The Urgent Need to Redesign Corporation

“Deeply rooted forces in corporate design contribute to countless major issues: the working poor, the shrinking middle class, wealth concentration, and the ecological crisis.” (Marjorie Kelly and Allen White)

The Need

I learned that many of the illth in our society, ranging from human rights abuse to environmental degradation, stems from the inherent defect in the design of corporation, the heart of our so-called “modern” economy.

While governments can make regulations, civil society can expose corporate misconducts and crimes, and corporations themselves can offer their goodwill under the banner of Corporate Social Responsibility (CSR), these measures only deal with symptoms and effects, not root-causes. I offer the following quotations and links to show the necessity of redesigning corporation to eliminate those illth from source.

I believe this is one of the most urgent and strategic issue we must tackle in our effort to make the world a better place for all to live in.

The Arguments

“A bad system produces bad situations in which people act badly without even necessarily knowing why . . . if enough people absorbed this argument, we might find ourselves in a better polity . . . But, alas, we seem happier with scapegoats than explanations.”

“The premise is that good people using the tools of ethical analysis will make socially responsible decisions. But moral individuals only take us so far when the rules they are legally bound to follow say they must put shareholder interests above all others. At some point you have to look at system ethics: what behavior does the system encourage or require?”

“The aim is to educate people that the problem isn’t greedy executives or evil individual corporations like Exxon. The problem is the system design. The problem is state law that says corporations exist only to maximize gains for shareholders.”

“It makes no sense to endlessly chase after individual instances of corporate wrongdoing, when that wrongdoing is a natural result of our system’s design. Corporations abuse the public interest because the law tells them their only legal duty is to maximize profits for shareholders. Until we change the law of corporate governance, the problem of corporate abuse can never fully be solved.”

“Business enterprise is integral to any economy. Business enterprises, however, may take many legal forms that confer no special rights or privileges beyond those of any natural person and properly limit the concentration of unaccountable economic power. These forms include cooperatives, partnerships, sole proprietorships, and special for-profit corporations with charters designed to balance public and private interests.”

“Each of these legal enterprise forms is more consistent with the beneficial function of markets than are global-scale transnational private-benefit corporations with internal centrally planned economies larger than the economies of most nations. Breaking up the larger private-benefit corporations into smaller component enterprises either rechartered as public-benefit corporations with clear public purposes or converted to non-corporate enterprise forms is an essential step toward restoring beneficial market discipline and responsible, rooted private ownership.”

“How can corporations be designed so as to blend social, environmental, and financial mission at their very core? This is the design challenge of the 21st century.”

“New Principles of Corporate Design:

1. The purpose of the corporation is to harness private interests to serve the public interest.
2. Corporations shall accrue fair returns for shareholders, but not at the expense of the legitimate interests of other stakeholders.
3. Corporations shall operate sustainably, meeting the needs of the present generation without compromising the ability of future generations to meet their needs.
4. Corporations shall distribute their wealth equitably among those who contribute to wealth creation.
5. Corporations shall be governed in a manner that is participatory, transparent, ethical, and accountable.
6. Corporations shall not infringe on the right of natural persons to govern themselves, nor infringe on other universal human rights.”