The corporate world is a site of legally created irresponsibility.
Our 4 year-old had an invisible friend, Kim. She and Kim invited us to a tea party. We were amused as we passed cookies and a cup to Kim. Then our daughter carelessly dropped a cup. Before we could say anything she said that Kim had done it. As earnest parents, we told her that pretence could only be carried so far. We felt we had to teach her that all of us are to take responsibility for our conduct and for actions taken on our behalf. That is the moral glue that makes a society stick together. Unless you find yourself in the corporate world.
The Desmarais, Thompson, Murdoch, Weston, Irving, Bronfman families, Jim Pattinson, Schwartz and Heather Resiman and all other such titans and the thousands of wannabe titans of Canadian finance, industry and everything else, have invisible friends. They are corporations. They act on behalf of the titans and wannabe titans. The titans and the wannabe’s are not responsible for their conduct. They may lose the money they have invested but are not responsible for the actions of their invisible friends, of their Kims. Controlling shareholders of corporations are members of a privileged class. If we want corporations to stop behaving anti-socially and, all too often, illegally, this privilege must be revoked.
The way it works is that law simply says that if any sane adult applies to get a certificate to conduct their business by means of a corporation, they will be granted that certificate. At that moment a corporation is created. In law, it is held to be as much a legal person as you and I. It has all of our capacities. It can own property and enter into contracts. It can be held responsible for what it does with its property and in its contracts, just like you and I. It is separate from every other person in the world, just like you and I.
Of course, it is not really a person like you and I. You cannot see it, you cannot smell it, you cannot pick it up, you cannot kiss it. It cannot think; it cannot act. It needs people to do this. It is given directors and managers to do so. They are appointed by those who give up property to the corporation. They do so to entitle them to a share of any profits the corporation makes. They are, therefore called shareholders. They expect the managers to chase profits on their behalf. They may lose the money they have invested but, because the corporation is a separate person, one which law pretends thinks and acts in its own right, they can only lose the money they have invested. Like gamblers who bet on a horse they may lose their bet but, like those gamblers, they will not be responsible for the way in which the horse was trained and ridden. Like gamblers, they can lose the money they invested, but no more than that. And, like the bettors on the racehorse who cannot be held responsible for cheating by a jockey or a trainer, they cannot be held responsible for any violations of the law that the corporation has committed through its managers. Financially, the shareholders’ liability is limited. And, similarly, when it comes to social and criminal responsibility, shareholders are immune from retribution even though heinous conduct was entered into by the corporation (through its managers) on their behalf.
Many of us are invested in corporations, often indirectly through our pension funds, because we want to safeguard our savings. But this does not apply to direct investors who become controlling shareholders. The titans and wannabe titans invest some of their wealth in corporations to make more wealth. This is what drives them as red-blooded capitalists. The legal pretence that allows them to limit their risks and immunizes them from personal responsibility encourages them to push their managers to extremes. Mangers are punished by controlling shareholders if they do not make profit-maximization the primary focus of the corporation and rewarded by them if they do. Controlling shareholders have no reason to worry about how their mangers achieve the shareholder’s goals. After all, they will not be held responsible for bad conduct. Directors and executives may be held accountable, but rarely are. This is why corporations, as a group, constitute the most harming, most recidivist anti-social members in our polity.
Before his corporation killed 26 Nova Scotia miners, Colin Frame was the face of the Westray Mine. He was named the miner of the year; he was widely praised because (with heavy taxpayer subsidies) he started up a mine where no one else thought it could be done safely and profitably. He was a darling of the business media. Until the mine blew up. Then he disappeared from legal view. The corporation was allowed to go bankrupt and Frame went on to head another corporation. The same thing happened at Lac-Mégantic. A train was run in the cheapest, shoddiest manner so that shareholders could make extra profits. It ran amok and killed 47 people and wrecked a township. Not one of the profiteering shareholders was held to legal account. The same was true in all those bankster cases where supposedly respectable banks, run by the most patrician of managers and controlling shareholders, bilked the public billions of dollars. Not one major controlling shareholder or manager went to jail. “Too big to fail, too big to jail” said the experts in service of corporate capitalism.
There is a mass of empirical evidence that it is easy in Canada to find controlling shareholders in most of our corporations, small, medium and large. Why not hold them personally responsible for
behaviours they could control and from which they seek to benefit? This is the spirit that animates our legal system when it is applied to non-capitalists. Churches, schools, police commissions, do not condone the bad conduct of their agents they entrust with the task of realizing their goals but we seek to hold them responsible; so, too, with liquor licensees who serve people when they should not and then these drunks go on to harm unknown others; so, too, with franchisors who benefit from their control over franchisees who resort to wage theft to make a living and so, too, with supposedly respectable retailers who benefit from the creation of long supply chains where, at the bottom, desperate people are horribly exploited. We do not always succeed in bringing these controlling and benefitting institutions and enterprises to justice, but we know we should try if we want justice.
So it ought to be with corporations. Very, very often we know who controls and benefits a harm-doing corporate actor. Let us make them stand-up and be counted, like the rest of us.
Our daughter is now a grown-up. She no longer has a Kim. She is accountable. She is a socially responsible contributor to society. She became responsible because she was not allowed to hide behind a legal construct created to give capitalists, and no one else, special privileges. It is time to end this sorry state of affairs. It is time, and it is possible.