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.”†
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.
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.