Are Corporations Too Powerful?

In today’s world corporations are everywhere. They are ubiquitous throughout the developed world and even in the third world. Corporations are powerful forces for wealth creation. They have created millions of jobs, become extremely wealthy and control vast amounts of wealth and resources. But, corporations are no longer purely economic institutions. They participate in the democratic political process, leveraging their tremendous resources to shape laws, policies, and regulations in their favor. Arguably corporations have become one of the most powerful institutions ever created. The question is: are corporation too powerful?

The basic idea of a corporation began when business started looking for ways to raise more capital. Stock markets help corporations concentrate vast amounts of wealth that can be invested in their businesses, fund research and develop new products. This concentration of wealth also provides corporations with an immense concentration of political power. Another good question to ask is: is this concentration of power, in the hands of a few, compatible with democracy?

Are corporations too powerful?

Wal-Mart, one of the largest and most profitable corporations in the world, had $405 billion in sales in 2010.¹ This makes them one of the richest economies in the world. In fact, according to data from the World Bank, if Wal-Mart were a country, it would rank 24th in the world. This makes it larger than the economies of most of the worlds nations including countries such as: Austria, Denmark, Israel, and Chile.² Many other corporations would also out rank many other nations (Exxon-Mobile, Shell, Toyota). If corporations were ranked along with countries, 51 of the top 100 economies would be corporations and 49 would be actual countries.³ Corporations have even surpassed many nations in size of population. McDonald’s 2.1 million employees is almost double the size of Estonia’s 1.3 million people.†

As corporations have grown in size and wealth their ability to influence politics and world events has also grown. Corporations are no longer national institutions. With the rise of the multi-national corporation, the interests of corporations have begun to diverge from the interests from their host nation. Many corporations pursue their own agendas which often run counter to the agenda of their home state. There are countless examples. One is Exxon’s lobbying to defeat US acceptance of the Kyoto Protocol, which called for limits of carbon emissions. Another would be banks lobbying against financial regulation (Glass-Steagall Act). A more disturbing example is when Gerber used the World Trade Organization to challenge and defeat a law passed by the government of Guatemala to promote breastfeeding and limit the use of formula. There are countless other examples of corporations shaping public policy to benefit their interests. Corporate power pervades our economic and political systems. Few other institutions can compete with the power of corporations. So, it appears that in addition to being ‘too big to fail,’ many corporations have deemed themselves ‘too big to govern.’*

Is corporate power compatible with democracy?

Corporations are an important part of the economy and indeed the fate to a certain extent the entire economy depends upon corporate success. It is natural for corporations to want a say in how they are regulated. And it is perfectly fine for politicians to listen to corporations to ensure that regulations are not overly onerous. On the surface corporate influence over policy seems to be compatible with the concept of ‘self-government.’ The problem lies in how corporations participate in the democratic process. One of the primary methods that corporations use is campaign contributions. Corporations donate money to the campaigns of candidates (or directly to a political party) in hopes that the candidate/party will support or oppose a certain bill or policy.

Corporate participation in the political process has also given rise to the concept of ‘corporate personhood.’ Corporations have been given rights and allowed to participate in the political process in the same manner as people (with the exception of voting). The idea of corporate personhood is that a corporation is a unique and distinct entity with its own rights that are separate from the rights of the people who make up the corporation. By viewing the corporation in this way, as a ‘person,’ the courts have moved to protect corporate rights. The most famous example of this is declaring that the donating of money to campaigns and parties is a form of free speech, and therefore corporations have the unrestricted right to give money to politicians. The most important case in creating corporate personhood was Citizens United v. FEC.

“In 2008, its [Exxon-Mobile’s] political action committee (PAC) raised about $1 million from its employees and offices. Its profits that year -– which it was legally barred from pouring into politics -– were $45 billion. It was illegal for Exxon to spend that money on elections; now with this decision [Citizens United], it will be legal.”º

In the past corporate money had been banned from elections (see: the Tillman Act 1907 and the Federal Corrupt Practices Act). Previously, if corporations wanted to donate money to campaigns, they had to raise that money from the people who made up the corporation. Now a corporation can directly spend its own profits to influence elections. This is causing the government to become distorted. Corporations are using their immense power to manipulate the government for the benefit of the few.

