One Female Cultural Creative: August 2007

Fall 2007: Stand Up to Corporate Power

Who Will Rule?
by Michael Marx and Marjorie Kelly

Citizen movements are proving that we can take on corporate power, and together build a future that works for all life.

Corporate power lies behind nearly every major problem we face—from stagnant wages and unaffordable health care to overconsumption and global warming. In some cases, it is the cause of the problem; in other cases, corporate power is a barrier to system-wide solutions. This dominance of corporate power is so pervasive, it has come to seem inevitable. We take it so much for granted, we fail to see it. Yet it is preventing solutions to some of the most pressing problems of our time.

With global warming a massive threat to our planet and a majority of U.S. citizens wanting action, why is the U.S. government so slow to address it? In large part because corporations use lobbying and campaign finance to constrain meaningful headway.

Why are jobs moving overseas, depressing wages at home, and leaving growing numbers under- or unemployed? In large part because trade treaties drafted in corporate-dominated back rooms have changed the rules of the global economy, allowing globalization to massively accelerate on corporation-friendly terms, at the expense of workers, communities, and the environment.

Why are unions declining and benefits disappearing? In large part because corporate power vastly overshadows the power of labor and governments, and corporations play one region off against another, busting unions to hold down labor costs while boosting profits, fueling a massive run-up in the stock market.

Why were electricity, the savings and loan industry, and other critical industries deregulated, contributing to major debacles whose costs are borne by the public? In large part because free market theory, enabled by campaign contributions and lobbying, seduced elected officials into trusting the marketplace to regulate itself.

With all this happening, why do we not read more about the pervasiveness of corporate power? In large part because even the “Fourth Estate,” our media establishment, is majority owned by a handful of mega-corporations.

Big corporations have become de facto governments, and the ethic that dominates corporations has come to dominate society. Maximizing profits, holding down wages, and externalizing costs onto the environment become the central dynamics for the entire economy and virtually the entire society.

What gets lost is the public good, the sense that life is about more than consumption, and the understanding that markets cannot manage all aspects of the social order.

What gets lost as well is the original purpose of corporations, which was to serve the public good.

A Movement for the Public Good
The solution is to bring corporations back under citizen control and in service to the public good. The main components of such a movement already exist—including organized labor, environmentalists, religious activists, shareholder activists, students, farmers, consumer advocates, health activists, and community-based organizations.

We’ve seen the power of ordinary people working together on the streets of Seattle in 1999, challenging the World Trade Organization. We’ve seen them achieve impressive results curbing sweatshop abuses, limiting tobacco advertising, challenging predatory lending practices at home and abroad, and protecting millions of acres of forests, to name just a few successes.

We’ve also seen the growth of community-friendly economic designs like worker-owned enterprises, co-ops, and land trusts that, by design, put human and environmental well-being first.

Focus on Corporate Power
Each of these movements advocates for healthy communities, for a moral economy, and for the common good. If they acted together, they would possess enormous collective power. But as yet there is no whole, only disconnected parts. Despite many achievements, the gap in power between corporations and democratic forces has widened enormously in recent decades.

Activists and citizens are beginning to turn this around. We can build on this work. But if we are to close the gap in power, our strategies must evolve. We need to dream bigger, to speak with one voice across issue sectors, and to act more strategically. We need to focus less on symptoms of corporate abuse and more on the underlying cause—excessive corporate power. We must recognize that ultimately our struggle is for power. It is not just to make corporations more responsible, but to make them our servants, in much the same way that elected officials are public servants.

We need what the movement now lacks: a coherent vision of the role we want corporations to play in our society and a strategy for achieving that vision. It’s about putting We the People back in charge of our future, rather than the robotic behemoths that set their sights on short-term growth and high profits, regardless of the consequences.

The streams of many small movements must flow together into a single river, creating a global movement to bring corporations back under the control of citizens and their elected governments. The urgent need for unified action impelled a small group of organizations to initiate a long-term Strategic Corporate Initiative (SCI), of which we are a part.

A Way Forward
Over the past 18 months, the SCI team interviewed dozens of colleagues and progressive business executives to develop a coherent, long-term strategy to rein in corporations. Three major strategic tracks emerged:

1. We need to restore democracy and rebuild countervailing forces that can control corporate power.

At the community level, this means elevating the rights of local municipalities over corporations. Communities should have the right to determine what companies will do business within their jurisdiction, and to establish requirements like living wage standards and environmental safeguards.

