Barking up the Wrong Tree

22 February 2025

By Robert C. Hinkley*

In the past 250 years two institutions were conceived and have come to rule our lives: modern democratic government and the modern corporation. Donald Trump and Elon Musk have decided the key to solving America’s problems is reforming government.  They’re barking up the wrong tree.  It’s the corporation that needs reforming.

For more than two centuries democracy has safeguarded individual’s freedom, advanced the common good and protected the public interest for the people of the United States and many other countries as well.  The price of eggs going up and the use of pronouns aren’t reason enough to jettison democratic government and instal authoritarians. 

Thomas Paine, the author of Common Sense, said that all governments are evil because they restrict freedom.  However, recognizing it as a necessary evil, he reasoned that the government that governs least governs best.  The trick is to find a government that governs least but also can advance the common good of all and protect the public interest from those who would exercise their own freedom in ways which would harm it.  

Modern democracy was the solution. By design, it was formed to be a weak form of government.  No behaviour is prohibited until a law is passed making it illegal. The idea was that this would infringe on people’s freedom the least—and it has.

When the modern democracy was founded, it only had to govern individuals.  There were only a few small corporations around and those usually had a public purpose such as building a canal, bridge or turnpike.  There was little chance that they were going to cause severe harm to the public interest.  That made governing them relatively easy.

Today, governments must govern both individuals and corporations.  The object of business is to generate private wealth, a lesser goal than ensuring everyone’s security.  The generation of private wealth should never come at the expense of severe damage to the common good. 

The biggest corporations pose the biggest threat to the public interest, simply because they have the power to do the greatest damage. Their actions are the collective actions of hundreds and sometimes thousands of people. They are backed by billions of capital. These institutions can do more harm in one afternoon than individual human beings can do in a lifetime.

Democracies provide security for its people by relying on two forms of restraint:  voluntary restraint and mandatory restraint.  Voluntary restraint is the self-control that keeps the vast majority of citizens from severely harming the public interest or their fellow citizens.  It’s called citizenship, refraining from behaviour that causes harm to others even though no law prohibits it. 

Mandatory restraint comes into play when the voluntary form fails, and our elected representatives deem it necessary to pass a law to prevent individuals or the public interest from continuing to be harmed. 

Together these two forms of restraint must contain the infliction of harm, by both individuals and corporations, or government is not doing its job.  The problem is that corporations are managed by people whose natural self-control and inclination towards citizenship has been purged by the law.

The corporation is designed to be focussed on the pursuit of self-interest.  This is reflected in the corporate laws of the world which provide that directors, the people who manage corporations, have only one duty: “to act in the best interests of their corporation.”  It’s the law everywhere and has been so for many generations.     

Before this became the law, corporations were also required to safeguard the public interest, at least from severe harm.  Eliminating this requirement emasculated the personal self-control and conscience of directors by requiring them to play a role where their only obligation is to serve the company’s best interests.  Now, when a company finds itself heavily invested in a business operation newly discovered to be causing severe harm (e.g., the emission of significant amounts of greenhouse gases), its directors find it difficult, if not impossible, to cease and desist when it would require writing off the investment in that operation.  It wouldn’t be in the company’s best interests.

Instead of stopping, the corporation hires lobbyists to delay and frustrate new legislation that would make it stop.  In a world where the economy has been given first priority, these tactics are usually successful, and the infliction of severe harm continues. 

It is easy to see how this works. Despite 30 years of UN Conferences of the Parties on the Environment (COPs) where almost every country in the world pledged to do something to reduce the emission of greenhouse gases, little has been achieved and temperatures continue to rise.  The war against climate change is being lost, largely to big corporations. 

More than 50 years after it became known that tobacco products cause cancer, these products are still killing more than 8 million people per year.  More recently, social media companies have altered their business models to drive users attention to sites which spread disinformation, propaganda and lies in ways which split our communities and undermine democracy.

The duty of directors, as it now exists in the law, is a rare example of a law which encourages powerful people to allow companies under their control to continue inflicting severe harm on the public interest.  In certain circumstances, it requires corporations to be bad citizens and exonerates their management when they are.  Can you think of another law that does this?

It also does something else.  It allows directors to be careless.  They don’t have to consider the potential adverse effects their new investment might have on the environment, the public health and safety or the wellbeing of the communities in which they operate.  They don’t have to monitor their businesses to see if those effects are now becoming more serious.  They only have to get their lawyers to tell them that the business is complying with existing law.

So long as the current duty of directors remains the law, we will remain in the hell of our own making where the pursuit of corporate self-interest destroys the environment and other elements of the public interest.  As soon as we recognize this, we can set about correcting it, eliminating the conflict, and bringing harmony back to the goals of our systems of government and commerce.

Change is not impossible.  No corporation should be organized with the right to destroy the environment or another element of the public interest simply because no law has been passed to prevent it.  Private profit and protecting the public interest from severe harm are not mutually exclusive.  Both can, and must, be achieved simultaneously. 

In the last 50 years, we’ve chosen to put the economy above all else.  This was a mistake. Protecting the public interest must have top priority and the pursuit of private wealth must not upset it.  

To keep the public interest from suffering further at the hands of corporations, we must state this priority firmly.  Changing the law by putting protection of the environment and other elements of the public interest back in the duty of directors is the way.

This can be achieved by simply adding to the duty to “act in the best interests of the corporation,” the words “but not at the expense of severe damage to the environment, the public health and safety or the wellbeing of the communities in which the company operates.”  Adding, “the dignity of employees,” to the list of protected elements of the public interest, should also be considered.

The time is drawing near when we will realize the solution to the world’s most pressing problems lies not in anger, hate and survival of the fittest or appointing a dictator, but working together through democracy to resolve our problems with solutions that achieve the best interests of all.  When we do, we will abandon our flirtation with authoritarians and see them for what they’ve done—seized control by stirring up anger and stoking hate with misinformation, propaganda and lies.  We will forgive each other for being manipulated by their mischief and work together to ensure it doesn’t happen again.  We will see that democracy is the way to get back on the path that leads to our evolution and away from our destruction.  It’s our ally, not our enemy. 

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Robert C. Hinkley is a retired corporate attorney, former partner at Skadden, Arps, Slate, Meagher and Flom LLP.  He is the author of “Time to Change Corporations: Closing the Citizenship Gap.”