‘Corporations have caused more harm than good and there is little that society can do to stop them’. Discuss.
Introduction
Since the development of the first American corporations and their control mechanisms in the 1790s, individuals ranging from economists to politicians to the general public have discussed the positive and negative qualities associated with them, as well as, the growing influence and power they hold within society. In the modern era of corporations, the Limited Liability structure has given birth to entities that are “too big to fail” due to their interconnectivity and significant role they play in the success of the economy. This raises the question: Does society control corporations, or do corporations control society? The paradigms of thought on this can be split into two general categories: individuals who believe corporations cause more harm than good and present a growing danger to society, and individuals who believe they are beneficial and necessary for society to continue its growth and innovation. However, the complexity of corporations and their impact on society shows how absolute statements and positions regarding this discussion are often an over-simplification of an intricate and multi-faceted discussion. This paper will explore these concerns to deduce whether corporations are causing more harm than good to society, and whether society has reached a tipping point where little can be done to stop the destructive and profit-seeking behaviour of Limited Liability corporations. Within this paper, the films “The Corporation” and “Can we Do It Ourselves”, as well as, pieces by Chang H-O, Koen C. I. and Plesch, D. and Blakenburg regarding the history, roles, responsibilities and formation of Limited Liability corporations within Capitalist societies, will be analysed to discuss whether corporations cause more harm than good and if society has lost the ability to control and hold corporations accountable.
The Harmful Nature of Corporations
An argument can be made that the control mechanisms and structure of corporations through Limited Liability, obtaining rights without responsibility, profit-driven nature and being considered a person inherently positions corporations to cause society more harm than good. Plesch and Blakenburgs
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support this point in their piece “Corporate Rights and Responsibilities: Restoring Legal Accountability” by referencing the renowned economist, Adam Smith, and his judgement of Joint stock companies (Limited Liability companies) in 1776 and draws eerily similar comparisons to the ramifications and public opinion that is still present in 2018. Adam Smith’s judgement of Limited liability corporations excellently highlights the inherent short-comings of this structure as it encourages managerial “negligence and profusion” (Plesch and Blakenburg, 2007, Pg 10) while ignoring appropriate “anxious vigilance” (Plesch and Blakenburg, 2007, Pg 10) when making investment decisions that have no repercussions on the decision-maker’s personal finances. Continuing, Smith critiqued the exemption of certain individuals from general law merely because they might be capable of succeeding if they had less legal impediments and found it “certainly not reasonable” (Plesch and Blakenburg, 2007, Pg 11). Although Smith makes valid points on the negative economic consequences of Limited Liability, his analytical scope falls short of making compelling arguments about the political, social and environmental consequences of corporations. The argument scope, its temporal context and the evolution of Limited Liability over time limits Smith’s argument, but his points on the inherent negative qualities regarding the legal immunity and negligence of Limited Liability corporations remains consistent over time.
In addition, Plesch and Blakenburg go in depth into three reasons why unequal protection through Limited Liability is harmful; it violates the legal equality of the public in favour of the “Unaccountable Few”, it enriches few but harms many and promotes speculation and corruption, not economic growth and innovation (Plesch and Blakenburg, 2007, Pg 16-23). These problems cannot be ignored when discussing the impact of corporations, as films such as The Corporation (2005) highlight how quickly the lines between right and wrong get blurred when legally immune and profit-driven corporations try to maximize their bottom line. According to Plesch and Blakenburg, corporations are enabled by their unequal protection to proceed to destroy the environment, create sweatshops and deceive pensioners. In principal, this is a legitimate point and partially explains how Limited Liability corporations can continue committing crimes domestically and abroad without suffering proportionate punishments. However, Plesch and Blakenburg fail to specifically touch upon; what some call a responsibility and others a scapegoat, the sole responsibility of corporations to maximise profit for their shareholders. The Corporation (2005) uses that fact as the main premise to explain how this onedimensional approach has enabled corporations’ exploitation, negligence and corruption of society. Considering these theories together, they adequately explain how Limited Liability corporations can cause more harm than good to society, while evading legal, social and political prosecution by referencing their ingrained legal responsibilities when faced with criminal and civil allegations.
