Bill Totten's Weblog

Saturday, April 30, 2005

Corporate Rights and Wrongs

by Blaine Townsend

Trillium Asset Management (November 2003)

A century of corporate transgressions can be traced to two words: limited liability. These words define the legal canon which retards accountability of corporations in our system. There is no such restriction, however, on the constitutional protections corporations also enjoy. Until this basic imbalance is redressed, the world's ecology, human rights and capital markets will continue to be at odds.

Most scholars cite the 1886 Supreme Court case of Santa Clara versus the Southern Pacific Railroad as the turning point in a shift of power to corporations in our society. This ruling declared (without comment) that corporations were entitled to protection as "natural persons" under the 14th Amendment. The 14th Amendment gave citizenship to slaves and established due process and equality for individuals under the law. It is doubtful protecting the rights of Wal-Mart was what the authors had in mind.

The Santa Clara ruling, when combined with the limited liability laws that preceded it, gave corporations the powerful rights of individuals, without the corresponding responsibilities. Ever since, American corporations have managed to skirt the social contract. This is precisely what framers of the Constitution feared. Thomas Jefferson, in fact, tried to get "freedom from monopolies" protected as a constitutional right. Although he failed in this attempt, state legislators were still the only ones that could grant corporate charters until the late 19th century, and then only for specific projects.

Based on the litany of corporate ills exposed during the 21st century, it is clear Jefferson's fears were well founded. Just pick up a newspaper. This month it is financial services companies siphoning money from individual investors; last year it was high profile CEOs defrauding their shareholders and using the proceeds to influence elected officials.

But the rarefied protections corporations have enjoyed since the 19th century might not last forever. Today, massive demonstrations surround the meetings of the modern day Robber Barons, the World Trade Organization (WTO). People understand that the WTO gives corporations powers that trump local laws, and corporations are getting the message that growth at the expense of public health will be fiercely resisted.

Earlier this year, for example, two quiet townships in western Pennsylvania did something revolutionary. Outraged by toxic pollution from agribusiness, the townships declared they would refuse to recognize the rights of any corporation with a history of polluting. They were the first municipalities in this country to take such a stand.

The actions of these Pennsylvania farmers would no doubt have pleased Jefferson. The mere idea of the World Trade Organization, on the other hand, would have been beyond his most twisted, darkest imagination. The WTO and other international trade agreements extend the subjugation of individual rights from this country to the entire world.

Case in point: Twenty years ago a Texaco subsidiary dumped twenty billion gallons of toxic wastewater into the Ecuadorian rainforest. Today, ChevronTexaco claims that since the impoverished and suffering indigenous population hasn't actually proven anything in a court of law, the company must not have done anything wrong.

Limited liability law may be too imbedded to change easily, but the perpetuity of charters could be tied to local and social accountability. This would restore some protection against corporate abuse. The world wouldn't change over night, but it might make a New York based mutual fund company a little more reluctant to bilk investors; or an energy company located in largely Spanish speaking California a little more reluctant to pollute a Spanish speaking country.

Further, it would make it harder for goliath corporations to function. This would create new industries, technologies and jobs. In other words, plenty of money would be made. The money would just be spread around to many more (albeit smaller) companies and be made in a way that didn't recklessly mortgage the future of the planet. Any corporation opposed to that idea doesn't deserve protection.

After all, the rights protected in the Constitution of the United States were hard fought and hard won. They shouldn't be given away easily.

Bill Totten


  • You should also look at

    By Anonymous Anonymous, at 8:45 AM, May 18, 2005  

  • These words define the legal canon which retards accountability of corporations in our system.

    By Anonymous Dr. Health, at 8:53 PM, March 04, 2011  

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