Reprinted from AT WORK, Vol. 8, No. 3, May/June 1999
Ending Corporate Claims to Human Rights

David C. Korten

Have corporations gained more rights than people? Yes, says the author, and as a result, the ability of individuals to live freely, fully, and well is being slowly eroded. Here he offers six ideas for restoring human rights and dignity.


Human rights secure our freedom to live fully and responsibly within life's community. We are finding, however, that as corporations have become increasingly successful in claiming these same rights for themselves, they have become increasingly assertive in denying them to individuals. For example, they use property rights as an instrument to deny the economically weak the most fundamental of human rights--the right to live--by denying them the right of access to a means of living. The conflict between the person's right to a means of living and the presumed right of the corporation to the security of its property and profit is perhaps the ultimate confrontation between the natural rights of living, breathing people and the rights that the institutions of capitalism have presumed for themselves, but it is only one of many.

Supported by legions of corporate lawyers and sympathetic judges, corporations have worked through the courts to acquire ever more of the rights and freedoms that human beings gained only through long and difficult political struggle [see box on next page]. They have in turn used the rights so acquired to extend their control over the institutions of democracy and the material, communications, and knowledge resources on which people depend to secure their living. Now, the institutions of money are well on their way to declaring themselves owners of the whole of life through the systematic effort to expand the private patenting of genetic materials.

There seems to be an ironclad relationship. The stronger the rights of corporations, the weaker the rights of persons to live fully and well with freedom, responsibility, and dignity. Thus, to restore human rights and dignity we must eliminate the autonomous rights and powers of money and its institutions. I propose a six fold agenda aimed at restoring political democracy, ending the legal fiction of corporate personhood, establishing an international agreement regulating international corporations and finance, eliminating corporate welfare, restoring money's role as a medium of exchange, and advancing economic democracy.
 

To raise the money required to wage successful campaigns, politicians must spend a large portion of their time courting favor with and tending to the interests of the biggest corporations and wealthiest investors. It has become a vicious cycle. The more the politicians bend the rules to channel an ever greater share of society's real wealth to the already rich, the more money the rich can channel to politicians to gain further advantage.

No issue is more central to restoring the rights of people than serious campaign finance reform. If a democracy of people based on "one person, one vote" is to be restored, then we must have strict limits on political giving and spending and get corporations out of the political process. Meaningful reform will necessarily include a combination of public financing of political campaigns and provision of free television and radio time to qualified candidates as a public service obligation of those licensed to use the public airwaves, and a prohibition on any effort by a corporation to influence the outcome of all election, legislation, or referendum, or the negotiation of an international agreement or treaty.

The matter of excluding corporations from political participation merits elaboration. The authority by which a government issues a corporate charter is derived from the sovereign authority of its people. It is appropriate that those who have created the corporation determine the rules under which it will exist and function and that the corporation accept those rules or relinquish its charter and operate as an unincorporated entity. Barring the corporation from politics affirms the principle that political rights and freedoms reside in the person, not in properties or artificial legal entities.
 

The legal fiction that the corporation is a natural person is a major lever by which corporations have acquired the rights they now use to deny the right of living people to a means of living. Similarly, this legal fiction is used by corporations to claim free speech rights for themselves in promoting their products without public oversight and in seeking to influence public policy, while they use a combination of speech and property rights to prohibit the exercise of the right to free speech by real people. Thus union members are barred from engaging in organizing activities on company property. Citizen activists are barred from exercising their speech rights in shopping malls. The corporations that control the media reserve the right to decide whose voices will and will not be heard on the public airwaves.

Step by step, a small number of corporations are privatizing ever more of our public spaces and reserving them solely for the exercise of their own speech rights to the exclusion of the speech rights of real persons. In these and other ways the doctrine of corporate personhood actively endangers the rights of people and presents a barrier to citizen efforts to hold corporations accountable to a larger public interest.

THE EXPANSION OF CORPORATE RIGHTS  

In 1886, in the case of Santa Clara County v. Southern Pacific Railroad, the U.S. Supreme Court decided that a private corporation is a person and entitled to the legal rights and protections the U.S. Constitution affords to any person. Because the Constitution makes no mention of corporations, this is a fairly clear case of the Court's taking it upon itself to rewrite the Constitution. Since that time, the U.S. courts have moved persistently in the direction of expanding corporate rights and increasing the autonomy of corporate management, even from intervention by the corporation's titular owners.

