Working Indiana - Working for Democracy and Justice

Using the DSM-IV (the Diagnostic and Statistical Manual of Mental Disorders) as their guide, filmmakers Joel Bakan, Mark Achbar and Jennifer Abbott persuasively argue that Corporations like human beings fall within a professional psychiatric taxonomy.  In their 2003 documentary, The Corporation, the corporate personality is laid bare, demonstrably void of conscience and unconcerned for anything but self gain.  Corporations, it is argued, can be described as having the following “human” traits: callous unconcern for the feelings of others, incapacity to maintain enduring relationships, reckless disregard for the safety of others, deceitfulness (repeated lying to and deceiving others for profit), incapacity to experience guilt and failure to conform to the social norms with respect to lawful behaviors.   In short, corporations are “psychopaths” as defined by DSM-IV.

Corporations have a venerable lineage strongly marked by an uneasy relationship with their host states.  In Europe the Dutch East India Company contended with its British rival the East India Company.  Both companies expanded in power and scope until they formed virtual governments with vast overseas “possessions.”  When Parliament enacted the Tea Act, allowing the British East India Company to “dump” its tea at reduced taxes on the American public while smaller American importers paid higher rates, it sparked the Boston Tea Party and, eventually, the American Revolution.  This revolutionary hostility toward the Company helps explain why early American entrepreneurs were required to apply directly to their local legislature to procure a Corporate Charter and why, in turn, most Charters were limited in scope and duration.

Early American corporations were customarily confined to projects that were too capital intensive for taxpayers: canals, railroads, turnpikes.  Generally, these projects remained under charter until they were completed and the investors were repaid their investment.  Afterwards, it was expected that the canal, railroad or turnpike would be turned over to the public or, in the case of railroads, open to public use.

Perhaps modern corporations owe their psychopathic traits to their schizoid structure which separates ownership from management.  Corporations are owned by “shareholders” who enjoy freedom from liability and expect profits.  Corporations are governed, however, by Directors who employ managers to carry out policy decisions on a day to day basis.  It’s a bit like having a physical body separated from the brain.  The body (shareholders) can express their opinions but Management makes the decisions.  Shareholders may not simply sue the Board for mismanagement because only the corporation owns the right to sue for an injury or mismanagement.  Instead, shareholders must generally ask the corporation politely to examine its own conscience. 

One justification for judging corporate behavior by human standards advanced by critics is that corporations increasingly enjoy human constitutional rights.  The extension of constitutional rights to corporations appears to be the result of human error—not carefully crafted jurisprudence.  On September10, 1886 Supreme Court J. Bancroft Davis posed a question to Chief Justice Waite.  Davis wrote: “I have a memorandum in the California  cases Santa Clara County v Southern Pacific, as follows:  In opening the Court stated that it did not wish to hear argument on the question whether the Fourteenth Amendment applies to such corporations as are parties in these suits.  All the judges were of opinion that it does.  Please let me know whether I correctly caught your words and oblige.”  Waite found Davis’ memorandum to be “sufficient[ly] accurate” and left it to the reporter whether anything needed to be reported since “we avoided meeting the constitutional question in the decision.”  Davis decided what the Court did not: that the 14^th amendment equal protection guarantee applied to corporations.  Subsequent Courts built on this flimsy foundation and extended the due process, Fifth Amendment, Fourth Amendment and Free Speech guarantees.

In an ironic footnote to this history, no lesser figure than Karl Marx is quoted as critical of Davis in the January 5, 1879 Chicago Tribune.  The miffed father of Communism complained of mistakes made by the same J. Bancroft Davis while serving as secretary to the world Socialist Reunion at Gotha, Germany in May 1875.  There, Davis reported a “Twelfth Clause” as part of the Reunion’s official Platform.  The Tweflth Clause supported “state aid and credit for industrial societies, under democratic direction,” a notion Marx decried since the party believed instead that transformation of the means of labor into the common property of society was “a question of time, of education and the institution of higher social status.”  Marx huffed that Davis’ Twelfth Clause was not only inconsistent with the Platform but in fact was supposed to be included in the “Introduction,” inserted there as a means of placating a dispute between two warring delegations.  Seldom has history afforded the same man an attempt to misdirect both Socialism and Capitalism.

In addition to sneaking under the protection of our Constitutional umbrella, modern corporations have largely freed themselves of the pre-Civil War restraints imposed by the system of legislative chartering.  Early corporations were limited to performing specific functions: building a canal or a bridge for example, and undertakings beyond the scope of their charter were at peril of being ignored in Court as ultra vires resulting in unenforceable contracts and promises.  Banking corporations were subject to even tighter controls and all corporations survived for an average lifespan of from twenty to thirty years after which, barring renewal, their charter would die.  Modern corporations do not require a majority vote of the local legislature, and arise from filling out a few simple forms retrievable on the internet.  Dracula-like, they can last nearly perpetually and do not have to strictly limit the scope of their activities.

Corporate ownership is widely dispersed throughout the economy; in fact the retirement vehicle de mode, the 401(k) is generally funded by “mutual funds” in turn made up from investments in selected corporate securities.  There are now more mutual funds than there are listed stocks on the New York Exchange so it is unlikely that corporations will cease to be the dominant form of business—and employment—in America since dismantling the corporate structure would be, in effect, dismantling the hopes for our own futures.  And herein lies the rub: we have created and perpetuated a system of doing business that, if not inimical to our interests, is constitutionally indifferent to them and yet we must depend upon it.  Like the “employment at will” doctrine whose legal family tree also sprouts from a J. Bancroft Davis type decision—taken by a legal treatise writer and not a court—the modern corporation is well entrenched in the fabric of our existence.  Knowing how it got where it is (by happenstance and not policy) is a strong reminder that attempts at reform are not misplaced since accident, and not deliberation, accounts for the modern corporation’s existence in the first instance.

Finally, no less a figure than Adam Smith, the founder of modern economics, expressed similar suspicion of the corporate form:

“the trade of a joint stock company is always managed by a court of directors…[who] being the managers of other people’s money…cannot well be expected [to] watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own.  Like the stewards of a rich man they are apt to consider attention to small matters as not to their master’s honor.  Negligence and profusion, therefore, must always prevail, more or less, in the affairs of such a company.”