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#489 - Fixing Corporations -- Part 2: Corporations For The Seventh Generation, 10-Apr-1996

[Note: This is second of two articles that explore strategies for going
beyond the usual calls for "corporate accountability." (Part 1 appeared
in REHW #488.) The author is part of a movement, already taking root in
over a dozen states, that advocates retaking the historic right of the
sovereign people to determine and direct corporate action.]

In view of the historic provisions that used to govern corporations
(see REHW #488), their representatives must be pleased that at least in
this country, boycotts and divestment strategies are considered
radical, and "dialoging" is the preferred mode of interaction. The rest
of this paper is an exploration of ways to restructure today's
corporation so that citizen activist efforts to eliminate corporate
wrongs can amount to more than just a few hard-won needles in a
corporate haystack.

As we saw last week, corporations are a special form of business entity
given a state charter and certain privileges in exchange for being
subject to the will of the sovereign people as expressed through state
legislatures.

Over the last half a dozen generations, corporation representatives
have managed to set up barriers to insulate the corporation from
citizen influence. Several trends have made it more difficult to direct
the corporation towards serving the public interest it was created to
serve. Among them: ** Under cover of the U.S. Constitution's "commerce"
clause[2] as interpreted by the U.S. Supreme Court, federal regulatory
agencies have usurped many of the powers once exercised regularly by
state legislatures. Today's corporations are ideally suited to wage
battles on the regulatory front, because it is so difficult for
citizens' groups to match their resources.[3] (In many ways, the late
19th century ascendance of the "commerce" argument is an eerie
foreshadowing of today's NAFTA and GATT controversies.)

** Through a series of leveraged expansions of the "diversity clause"
of the U.S. Constitution[4] (allowing "citizens" from two different
states to be heard in federal court instead of the presumably more
biased courts of either's home state), the U.S. Supreme Court "deemed"
corporations "citizens" and thus gave them nearly unrestricted access
to federal courts.[5] This saved corporations the trouble of defending
themselves in the courts of the state where they actually cause the
harms. ** In 1886 the U.S. Supreme Court decreed that corporations are
"persons" under the 14th amendment, thus granting them protection under
the Bill of Rights.[6] Such guarantees of free speech, due process, and
equal protection under the law were long considered to apply to human
persons. This ruling gave corporations unprecedented "rights" to
question almost any law applied to them, and frustrated the ability of
the people to direct corporate action in service of the public good.

** Stockholders, who used to really run corporations, have seen their
power dramatically reduced. Today the powerful corporate manager class
is insulated from stockholder influence by a variety of stock voting
tricks and governance structures that they themselves set up. They are
protected from most liability by state corporation codes and lax laws
and enforcement. And they write their own paychecks.[7]

In order to have a world that we would not be ashamed to bequeath to
the Seventh Generation, we must make two major changes in the
governance of the corporation. First, we must remove obstacles to
citizen control of the corporation. Second, we must reinstate
provisions such as those (enumerated in REHW #488) once governing
corporations, and add others that are particularly suited to our times.

"Model" provisions can become part of 1) state constitutions, 2) state
corporation codes and/or 3) the actual corporate "charters," which are
the documents states give to corporations to formally bring them into
existence. A program to institute such changes would include areas such
as the following.

People's power over corporations.

1. We the people can demand that state legislatures, the most direct
expression of the people's will, use their "reserved power" to revoke
the charters of errant domestic corporations. (A domestic corporation
is one chartered in that state.) The people of Delaware and a few other
states with "easy" chartering policies would have a more exciting time
than the rest of us here, since the overwhelming majority of offending
(U.S) multinational corporations are chartered there.

2. In other states, citizens can demand that their attorneys general
(or whatever agent is specified in their state laws and constitutions)
revoke the permission of errant foreign corporations to do business in
their state. (A foreign corporation is one chartered in another state
in the U.S. Those chartered in other countries are called alien
corporations.) Such actions have already been initiated against
Weyerhaeuser, WMX (formerly Waste Management, Inc.), and CSX
corporations.[8] (See REHW #455.)

** Annul "rights" given corporations by judge-made law. We can work for
state constitutional amendments that underline corporations' status as
subservient to the people and the legislatures, and assert that
corporations are not legal constitutional "persons" and thus are not
protected by the Bill of Rights of the U.S. Constitution.

** Re-open corporate affairs to legislative scrutiny. At one time, all
corporate records and affairs were open to legislatures or other
designated state officials so that state governments, on behalf of the
people, could monitor and evaluate corporate actions. We can reinstate
such provisions in state corporation codes.

** Reinstate stockholder/owner control over corporate management and
policy. For decades, concerned stockholders have attempted to curb some
of the worst excesses of corporate policies, only to find their efforts
thwarted by corporate management. We can modify states' corporation
codes to return a modicum of control of corporations to their putative
owners, the stockholders. Some basic provisions might include a) a one
stockholder, one vote policy, b) prohibitions against issuing non-
voting stock, c) removal of obstacles to stockholders' access to
information, initiation of policies, and removal of unsatisfactory
corporate management.