Corporations now enjoy unlimited life; virtual freedom of movement anywhere on the globe; control of the mass media; the ability to amass legions of lawyers and public relations specialists in support of their cause; and freedom from liability for the misdeeds of wholly owned subsidiaries. They also enjoy the presumed right to amass property and financial resources without limit; engage in any legal activity; bring liability suits against private citizens or civic organizations that challenge them; make contributions to political parties and political action committees and deduct those contributions from taxable income as business expenses; withhold potentially damaging information from customers; and avoid restrictions on the advertising of harmful but legal products in the name of commercial free speech.

Although their owners hold the ultimate decision-making power and the corporation is obliged to manage its affairs for the sole benefit of its owners, these owners bear no accountability for corporate misdeeds or liability beyond the loss of value of their shares. Step-by-step, largely through judge-made law, corporations have become far more powerful than ever intended by the people and governments that created them.

The time has come to launch a serious challenge against the legal fiction of corporate personhood on the principle that the natural rights of persons belong only to living persons. The objective is to restore the doctrine that a corporation enjoys only those privileges specified in its charter to facilitate the conduct of a business in the public interest and that these privileges are subject to periodic public review and withdrawal. Furthermore, the privileges extended are exclusive to the jurisdiction of the governmental entity that issued the charter and do not extend to any other jurisdiction except by the explicit action of the appropriate governmental authorities in that jurisdiction. This doctrine would place strict limits on corporate privileges, without in any way restraining or limiting the recognition and exercise of the universal rights of living persons.
 

International trade and investment agreements such as GATT, NAFTA, APEC, and the others have become the favored venues for further extending corporate rights at the expense of democracy and the right of people to govern their own economic affairs. Created largely outside any democratic process, these agreements override democratically enacted laws protecting human and environmental interests. So deeply have our governments aligned with the interests of global capitalism that, following the Uruguay Round of the GATT negotiations that established the World Trade Organization (WTO), there was a flurry of initiatives led by the United States to put in place agreements on international investment and finance, including a Multilateral Agreement on Investment (MAI) that would preclude virtually any governmental regulation of the free international flow of speculative money and require governments to guarantee foreign investors against any losses they might incur from the subsequent introduction of environmental or health and safety regulations.

Managed borders are essential to the very existence of life--a principle that applies to economies as well as to cells and organisms. To create mindful markets people must be able to protect the coherence and integrity of their domestic and local economies, which is virtually impossible if their borders are wide open to foreign corporations and financial institutions they are forbidden to control. If we are to take economic democracy seriously, decisions regarding economic policies and choices must be firmly in the hands of a country's citizens.

The time has come for a citizen led initiative to demand that our governments put in place an entirely different kind of international agreement aimed at holding global corporations and finance accountable to the human interest. This may logically begin with an international alliance of citizen groups joining to draft a prototype international agreement affirming the rights of people to set their own health, safety, employment, and environmental standards and to establish standards and mechanisms for regulating international corporations and financial flows. Such a document would also recognize and secure the right of each individual country to set its own economic priorities and standards and determine the terms under which it will trade with others and invite others to invest in its economy.
 

Corporate welfare is not limited to direct public subsidies and tax breaks. It includes a much wider range of externalized costs relating to such things as substandard wages and working conditions, worker health and safety, environmental damage, and dangerous and defective products. There is a strong case to be made that corporations provide handsome returns to their top managers and shareholders only at an extraordinary cost to the rest of society. Many would surely go out of business if required to pay their own way as market principles dictate.

An obvious starting point toward the elimination of corporate welfare is to eliminate direct public subsidies and tax breaks for corporations, because these are direct financial transfers from taxpayers to corporate managers and shareholders. The next step is to charge environmental use fees for the full public costs of natural resource extraction and the release of pollutants into the environment. Such action would align with current tax shift proposals that call for reducing or eliminating taxes on employment, basic incomes, and essential consumption and making up the lost income through fees for resource extraction and pollution. A shift from employment and consumption taxes to environmental fees would encourage employment, eliminate the most regressive sales taxes, reduce pollution and resource extraction, and encourage recycling--all highly beneficial outcomes. A third step would be to establish procedures for estimating

the amount of other indirect subsidies enjoyed by individual corporations and assessing a public facilities fee in that amount. The fee would recover the costs to society of corporations that fail to provide a living wage adequate to support a family, health insurance, pension contributions, and safe working conditions for their workers on the grounds that these costs are thus borne by the larger society. Similarly, it would recover the public costs of harmful and defective products such as cigarettes and unsafe automobiles.

