FIXING CORPORATIONS--PART 1: LEGACY OF THE FOUNDING PARENTS by Jane Anne Morris[1]
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The people who founded this nation didn't fight a war so that
they could have a couple of "citizen representatives" sitting in
on meetings of the British East India Company. They carried out
a revolution in order to be free of oppression: corporate,
governmental, or otherwise; and to replace it with democratic
self-government.
It seems that things have slipped a little. Today, as soon as
any group or movement puts together a coherent critique of the
role of corporations, tongues start clucking. Politicians,
mainstream reformers, degreed experts, and media commentators
fall all over each other in an effort to dismiss such clear,
practical, focused thinking as mere "conspiracy theories" cooked
up by unbalanced "crackpots."
They forget that 17th century political philosopher Thomas Hobbes
called corporations "worms in the body politic."[2] Adam Smith
condemned them for their effect in curtailing "natural
liberty."[3] And most of the so-called "founding fathers" of this
nation shared an opinion of corporations that today would earn
them the label "lunatic fringe" from the same mainstream
tongue-cluckers.[4]
Those who won independence from England hated corporations as
much as they hated the King. For it was through state-chartered
corporations that the British government carried out some of its
most pernicious oppression. Governments extending their power by
means of corporations, and corporations themselves taking on the
powers of government, are not new problems.
Because they were well aware of the track record of
government-chartered corporations, and because they guarded their
freedom so jealously, citizens of the newly independent United
States of America chartered only a handful of corporations in the
several decades after independence.[5]
On those few occasions when states did charter a corporation,
"the powers which the corporation might exercise in carrying out
its purposes were sparingly conferred and strictly construed."[6]
But inevitably, the generation that had fought against injustices
perpetrated by corporations like the British East India Company
and the Hudson Bay Company was followed by others whose memories
of corporate oppression were less vivid. Still, the warnings
against corporations continued.
On the eve of his becoming Chief Justice of Wisconsin's Supreme
Court, Edward G. Ryan said ominously in 1873,
"[There] is looming up a new and dark power... the enterprises of
the country are aggregating vast corporate combinations of
unexampled capital, boldly marching, not for economical conquests
only, but for political power.... The question will arise and
arise in your day, though perhaps not fully in mine, which shall
rule --wealth or man [sic]; which shall lead --money or
intellect; who shall fill public stations --educated and
patriotic freemen, or the feudal serfs of corporate
capital...."[7]
The feudal serfs of corporate capital made a lot of headway
during the next fifteen years. But in 1888 President Grover
Cleveland echoed Justice Ryan's sentiments:
"Corporations, which should be the carefully restrained creatures
of the law and the servants of the people, are fast becoming the
people's masters."[8]
Well into the twentieth century corporate excesses were
acknowledged and condemned by some pretty prominent persons.
Louis D. Brandeis, a multimillionaire (from his own law practice
and astute investments) by the time he became a Supreme Court
Justice in 1916, referred to corporations as "the Frankenstein
monster which States have created by their corporation laws."[9]
Far from being "radical," harsh criticism of corporations has a
long, respectable, and mainstream political lineage. Now that
you know you're in good company, let's dream a little. Imagine
what grassroots environmental activism would be like if
corporations were restructured to be responsive to the people and
to serve the public interest.
What if...
** corporations were required to have a clear purpose, to be
fulfilled but not exceeded.[10]
** corporations' licenses to do business were revocable by the
state legislature if they exceeded or did not fulfill their
chartered purpose(s).[11]
** the state legislature could revoke a corporation's charter for
a particular reason, or for no reason at all.[12]
** the act of incorporation did not relieve corporate management
or stockholders/owners of responsibility or liability for
corporate acts.[13]
** as a matter of course, corporation officers, directors, or
agents could be held criminally liable for violating the law.[14]
** state (not federal) courts heard cases where corporations or
their agents were accused of breaking the law or harming the
public.[15]
** directors of the corporation were required to come from among
stockholders.[16]
** corporations had to have their headquarters and meetings in
the state where their principal place of business was located.[17]
** corporation charters were granted for a specific period of
time, like 20 or 30 years (instead of being granted "in
perpetuity," as is now the practice.)[18]
** corporations were prohibited from owning stock in other
corporations in order to prevent them from extending their power
inappropriately.[19]
** corporations' real estate holdings were limited to what was
necessary to carry out their specific purpose(s).[20]
** corporations were prohibited from making any political
contributions, direct or indirect.[21]
** corporations were prohibited from making charitable or civic
donations outside of their specific purposes.[22]
** state legislatures set the rates that corporations could
charge for their products or services.[23]
** all corporation records and documents were open to the
legislature or the state attorney general.[24]
ALL OF THESE PROVISIONS WERE ONCE LAW IN THE STATE OF WISCONSIN.
And similar ones in most other states.
There is no reason why grassroots activists can not insist that
we once again impose similar laws to direct corporate actions.
But because education and media corporations are silent about the
power of the sovereign people literally to dictate terms to
corporations, we instead spend our time fighting in regulatory
agencies and courts where the odds are against us from the get-go.