Part of the topic is answered by identifying the inherent legal and moral flaws embedded within corporations and Limited Liability, which enable them to live above the rule of law in the name of profit. But to acutely analyse the impact of corporations on society one must probe the topic at a system level, specifically, how corporations interact with government, authority and other social actors within the political economic system of capitalism. Traditionally, capitalism is defined as an economic system where private across own and control property in accord with their interests, where the “invisible hand” pricing mechanisms coordinate supply and demand which automatically adjusts in the best interest of society (Scott, 2006). Ha-Joon Chang in “23 Things They Don’t Tell You About Capitalism” clarifies this complex relationship between corporations, capitalism and politics, namely that governments cannot pick winners and there is no such thing as a free market (Chang, 2009). Expanding this to a wider scope, it speaks volumes on how, for instance, the relationship between corporations, lobbyists and politicians in the United States is closely recognizable to legal bribery. Although, is this relationship a consequence of corporations or the larger system of capitalism? This paper argues that the harmful nature of corporations, at least partially, is a direct result of the manifestation of these same qualities within the system of capitalism. However, this is not to say that corporations do not cause significant harm to some areas of society, but it is not yet determined whether corporations cause more harm than good and whether society can stop them.
The Beneficial Nature of Corporations
After discussing many inherent problems within corporations and the system it operates in, it is important to recognize how they have played a role in improving many aspects of human life, from the progression of technology to the wider availability of essential amenities. The corporation’s benefit for society can be broken down two categories: the goods and services they consistently supply and the employment opportunities they offer to the areas they operate within.
According to Robert Atkinson, author of “Big is Beautiful: Debunking the Mythology of Small Business” states that larger corporations provide benefits to society in the form of higher-wage jobs, better workplace benefits, lower prices and a range of other benefits that smaller businesses and cooperatives do not offer (Atkinson, 2018). Additionally, Atkinson argues that scholarly literature generally finds that larger firms enjoy higher profits, but is this because of a greater market share or superior productivity and efficiency? Referencing academics David Szymanski, Sundar Bharadwaj, and P. Rajan Varadarajan, Atkinson reports that they answered this question by finding that large firms with greater market share reap higher profits because they are more efficient compared to smaller firms, which “benefits workers, consumers and shareholders” (Atkinson, 2018). This theory presentation and analysis by Atkinson seems to hold large corporations in an altruistic and nearly infallible light while only focusing on a few key benefits of higher efficiency, lower costs and better wages. This can be interpreted as evidence that the benefits corporations provide society are strictly limited to improving productivity, costs and wages, as a clearly pro-corporation author neglects to mention additional benefits.
Moreover, the argument regarding the benefit corporate goods and services have on society is like a double-edged sword, as the goods and services give one section of society incredible benefits at the expense of either an animal, individual or states freedom and human rights. Taking note of this slight contradiction, it is now appropriate to recognize the paradigm-shifting goods corporations produce. Take Google, Apple and Microsoft as instances where corporations can make incredible steps to improving the overall fabric of society while minimizing the harmful by-products being left to consumers. Again, it is important that the paper makes note of the existence of harmful elements, even in ideal tech corporations, in the form of E-waste, conflict minerals, child labour and more. These neocorporations realize the importance of using Corporate Social Responsibility (CSR) to reduce their harmful impact on society, but also as a valuable customer relationship management tool. However, this shifting importance towards CSR is a great sign for the future of corporations within the neocapitalist society, as well as, a crucial variable to consider in discussing this topic. If a corporate impact spectrum could be created with Google on the left representing CSR and Enron on the right representing corporate greed, negligence and corruption, and most firms fell under either Google or Enron’s side of the spectrum, this topic could be addressed with a straightforward answer.
Conversely, the value and benefit of corporations can extend beyond the physical goods, services and opportunities they offer to society, as there is something to say about the symbolic value certain corporate brands provide individuals within society. This represents an obscure realm of potential research that aims to better understand the underlying benefits, or additional harm, corporations inflict on society through the supply of their goods and services, as well as, the various corporate communication channels and techniques utilized.