** Give state courts clear authority to hear all corporation cases.
State courts, more sensitive to local needs and conditions and more
accessible to citizens, once heard most corporation cases. During the
last years of the nineteenth century, numerous unsuccessful attempts
were made at the federal level to reinstate this practice. Both federal
legislation and federal constitutional amendments were proposed. Either
one would do the trick.

** Reinstate historic limits on corporations. State corporation codes
and/or corporate charters can be amended to include provisions such as
the following: a) Require corporations to have a specific purpose, with
a penalty of charter revocation if said purpose is either not fulfilled
or is exceeded. This would include a prohibition on the kind of "look
how ethical we are!" advertising that currently dissipates
stockholders' dollars and discombobulates public perceptions. b)
Require a percentage of stockholders to live within the chartering
state. c) Prohibit corporations from owning stock in other
corporations. d) Issue corporate charters for only a specific term of
existence, perhaps ten or twenty years. e) Limit real estate holdings
to that necessary for corporate purposes. f) Prohibit any and all
political donations by corporations. g) Prohibit all civic, charitable,
or educational donations not specifically provided for in the corporate
purpose. h) Impose strict liability for all corporate officers and/or
stockholders.

** Initiate new limits on corporate activities. We can add provisions
(to state codes, charters, and/or constitutions) that:

a) Forbid corporations from doing business under pseudonyms or
alternative names.

b) Require corporations to use earth-friendly materials in all stages
of operations, and to list all ingredients.

c) Prohibit corporations from buying up patents for the purpose of
preventing others from exploiting them.

d) Require every corporate document to be signed by a human being who
thereby takes responsibility for the veracity of statements and the
soundness of judgments therein.

e) Require a corporation to pay for periodic health, safety, and
environmental audits by independent experts selected by workers and
affected communities.

f) Require that in the event of bankruptcy, corporate management pay
and perks be withheld until all other debts and creditors are paid,
starting with workers and small businesses.

g) Require 95% recycling.

h) Prohibit corporations from seeking or accepting "incentive" packages
from any government entity.

i) Establish a maximum ratio (like 1:5) between compensation of the
lowest-paid worker and the highest-paid executive.

j) Establish a process similar to "recall" procedures for elected
officials, so that citizens can initiate revocation referendums for
corporate charters (in the case of domestic corporations) and for
certificates of authority (that allow foreign corporations to do
business in one's state).

k) Require uniformity of health benefits within each corporation for
all corporation employees (from CEOs to wage-laborers).

This is just a sampling of some of the options open to us. Priorities
might include working to revoke corporate charters, to end the
privileges granted corporations under the judicial "corporate
personhood" doctrine, and to prohibit political contributions. Most of
the obstacles we face are in the arena of judge-made law, but historic
legislation and constitutional provisions offer us a solid body of
favorable precedents. Much debate lies ahead. But it is high time we
shifted the controversy from whether we control corporations to how we
do so.

The sky's the limit. What are we waiting for?

by Jane Anne Morris[1]

=====

[1] Jane Anne Morris is a corporate anthropologist working on
corporation issues as part of Democracy Unlimited of Wisconsin
Cooperative. [Join them: 29 E. Wilson, Ste. 201, Madison WI 53703;
phone (608) 255-6629; fax (608) 255-6643]. She is author of NOT IN MY
BACK YARD: THE HANDBOOK (San Diego: Silvercat Publications [(888) 299-
9119], 1994).

[2] U.S. Const. Art. I, Sec. 8.

[3] An excellent discussion of the difficulties of relying on a
regulatory strategy to actually regulate corporate action can be found
in Christopher D. Stone, WHERE THE LAW ENDS: THE SOCIAL CONTROL OF
CORPORATE BEHAVIOR (NY: Harper & Row, 1975.]

[4] U.S. Const. Art. III Sec. 2.

[5] See note 15 in REHW #488.

[6] Santa Clara County v. Southern Pac. R.R., 118 U.S. 394.

[7] A discussion of the historical process of taking power from
stockholders and giving it to a largely independent corporate
management can be found in Adolf A. Berle, Jr., "Historical Inheritance
of American Corporations," in Edmond N. Cahn, editor, SOCIAL MEANING OF
LEGAL CONCEPTS (New York: NYU School of Law, 1950), pgs. 189-218.

[8] CORPORATE CRIME REPORTER, Vol. 9 No. 25 (June 28, 1995).

Descriptor terms: reforming corporations; regulation; history;
constitutional law; jane anne morris;

lead; migraine headaches; theo colborn; john peterson myers; dianne
dumanoski;