By What Authority:

April 1996

By What Authority

Corporations for the Seventh Generation:

Changing the Ground Rules, Part 1

Jane Anne Morris (April, 1996)

(Rachel's Environment & Health Weekly #488 Providing news and resources for environmental justice - April 4, 1996)

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 or 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..

All of these provisions were once law in the state of Wisconsin. And similar ones existed in most other states.

There is no reason why grassroots activists cannot 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 form 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.

Notes:

  1. Jane Anne Morris is a corporate anthropologist working on corporation issues as part of the Program on Corporations, Law and Democracy (POCLAD). They can be reached at P.O. Box 246, So. Yarmouth, MA 02664. Phone: (508-398-1445; FAX: (508)398-1552; email: poclad@people.org. She is author of Not in My Back Yard: The Handbook (San Diego: Silvercat Publications, 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 from the address above.

  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. AG. 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 : A Magazine of Green Social Thought, Winter 1996 (address above).

  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.

Rachel's Environment & Health Weekly (ISSN 1078-103x) is published weekly by Environmental Research Foundation, 612 Third St., Suite 2A, Annapolis, MD 21403-3246. Peter Montague, editor; Maria B. Pellerano, associate editor. RATES: $25 per year for individuals and citizen groups; $45 for universities and libraries; $80 for professionals and government agencies; $15 for students and seniors; $400 for businesses; in Canada and Mexico, add $8.00; in all other countries, add $15.00. AII payments in U.S. funds drawn on U.S. bank; Visa and Mastercard accepted. Telephone (410) 263-1584; fax (410) 263-8944; E-mail: erf@rachel.org. Rachel's Environment & Health Weekly is not copyrighted.

Corporations for the Seventh Generation:

Changing the Ground Rules, Part 2

Jane Anne Morris (April, 1996)

(originally published in Rachel's Environment & Health Weekly #489 Providing news and resources for environmental justice - ApriI 11, 1996)

[Note: This is second of two articles that explore strategies for going beyond the usual calls for "corporate accountability." (Part 1 appeared in REHW #488.) The author is part of a movement, already taking root in over a dozen states, that advocates retaking the historic right of the sovereign people to determine and direct corporate action.]

In view of the historic provisions that used to govern corporations (see REHW #488), their representatives must be pleased that at least in this country, boycotts and divestment strategies are considered radical, and "dialoguing" is the preferred mode of interaction. The rest of this paper is an exploration of ways to restructure today's corporation so that citizen activist efforts to eliminate corporate wrongs can amount to more than just a few hard-won needles in a corporate haystack.

As we saw last week, corporations are a special form of business entity given a state charter and certain privileges in exchange for being subject to the will of the sovereign people as expressed through state legislatures.

Over the last half a dozen generations, corporation representatives have managed to set up barriers to insulate the corporation from citizen influence. Several trends have made it more difficult to direct the corporation towards serving the public interest it was created to serve. Among them:

In order to have a world that we would not be ashamed to bequeath to the Seventh Generation, we must make two major changes in the governance of the corporation. First, we must remove obstacles to citizen control of the corporation. Second, we must reinstate provisions such as those (enumerated in REHW #488) once governing corporations, and add others that are particularly suited to our times.

"Model" provisions can become part of 1) state constitutions, 2) state corporation codes and/or 3) the actual corporate "charters," which are the documents states give to corporations to formally bring them into existence. A program to institute such changes would include areas such as the following:

People's power over corporations.

This is just a sampling of some of the options open to us. Priorities might include working to revoke corporate charters, to end The privileges granted corporations under the judicial "corporate personhood" doctrine, and to prohibit political contributions. Most of the obstacles we face are in the arena of judge-made law, but historic legislation and constitutional provisions offer us a solid body of favorable precedents. Much debate lies ahead. But it is high time we shifted the controversy from whether we control corporations to how we do so.

The sky's the limit. What are we waiting for?

Notes:

  1. Jane Anne Morris is a corporate anthropologist working on corporation issues as part of the Program on Corporations, Law and Democracy (POCLAD). They can be reached at P.O. Box 246, So. Yarmouth, MA 02664. Phone: (508-398-1445; FAX: (508)398-1552; email: poclad@people.org. She is author of Not in My Back Yard: The Handbook (San Diego: Silvercat Publications, 1994.

  2. U.S. Const. Art I. Sec. 8.

  3. An excellent discussion of the difficulties of relying on a regulatory strategy to actually regulate corporate action can be found in Christopher D. Stone, Where the Law Ends: The Social Control of Corporate Behavior (NY: Harper & Row, 1975.)

  4. U.S. Const. Art. III Sec. 2.

  5. See note 15 in REHW #488

  6. Santa Clara County v. Southern Pac. R.R., 118 U.S. 394.

  7. A discussion of the historical process of taking power from stockholders and giving it to a largely independent corporate management can be found in Adolf A. Berle, Jr. Historical Inheritance of American Corporations, in Edmond N. Cahn, editor, Social Meaning of Legal Concepts (New York: NYU School of Law, 1950) pgs. 189-218.

  8. Corporate Crime Reporter, Vol. 9 No. 25 (June 28, 1995).

Rachel's Environment & Health Weekly (ISSN 1078-103x) is published weekly by Environmental Research Foundation, 612 Third St., Suite 2A, Annapolis, MD 21403-3246. Peter Montague, editor; Maria B. Pellerano, associate editor. RATES: $25 per year for individuals and citizen groups; $45 for universities and libraries; $80 for professionals and government agencies; $15 for students and seniors; $400 for businesses; in Canada and Mexico, add $8.00; in all other countries, add $15.00. AII payments in U.S. funds drawn on U.S. bank; Visa and Mastercard accepted. Telephone (410) 263-1584; fax (410) 263-8944; E-mail: erf@rachel.org. Rachel's Environment & Health Weekly is not copyrighted.