Much activism today concerns itself with struggling to induce
government agencies to enforce their own laws, or exerting
superhuman efforts to close gaping loopholes in existing laws.
When we're not doing that, we're perhaps trying to add an
obviously toxic chemical to a list of prohibited substances. Or
maybe we're trying to coax a corporation that profited greatly
from poisoning our air and water to pay for even a small portion
of the cleanup costs.
One reason that we the sovereign people don't know our own
strength is that too often we think of corporations and business
as more or less synonymous. But corporations are not simply big
businesses. You don't need a corporate charter to sell apples on
the corner, or to operate a widget factory. Individuals, sole
proprietorships, partnerships and other business forms can do
business without obtaining a corporate charter from a state.
Corporations are a special case.
A corporate charter granted by a state gives special privileges
not possessed by other businesses. And in return, the state
retains the power to alter, amend, or repeal said charter. The
legislature of a state thus possesses not only the power to grant
charters but to revoke them. This power is laid out in what is
called the "reserved power clause," and is explicitly spelled out
in the laws or constitution of almost every state. Corporations
are all set up by states to serve a "public need" and act "in the
public interest." This is a long-established doctrine.
The corporation, insofar as it is a legal entity, is a creation
of the state... It is presumed to be incorporated for the benefit
of the public.[25]
Corporations are instrumentalities of the state, not independent
entities. How have we strayed so far from this notion?
Next week, we will outline some of the legal doctrines that were
built up as obstacles to the sovereign people's ability to direct
corporate actions. Then we will explore the potential of
specific provisions --similar to the ones enumerated above --that
we can add to state constitutions, corporation laws, or corporate
charters themselves, to reclaim our historic right to make
corporations serve the public interest.
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[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] Thomas Hobbes (1588-1679), English philosopher.
[3] In his WEALTH OF NATIONS (1776), Adam Smith was concerned
that people's liberty was being encroached upon through the use
of corporations to restrain competition and establish monopolies.
[4] A discussion of this and related issues can be found in
TAKING CARE OF BUSINESS: CITIZENSHIP AND THE CHARTER OF
INCORPORATION, a pamphlet by Richard L. Grossman and Frank T.
Adams, 1993, available for $4 from Charter, Ink., P.O. Box 806,
Cambridge, MA 02140.
[5] See note 3.
[6] Justice Louis Brandeis in Liggett v. Lee, 1933, 288 U.S. 517.
[7] Alfons J. Beitzinger, EDWARD G. RYAN: LION OF THE LAW
(Madison: The State Historical Society of Wisconsin, 1960), pgs.
115-116. From an 1873 address to the graduating class of the
University of Wisconsin Law School.
[8] Grover Cleveland, "Fourth Annual Message to Congress, 3 Dec.
1888," in MESSAGES AND PAPERS OF THE PRESIDENTS Vol. 8, pgs.
773-4 (James D. Richardson, editor, 1989)
[9] On personal finances, see Melvin I. Urofsky, LOUIS D.
BRANDEIS AND THE PROGRESSIVE TRADITION (Boston: Little, Brown &
Co., 1981), pg. 9; Brandeis, Liggett v. Lee, 288 U.S. 517 (1933).
[10] Wis. G.L. 1864, Ch. 166, Sec. 7; Wis. R.S. 1878, Sec. 1767.
[11] See the "reserved power" clause.
[12] Wis. A.G. Op. (1913), Vol. 2 p. 169.
[13] Act of Aug. 21, 1848, Wis. Laws, p. 148 (Gen. Incorp. for
Plank Roads).
[14] State ex rel. Kropf v. Gilbert, 251 N.W. 478 (1934).
[15] Dudley O. McGovney, "A Supreme Court Fiction: Corporations
in the Diverse Citizenship Jurisdiction of the Federal Courts,"
HARVARD LAW REVIEW Vol. 16 (May 1943), pgs. 853-898, 1090-1124,
1225-1260.
[16] Wis. R.S. 1878, Sec. 1776; Wis. Stat. 1931, 180.13.
[17] Wis. G.L. 1864, Ch. 166, Sec. 9.
[18] Wis. G.L. 1864, Ch. 166, Secs. 4,33.
[19] Wis. R.S. 1878, Sec. 1775.
[20] Wis. R.S. 1849, Ch. 54 Sec. 7; Wis. G.L. 1864, Ch. 166,
Secs. 6, 15.
[21] And it was a felony to do so. Wis. State 1953, Ch.
346.12-346.15.
[22] For example, Wis. G.L. 1864, Ch. 166, Sec. 7. See also the
author's, "America Needs a Law Prohibiting Corporate Donations,"
in SYNTHESIS/REGENERATION 9: A MAGAZINE OF GREEN SOCIAL THOUGHT,
Winter 1996.
[23] Stone v. State of Wisc., 94 U.S. 181 (1876).
[24] Wis. R.S. 1849, Ch. 54, Sec. 22.
[25] U.S. Supreme Court Justice Henry Billings Brown, in Hale v.
Henkel (1905) 201 U.S. 43, 74-5.
Descriptor terms: reforming corporations; history; controlling
corporations;
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