At the national level, restoring democracy means separating corporations and state. Corporations and the wealthy should no longer be allowed to dominate the electoral and legislative processes.

At the international level, the task is to create agreements and institutions that make social, environmental, and human rights an integral part of global economic rules.

2. We need to severely restrain the realms in which for-profit corporations operate.
Most extractive industries (fishing, oil, coal, mining, timber) take wealth from the ecological commons while paying only symbolic amounts to governments and leaving behind damaged ecosystems and depleted resources. The solution is to develop strong institutions that have ownership rights over common wealth. When commons are scarce or threatened, we need to limit use, assign property rights to trusts or public authorities, and charge market prices to users. With clear legal boundaries and management systems, the conflict over the commons shifts from a lopsided negotiation between powerful global corporations and an outgunned public sector, to a dispute resolved by deference to the common good.

3. We need to redesign the corporation itself, as well as the market system in which corporations operate.
Companies’ internal dynamics currently function like a furnace with a dial that can only be turned up. All the internal feedback loops say faster, higher, more short-term profits. And maximizing short-term profits leads to layoffs, fighting unions, demanding government subsidies, and escalating consumerist strains on the ecosystem.

To prevent overheating, the system needs consistent input from non-financial stakeholders, so that demands for profit can be balanced with the rights and needs of employees, the community, and the environment.

To end “short-termism,” company incentives—including executive pay—should be tied to measurements of how well the company serves the common good. Stock options that inflate executive pay should be outlawed or redesigned. Speculative short-term trading in stock should be taxed at significantly higher rates than long-term investments. Companies should be rated on their labor, environmental, and community records, with governments using their financial power—through taxes, purchasing, investing, and subsidies—to reward the good guys and stigmatize the bad guys.

At the same time, we need to celebrate and encourage alternative corporate designs, such as for-benefit corporations, community-owned cooperatives, trusts, and employee-owned companies.

The paths outlined here do not represent impossibilities. With a citizens’ movement, we could turn these musings into reality in 20 years.

Building a Global Citizens’ Movement
How can we change laws regulating corporate behavior when corporations dominate the political process? The answer is that change begins with the people, not their government. It always has. Civil society organizations and communities can align their interests to produce a wave that government leaders must either surf upon or drown within.

The people control the vital issue of legitimacy, and no system can long stand that loses its legitimacy, as fallen despots of the 20th century have demonstrated. Corporations have already lost much of their moral legitimacy. Business Week in 2002 found that more than four out of five people believed corporations were too powerful. A national poll by Lake, Snell, Perry, and Mermin two years ago concluded that over three-quarters of Americans distrust CEOs and blame them for the loss of jobs. An international poll by Globe Scan recently found corporations far behind NGOs in public trust.

Trigger events lie ahead that will create further openings for change. We can expect to see new global warming catastrophes, unaffordable energy price spikes, and new corporate scandals. We can capitalize on these openings if we can help people connect the dots—making the link, for example, between excessive CEO pay, companies’ short-term focus, and the inability of the private sector to manage long-term problems like the energy crisis and global warming.

We also need conceptual frames that link various movements together into a common effort. Currently our economy is dominated by a Market Fundamentalism frame, based on the belief that when self-interest is set free, Adam Smith’s “invisible hand” will create prosperity for all. Also dominant is the Private Property frame, which justifies actions by executives and shareholders to exploit workers, communities, and the environment in order to maximize the value of stockholder and executive “property” in share ownership.

We can advance new frames. “Moral Economy,” for example, is a frame that puts the firing of thousands of employees and simultaneous awarding of multimillion-dollar bonuses to executives in a moral context. Suggested by Fred Block of the Longview Institute, the Moral Economy frame invites the introduction of new system forces into market dynamics in order to protect the moral order, and to counteract the amoral, short-term, self-interested behavior promoted by Market Fundamentalism.

Within the overarching framework of a Moral Economy, other frameworks like Community and the Commons challenge the supremacy of individualism and self-interest in the Market Fundamentalism frame. Community well-being becomes the standard by which business practices are judged, and communities themselves the arbiters of whether standards are met. The Commons represents our shared property and wealth, which is not to be exploited for the selfish benefit of the few.

Imagine ... Responsible companies protect the environment as though there is a tomorrow, and they view worker knowledge and company’s reputation in the communities where they operate as their greatest assets.

