New Strategy Focuses on Corporations
Environmental Research Foundation
P.O. Box 5036, Annapolis, MD 21403
Fax (410) 263-8944; Internet: email@example.com
Peter Montague, Ph.D.
NEW STRATEGY FOCUSES ON CORPORATIONS
Whenever we fight for clean drinking water, or clean air,
or a safe workplace, we are likely to find a corporation on the
other side of the issue. The goal of a corporation is, first,
to survive, and, second, to return a profit to its shareholders
(its legal owners) and if the air has to be fouled to accomplish
these goals, then the air will be fouled. The Business Council
for Sustainable Development (a private group made up of the heads
of major corporations such as DuPont and Dow Chemical) acknowledges
that this is so: "Today, for instance, the earth's atmosphere
is providing the valuable service of acting as a dump for pollutants;
those enjoying this service rarely pay a reasonable price for
it," they say. This is an example of corporations "externalizing"
their costs. By using the air as a free dump, a corporation passes
the costs of waste disposal along to the public while the profits
from dumping fill the corporate treasury. This is standard business
During the last 200 years, corporations have evolved into
huge organizations wielding trillions of dollars to achieve their
goals. In theory, corporations are held in check by the marketplace.
If they do something bad, they will incur penalties that hurt
their profits. However in practice, society has found no effective
way of imposing penalties on corporations, so society today has
lost control of corporate behavior. Instead of effective control,
we have the concept of regulation.
In their 1991 book, POWER AND ACCOUNTABILITY, Robert Monks
and Nell Minow [M&M], argue that corporations thrive under
regulation: "The ultimate commercial accomplishment is to
achieve regulation under law that is purported to be comprehensive
and preempting and is administered by an agency that is in fact
captive to the industry," they say. In other words corporations
WANT regulation. Regulation limits their liability and in many
cases shields them from competition. Notice how tobacco companies
claim that the warning label on cigarettes absolves them of liability
for lung cancers. Corporate polluters WANT a permit system that
regulates their emissions; such a system LEGALIZES the dumping
of poisons into air, land and water. The large waste haulers FAVOR
regulations that require double liners and leachate collection
systems in landfills; such regulations drive the small waste hauler
out of business, thus limiting competition. From a corporate point
of view, the best regulations are those that appear to cover everything,
can't be set aside or undercut by other regulations, and are administered
by an agency that is captive to the corporate community.
It is not difficult for corporations to capture a regulatory
agency. (See RHWN #210, #289.) Who will staff the agency? Often
an "expert" from the regulated community. Even the most
vigorous opponent of an industry soon becomes coopted; perhaps
he or she wants to expand the agency's jurisdiction or budget,
for which industry support is needed. Perhaps he or she wants
a job with industry when the administration ends. Perhaps all
the information coming into the agency is prepared by industry
As Robert Monks says, "When Nell and I worked with the
Presidential Task Force on Regulatory Relief, during the Reagan
Administration, we found that business representatives continually
sought more rather than less regulation, particularly when it
would limit their liability or protect them from competition."
[M&M pg. 131.] Regulation was supposed to make corporations
accountable, but corporations have turned regulation into a shield
It is this ability to mold the environment to its own purposes
that causes Monks and Minow to say, "Despite attempts to
provide balance and accountability, the corporation as an entity
became so powerful that it quickly outstripped the limitations
of accountability and became something of an externalizing machine,
in the same way that a shark is a killing machine--no malevolence,
no intentional harm, just something designed with sublime efficiency
for self-preservation, which it accomplishes without any capacity
to factor in the consequences to others." [M&M pg. 24.]
Several things happened during the past decade to make a bad
When Michael Milken and his associates discovered that "junk
bonds" could raise enormous amounts of money easily and quickly,
this paved the way for "hostile takeovers" by "corporate
raiders." As Monks and Minow describe it, "Corporations
are ideally suited for self- preservation, which is the definition
of the externalizing machine. When they saw what Milken was doing,
corporate management proceeded to do whatever was necessary to
protect their capacity to direct enterprises, and they found that
protecting themselves from raiders meant protecting themselves
from shareholders and squeezing any semblance of accountability
out of the system." [M&M pg. 47.] Since corporate raiders
gained control by buying shares, corporate management protected
its turf by taking control away from shareholders. This protected
corporations against hostile takeovers, but it also insulated
management from accountability to shareholders.
