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.
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.