To give corporations rights via ‘corporate-personhood’ is to misconstrue the nature of corporations and creates a political imbalance that violates the spirit of ‘one person one vote’ and even the basic concept of fairness. To allow corporations rights and political participation is to magnify the political clout of executives, board members, and shareholders. “To the extent that the interests between a company and its members do not diverge, the citizens in the company have a multiplied influence that other citizens do not have.”‡

Corporations should be thought of as organizations composed of people rather than as people themselves. The rights of corporations should be exercised exclusively through people who compose the corporation. Corporations should have no rights other than the composite rights of its members. Meaning that if a corporation wants to donate money to the campaign of a certain candidate, then the executives, board members, and stockholders who make up that corporation, should donate their money to the campaign. Corporations should not be allowed to participate in the political system. Allowing corporations to participate in democratic politics has created

“societies that are profoundly out of whack, with far too much power in the hands of massive, often distant corporate entities that are only accountable, fundamentally, to their shareholders. Meanwhile, the public is seeing that the increasingly weak institutions designed to give them a voice [government] are unable to meet some of the most basic terms of the social contract, as the issues that need to be addressed are effectively beyond their jurisdiction.”†

Solutions

The extreme concentration of wealth produced by corporations is harmful to democracy and a government of the people. Their wealth inevitably leads to influence. While, I do not believe that- in a democratic system- wealth should be evenly distributed among all citizens, however, I believe power should be. So, to the extent that money equals power, the influence of money in politics should be severely curtailed. The first step, I think would for the Supreme Court to over turn their Citizens United decision. Otherwise, a constitutional amendment may be required. All campaigns should have spending limits and possibly be publicly financed. Another possibility would be to find a way to make corporations more democratic. These reforms would really just be the beginning of the larger reform that needs to be undertaken to protect our system of citizen government. As a society we need to think about, debate, and clearly define the relationship between, corporations, the government, and the people. Corporations are one of the most powerful forces shaping the world today, and they are doing so in ways that effect society as a whole, and that promote the interests of the few over the many. So it is essential that ‘we the people’ act via the government to promote the greater good.

___________________________________________________________________________________________________

*To the best of my knowledge this term was coined by Dr. Worden of the Worden Report.

Sources:

¹ “Walmart Reports Fourth Quarter and Fiscal Year 2010 Results,” Wal-Mart Stores, Inc., Walmartstores.com.

² “Gross Domestic Product 2010,” World Development Indicators database, WorldBank.org.

³ “The Rise of Corporations,” Anup Shah, GlobalIssues.org.

† “Inside Power Inc.: Taking Stock of Big Business vs. Big Government,” David Rothkopf, ForeignPolicy.com.

‡ “Oil and Gas Companies: Citizens Buying Government,” Dr. Worden, Wordenreport.com.

º “Room for Debate: How Corporate Money Will Reshape Politics: Bigger Than Bush v. Gore,” Michael Waldman, NYTimes.com.

CRS Annotated Constitution,” Legal Information Institute, law.cornall.edu.

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13 thoughts on “Are Corporations Too Powerful?

  1. RichardB1001 says:

    I think the Citizens United Case was way off base. the best way to keep corporate greed in check is through strict enforcement of anti-trust laws. You provided a thorough analysis of a timely subject. Thank you for taking the time to research and write this post.

  2. Duke says:

    Europe is he best example of corruption due to corporate power. Bankers have been appointed in place of elected officials. They are holding Greece, Spain, France, and other nations hostage. The austerity programs are wrecking economies. Spain has an unemployment rate of 25%.

    Bankers created worthless investments that drove them bankrupt. The public had to bail them out with public debt. Most of the current US debt traces back to the bailouts which amounts to over $9 trillion here (some say $14 trillion). The same happened in Europe. So Countries went heavily into debt to save the banks. The banks, in turn, wielded the very debt created because of them as a weapon. They are saying in order to service the debt we must cave into their demands.

    “Austerity” programs reduce spending on citizens (pensions, health care, etc) to free up money for banks. The public is being told they must suffer for debt that doesn’t belong to them. Neither you or I sold the derivatives that bankrupted the system. We did nothing wrong yet we’re being told our social security, medical care, and other services must be eliminated. The most innocent among us are the ones paying the heaviest price. What price did the financial community pay? They were not required to suffer the consequences of their criminal actions. Banking is more powerful now than ever to the point they rule several European nations through political appointments. They prospered while driving most of the western world to ruin.

    I can think of no better example to illustrate the point of your article. Allowing unlimited corporate power has brought several democracies to ruin and you don’t need history to see it. It is happening as we speak. I appreciate your post and hope it can open a few eyes or at least spur debate. We must somehow come to grips with the unbalanced nature of wealth in our society.

    • Thanks for such an indepth comment, it really adds to my point. You are right, the banks bear a large part (but not all) of the responsibility for the world’s current situation, and what happens when they are on the brink of failure? They ask the public to help them out. Profit has been privatized while losses have been nationalized.

  3. azleader says:

    Technically, your same title question could be asked of unions. Citizens United only extended to corporations a power unions have had all along… contribute unlimited funds to political campaigns. Neither are a “personhood”.

    Its the ability of corporations, unions and wealthy individuals to buy favors through campaign donations that is the cancer in the U.S. political system.

    Remove the cancer and corporations, unions and wealthy individuals can no longer corrupt the political process.

    The simplest and most direct way to cure the cancer is for Congress to pass a new law making elections at all levels 100% publicly funded.

    Its as simple as that.

    The law would make it illegal for corporations, unions, individuals – including the candidates themselves – or any other non-government entity to spend money on an election campaign.

    The government would then allocate funding for each election and that funding is split evenly among all viable candidates.