Ideally, all countries would choose to move toward the elimination of corporate subsidies in unison. Given, however, that there is almost no prospect of this happening, it is important to establish the principle that each nation has the right to protect its own producers from predatory competition from subsidized producers by imposing compensating tariffs.
 

Money serves a useful social function as a medium of exchange. In the hands of speculators, however, it becomes an anti-democratic, anti-market instrument of instability and unjust extraction. A central goal of economic policy should be to eliminate financial speculation and restore money's primary role as a medium of exchange.

Nearly $2 trillion now changes hands in the world's currency exchange markets each day. Roughly 1 percent of that money is related to trade in real goods and services. The rest, which is largely pursuing speculative profits, creates massive international financial instability while serving little if any public purpose. The following are reforms that merit consideration:

The previous elements of the agenda focus on constraining the power of global corporations and finance in order to open economic spaces within which people can create the institutions of economic democracy and a true market economy. In addition to such defensive measures, there is room for public policy to be proactive in promoting human-scale, stakeholder owned enterprises to displace the subsidized megacorporations whose hold the earlier measures are intended to weaken.

Many such enterprises already exist in the form of family businesses, cooperatives, community owned businesses, worker owned enterprises, and others. New ones are being formed each day. Here the need is to acknowledge the central role of these enterprises as the foundation of the new economy and expand the spaces in which they can flourish as the corporate superstructure is cleared away.

We can also salvage much from existing corporate structures by breaking down megacorporations into human-scale, stakeholder owned firms. The measures already suggested, such as getting corporations out of politics, restoring the integrity of national economic borders, and eliminating corporate welfare, will likely make most megacorporations unprofitable and thereby increase the receptivity of their managers and shareholders to selling off their component businesses to stakeholders at appropriately depreciated prices.

Measures to support stakeholder ownership might include requiring that before a major corporation is allowed to close a plant or undertake a sale or merger of significant assets, the affected workers and community must be given first option to buy out the assets on preferential terms. There might be preferential tax treatment for shareholders who sell their shares to stakeholders under an organized stakeholder buy-out program. Similarly, relief on estate taxes might be used to encourage the conversion of larger family owned corporations to stakeholder ownership on the death of their founders. Procedures could be established for converting worker pension funds into meaningful worker ownership programs. Banks might be given incentives to provide loans on preferential terms to finance stakeholder buyouts.

Efforts to move toward stakeholder ownership must take into account the history of worker ownership schemes that have not led to meaningful worker participation and empowerment. The legal framework and mechanisms of employee stock ownership plans (ESOPs) need to be reformed to enable and encourage ESOP owners to engage in real ownership participation. Consideration might also be given to expanding existing employee ownership plans to facilitate broader participation by other non-financial stakeholders.

It will be appropriate to supplement these initiatives in support of stakeholder ownership with the rigorous application of antitrust legislation revamped to establish the presumption that smaller is better until proven otherwise. Thus, mergers and acquisitions would be approved only in those rare instances in which their proponents make a compelling case that the combination would significantly advance the public interest. Any firm with more than a 10 percent share in a major market might be required every five years to make a compelling case in a public regulatory hearing as to why it would not be in the public interest to break it up into more human-scale stakeholder owned firms.
 

A FRONTAL ASSAULT

The proposed six fold agenda attacks the foundation of unaccountable financial and corporate power and opens the way to a radical redistribution of economic wealth and power by returning human rights to living persons. Although the agenda is based on solid, conservative principles of individual responsibility and local control, it does require a frontal assault on the institutional and intellectual underpinnings of our present system of elite privilege. As we look to the formidable task ahead, we should remember that slavery was once legal in the United States, as was discrimination based on race. There was once a Roman Empire, later a Soviet Empire, a Berlin Wall, and until recently, apartheid in South Africa. Corrupt and unjust regimes have a way of falling once ordinary people decide their time has come.

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