New conceptual frames, trigger events, a crisis of legitimacy—elements like these can serve to help build a citizens’ movement. But we cannot simply wait for this movement to form spontaneously. At the international level, we need regional organizations to come together to agree on overarching priorities. At the national level, we likewise need discussions that forge strategic priorities. At the community level, we need to create a network of municipalities working together to challenge corporate rights, to promote alternative business forms, and to inventory and claim our common wealth assets. Communities can also take the lead in creating public financing of campaigns, and in tying procurement and investment policies to corporate social ratings.

The idea is not that people will drop their issues and adopt new ones, but that we can learn to do both at once. We can knit ourselves into a single movement by adopting common frames and by integrating strategic common priorities into existing campaigns. For example, campaigns covering any issues from the environment to living wages could demand that targeted companies end all involvement in political campaigns.

As individuals, we can relegate our identities as consumers and investors to secondary status, elevating to first place our identities as citizens and members of families and communities, people with a stewardship responsibility for the natural world and with moral obligations to one another. We can stop buying the story that government is inefficient and wasteful, grasping that the real issue is how corporations and money dominate government. We can stop thinking that the solution is more Democrats in power, and realize it is more democracy.

The transformative changes we need will not be on any party’s agenda until a citizens’ movement puts them there. It’s up to us to build that movement. By joining together—by taking on the common structural impediments that block progress—we can make it possible for all of us to achieve the variety of goals we’re currently struggling for.

How would reducing the underlying power of corporations affect today’s issue campaigns? Ending corporate campaign contributions and political advertising would benefit a great many public interest causes. How often in recent years have initiatives to protect forests, increase recycling, provide healthcare coverage, and raise minimum wages been defeated by corporations who outspent their civil society opponents by a ratio of over 30 to one? We’ve all witnessed elected leaders move to the political center once they started receiving a steady flow of corporate contributions.

Likewise, if we could reduce the 13,000 registered corporate lobbyists in Washington, D.C. and end the revolving door between government regulators and corporations, would a handful of companies be allowed to own the lion’s share of our media? Would savings and loan, energy, transportation, and tobacco companies still have been de- or unregulated? Would oil and coal companies still drive our national energy policy?

Imagine ...
Imagine what it might be like in 20 years if our efforts are successful and people could once again govern themselves. A line would be carefully drawn between corporations and the state, reducing financial influence over elections and lawmaking, making possible a whole new generation of progressive elected officials committed to social transformation.

In 20 years, imagine that the institutions of the global economy are overhauled so that labor and environmental issues are integrated into trade policies, and impoverished nations are freed from unpayable international debts. Trade and investment rules promote fair exchange, and national governments have the policy space to support social and environmental goals at home. Transnational corporations that take destructive action are held accountable in a World Court for Corporate Crimes.

In 20 years, imagine community self-governance has become the new norm. No longer can companies open new stores in communities where they are unwanted, or play communities off one another to extract illegitimate public subsidies. We value and protect our precious common wealth, from ecological commons like air, water, fisheries, and seeds, to cultural commons like music and science.

In 20 years, imagine that it is a violation of fiduciary responsibility for corporations to pay CEOs obscene amounts, or to aggressively fight unions and lobby against environmental safeguards. Responsible companies protect the environment as though there is a tomorrow, and they view worker knowledge and company’s reputation in the communities where they operate as their greatest assets. Imagine such companies receive preferential treatment in government purchasing, taxation and investment policies, while irresponsible companies find themselves barred from government contracts.

Imagine we have a new national policy to make employee ownership as widespread as home ownership is today. And alternative company designs—like cooperatives and new, for-benefit companies—grow and flourish.

Imagine, in other words, that We the People are able to reclaim our economy and society from corporate control. Daring to dream that such a turn of events is possible—and charting the path to get there—is a critical challenge of our new century.

Michael Marx is director of Corporate Ethics International (CEI) in Portland, Oregon. Marjorie Kelly is with the Tellus Institute in Boston and the author of The Divine Right of Capital. They are part of the Strategic Corporate Initiative, a group unifying efforts to curtail corporate power, and igniting change toward a more humane, sustainable democratic society and economy.

Read more about the SCI and read their full report: “Strategic Corporate Initiative: Toward a Global Citizens’ Movement to Bring Corporations Back Under Control.”