With their new-found control over everything, corporate managers
began to pay themselves higher and higher salaries. Between 1973
and 1975, CEOs' [chief executive officers'] after-tax pay averaged
24 times that of the average manufacturing worker. By 1987 to
1989, the differential was 157 times the average manufacturing
worker. But taxes for CEOs declined from 50 percent to 28 percent,
while worker taxes increased from 20 percent to 21 percent."
[M&M pg. 166.]
One consequence of high salaries in business is that smart,
aggressive people are drawn into the corporate world, rather than
into government or education, thus further consolidating the power
of corporations. When the education system deteriorates, corporations
educate workers and potential workers for their own purposes;
this may provide loyal workers but it seems unlikely to produce
well- rounded citizens ready to question the proper role of corporations
in a free society.
Directors of corporations have never provided an effective
check on the behavior of management. Directors are selected by
management, paid by management, and informed by management. As
compensation expert Graef Crystal says, boards are typically "ten
friends of management, a woman and a black." [M&M pg.
77.] Generally speaking, boards of directors are captives of management.
They provide little or no accountability.
Corporations now dominate our political life. There are 40,000
registered lobbyists in Washington--75 lobbyists for each senator
and representative. A run for federal office costs anywhere from
$10 million to $150 million, and most of this money comes from
corporate PACs (political action committees). So every politician
who gets elected is beholden to corporate interests from day one.
As Senator Barry Goldwater has said, "PACs set the country's
political agenda and control nearly every candidate's position
on the important issues of the day. [M&M, pg. 124.]
Corporate crime is rampant. One study of America's largest
500 corporations in 1982 revealed that 23 percent of them had
been convicted of a major crime or had paid more than $50,000
in penalties for serious misbehavior during the previous decade.
And of course those statistics merely describe the ones who got
"Why do corporations engage in criminal behavior? It
has to be because, at some level, they find that the benefits
outweigh the costs. Or, more likely, management finds that the
benefits accrue to the corporation, while the costs are borne
elsewhere--the externalizing machine at work," say Monks
and Minow. [M&M pg. 133.]
Corporate greed and abuse of power seem to have worsened during
the 1980s, but it has been obvious to some people for a long time
that corporations exert an unhealthy influence over many aspects
of American society. As W.H. Ferry said in 1959, "As the
most important single factor in the lives of most Americans, the
corporation should be required to make affirmative contributions
to freedom and justice as our distinguishing values."
Yet control of corporations has never been the focus of the
environmental movement, the women's movement, or even of the labor
movement. Activists have focused their attention everywhere but
on the corporation, the key institution of modern life. As Richard
Grossman and Frank T. Adams say, "What passes for political
debate today is not about control, sovereignty, or the economic
democracy which many Americans thought they were fighting to secure.
"Too many organizing campaigns accept the corporation's
rules, and wrangle on corporate turf. We lobby congress for limited
laws. We have no faith in regulatory agencies, but we turn to
them for relief....
"How much more strength, time and hope will be invest
in such dead ends?" they ask.
To gain control over corporations, examine the corporate charter,
Grossman and Adams argue. The corporate charter is granted by
state legislatures; without a charter, a corporation ceases to
exist. The charter says a corporation must obey the law, serve
the public good, and do no harm. Corporations that fail to comply
can lose their right to do business.
Grossman and Adams suggest a wide range of controls that might
be exerted through the corporate charter, among them:
--corporate owners and officers must be liable for harms they
cause; --charters must be reviewed annually and corporate officers
show that all corporate harm has ceased; --the corporation is
an artificial creation and must not enjoy the protections of the
bill of rights; --no corporation should exist forever.
It is a curious fact of history that the environmental movement
has never focused its attention on the corporate charter as a
means of controlling corporate behavior. Now that seems likely
 Stephen Schmidheiny and others, CHANGING COURSE (Cambridge,
Mass.: MIT Press, 1992), pg.9.
 Robert A.G. Monks and Nell Minow, POWER AND ACCOUNTABILITY
(N.Y.: HarperCollins, 1991), pg. 131. Hereafter cited as M&M.
 W.H. Ferry, THE CORPORATION AND THE ECONOMY (Santa Barbara,
Calif.: Center for Study of Democratic Institutions, [1959),]
pg. 7. Single copies available from us for $6.00.
 Richard Grossman and Frank T. Adams, TAKING CARE OF BUSINESS:
CITIZENSHIP AND THE CHARTER OF INCORPORATION (Cambridge, Mass.:
Charter, Inc., 1992). For a copy, send $4.00 plus a self-addressed,
stamped envelope containing 52 cents postage to: Charter, Inc.,
P.O. Box 806, Cambridge, MA [22140.]22140.