    • You are right that money in general is the “cancer” of elections. I suppose it was my personal bias that inclined me to pick on corporations, although I think it would be difficult to make the case that unions are too powerful (maybe in the past but not today). Unions, however, were also banned from political contributions this was done in the 40s with the Smith-Connley Act and Taft-Hartly Act. As a result it was unions that invented PACs to circumvent these laws. So citizens united also lifted the ban on union money. It would be interesting to see which has donated more money 2012 unions or corporations. As far as publicly financed elections, I think it has some potential. Two questions about it would be who determines who receives public funding? And what criteria would be used to make that decision?

      • azleader says:

        Agreed… unions are a shadow of their former selves.

        I did not know that unions previously had many restriction on campaign financing. I learn something new every day.

        Matters not anymore… anyone can form a SuperPAC now.

      • azleader says:

        Regarding a new law…
        Q1 and Q2:
        The governing bodies of taxing jurisdictions would decide who and by what criteria someone is eligible to receive public funding for public offices withing their areas.

        I think the federal government already has standards for providing public funding for national presidential candidates that could be used as a model.

        You would still have to allow political parties to collect operational funds to grow their ranks and select candidates for office. The difference being that campaign funding for primary and final elections would be illegal. All primary or election funding, of course, must come from public funds.

        The taxing jurisdictions might have to set up some sort of “meet the candidates” mechanism process so that all candidates who register to run for public office can be seen and heard by voters or caucus members.

        1-Congress would decide qualifying criteria for President, U.S. Congressmen and U.S. Senators and it is funded from federal tax collections.
        2-States would decide eligibility requirements for state-wide offices, like governor, and funding for that comes from state tax revenues.
        3-Local taxing jurisdictions would decide eligibility requirements for public offices within their jurisdictions and funding comes out of their local taxing authority.

  4. Duke says:

    The idea business forms the cornerstone of our economy is (as you point out) an unquestioned fact. The uncertainty lies with the structure of the business and its size. No factual analysis exists to say a corporation must be huge or run by 5 or 6 board executives. Remember, a publicly traded company hires a CEO. He is simply another employee of the firm. Why is his voice the only employee to count? Why aren’t other workers included when decisions are made? There is no reason it can’t be and Germany does it by requiring labor representatives on the board. This arrangement made German companies some of the most successful on earth.

    Size is another issue. Since money = power, the easiest way to limit corporate power is by limiting how much disposable income it has for political influence. Ten smaller insurance companies would not have the cash one AIG could wield. Our *Too Large To Fail* corporate structure played a key role in the last financial collapse. It doesn’t work. By allowing corporations to become so large they have nearly unlimited resources, it puts the public at their mercy. Nothing says 10 smaller corporations wouldn’t provide the same benefits to our economy while avoiding the pitfalls of Too Large To Fail.

    Business in general isn’t our problem but rather the form we’ve allowed it to take. Huge monolithic organizations run by a handful of hired guns is the issue. They stifle competition by being near monopolies. They have the resources for political power we do not have. Although they are public institutions with stock held by the public, we have no voice in how they operate.

    If you believe in free markets, competition, and true democracy, this arrangement has to change. What we have now is crony Capitalism, monopolies, corporate control of our politicians, and corporate Welfare. There is no reason on earth it has to be this way. Our economy would greatly benefit from smaller companies competing with each other. No reasonable argument exists for one of two hired hands to completely control these mega-corporations while excluding public input. The US simply deserves better than this.

    • Thanks for another great comment. My curiosity has been peaked by the idea of Germany’s ‘co-determination,’ which you wrote about on tumblr. If any one is interested in reading about it here is a link (A Noir World)

      I will definitly be doing some research on this.

      I think that the economy would defintely be served be breaking up mega-corporations. No company or handful of companies should be able to ruin the economy by thier actions. To big to fail is hazardous to the republic. I do have some concerns about breaking up companies. This would have to be done very carefully. It must be kept in mind that many companies compete globally. If mega corporations were dismantled to difuse their wealth, resources and power, they could become less able to compete with foreign companies who do not restrict the size of their corporations. My heart agrees with you completely, I believe that more, small/medium sized companies would produce more competition and innovation. However my brain says ‘not so fast.’ Such action as breaking up companies could have tremendous and somewhat unknown effects effects on the economy. Breaking up companies might not produce more competition and innovation, it may just increase redundancy and inefficiency. I’m not an economist so I don’t really know what effects such a move would have. I would like to believe that it would be entirely positive, however nothing in life is, there are always pros and cons. These would need to be weighed carefully before any action was taken. But, it should be seriously considered.

  5. Yardley says:

    Fantastic article, packed with factual information and informed opinions. The comments great too. They are almost as good as the article!

    • Thanks for the kind words. As far as the great comments, I cannot take credit for them. They are the work of two regular readers. We may not see eye to eye on every issue but they always provide thoughtful and insightful comments, that contribute to the article. So, to them, to you, and anyone else who takes the time to read and comment: thank you.

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