor arbitrage in dental assistants

The privatization, corporate takeover on things like Dentistry is just symptomatic of what is wrong generally. Lawyers now cannot get a job, with 6 figure student debt. Law school is ridiculously expensive. The whole system is imploding where Americans are put last even when they have the education and skills.

You must have Javascript enabled to use this form.