Society Reigning in Corporations
The final section of this topic left to discuss is whether society can do anything to stop the harmful actions of corporations. Several of the papers that have already been used in this discussion touch upon certain reforms that could fix the inherent unequal protection granted to corporations. Pelsch and Blakenburg clearly maps out several reforms for restoring freedom and equality against such deeply “engrained special interest protection” (Plesch and Blakenburg, 2007, Pg 29). They critique the campaigns and appeals to the corporate person and general CSR moves by corporations and brands them as “not working” (Plesch and Blakenburg, 2007, Pg 29) and largely ineffective. Significantly more praise is handed down to the legislative and legally binding reform approach taken by the EU parliament and UK government to make good corporate governance a legally binding requirement. However, the starkest solution presented is the abolishment of Limited Liability altogether, which is argued by referencing the Enron case and how without Limited Liability the shareholders and directors would avoid the company-ending circumstances due to their change in incentive and the inevitable court date with the creditors and damage sufferers. This has truth to it and could be a potential solution to both the unequal corporate protection, as well as, the impact it has on the political sphere through lobbying of special interests. Although, there must be a replacement model that can provide at least partial protection and not force full liability on the shareholders, as this would not be considered equality and would only hinder innovation and responsible risk. The California model – pro rata liability, suggested by Plesch and Blakenburg, means that the shareholders are responsible for their initial investment, as well as, the proportion of debt that you own within the share of the company, own 1% of shares and you pay 1% of the debt. This appears to be an excellent option for reinjecting some responsible decision making and to actively get away from gross-negligence due to a lack of personal responsibility. Although its not a final solution by any stretch, it does provide some specific rules to guide responsible decision making and balance the risk between shareholders and creditors, not the general public.
Furthermore, in the Can We Do It Ourselves (2015) approach these reforms by discussing the role co-operative business structure and the market economy can help shift the power dynamics away from gross-inequality. These concepts switches the power dynamic away from empowering the capital owners to empowering regular employees who take the power of production into their own hands through renting capital. Compare this to the capitalist and corporation model where capital owners express totalitarian power over the means of production, which is supported by the fact that capital hires labour and labour powers production. What this film suggests is to flip the system and empower former labourers to hire capital to being their own, employee run companies. In comparison to the reform mentioned by Plesch and Blakenburg, this approaches the problem through a lens of empowering labourers through an upheaval of the current political economic system of capitalism. Only with research and time can one know the true effectiveness of the system, but this paper considers this option to be more fulfilling and promising compared to the idea of fully abolishing limited liability. Better yet, a multi-pronged approach of the California model -rata liability, the market economy and employee-led co-operatives would make a great start on reducing unequal legal protection for shareholders, while also educating the public on the danger of unlimited corporate power.
Overall, within society we have an abundance of paths that can be used to start the long journey of changing the current system we operate in; public protest, political reform, boycotts, town-hall debates, local co-operatives and much more are all available options. Corporations and Limited Liability were created by legal means, and thus, can be taken down by purely legal means, but this requires the difficult task of inspiring action within many powerful and morally corrupted institutions. So, is there little society can do to stop corporations? No! To say that modern societies are unable to reign in corporations is ludicrous. The fact that this unequal protection has not been abolished earlier comes down to the blatant moral and financial corruption of political and business leadership, however, the solutions have been highlighted through abolishing limited liability, creating rata liability, embracing a market economy and reversing the capital owner and labourer power dynamic.
Conclusion
In conclusion, the topic is thought-provoking and riddled with complex uncertainties whose interpretation differs based on the readers own personal biases and opinions. In this paper the topic was broken down into three sections to analyse the harmful nature of corporations, the beneficial nature of them and whether society can express its control over corporations, or if its too late. The first and second sections of this paper attempted to understand the underlying control mechanisms and workings of corporations to see whether they caused more harm than good to society. This paper found that several key principles of Limited Liability and corporations are inherently harmful to society, namely the justification of illegal acts in the name of profit and incentivized haphazard risk-taking. On the other hand, the beneficial side of corporations is seen back in all of the physical and intrinsic value corporations and their brands provide us on an everyday basis. However, a majority of the benefits provided to society through corporations almost always have an equal and opposite negative consequence to them that is forced onto a different area of society. Can it truly be considered beneficial if one section of society has to suffer for the enjoyment of a select few? This has led the paper to conclude that corporations have indeed caused more harm than good, due to the inherent structural flaws within the system of Limited Liability and the great-enabler of the overriding political economic system of capitalism.
Lastly, the idea that society is powerless to the will of corporations is a dangerous thought to truly believe in. This paper highlighted and critiqued some of the suggestions to tackle unequal corporate protection. Although none of them are perfect individually, as a collective they add immense value to society through the empowerment of several marginalized groups. Yes, there is no one thing society can do to reign in corporations, but there are a collective set of actions and ideals society can use as a guide to reduce the harm of corporations while maximizing their benefit.
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Bibliography
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