By Robert C. Hinkley
29 July 2023
The corporation was conceived many centuries ago. Imagine if that hadn’t happened and there were still no corporations. If they were first being established up today, how would you set them up?
Legislatures of long-ago designed companies with one purpose—to make money. They instilled that purpose by requiring the people in charge of corporations (directors) to always act in their company’s best interests. It wasn't mentioned at the time, but this included even when continuing to act in such interests resulted in severe harm to the public interest.
Think about that for a moment. The law created an entity with no conscience, more compass or obligation to look out for others, our environment or our communities. The result is that a few big companies every day cause severe harm to the public interest. For example, the emission of greenhouse gases which cause climate change, third world sweatshops and tobacco killing millions of people a year.
There’s been a lot of talk about how this behaviour should be stopped, but so far very little success at stopping it. Maybe it’s because corporate managers are totally focussed on protecting the company and not so much on being good citizens. It’s time for this to change.
Corporations didn’t spring forth from the Earth after a good rain. They only exist because a law was passed which said they could exist and designed how they should operate.
The corporation is a little bit like the HAL9000, the computer in 2001: A Space Odyssey. It was HAL’s job to operate the spaceship on the way to Jupiter. There turned out to be a programming flaw in HAL that made the computer more important than the astronauts’ survival. When HAL had to. make a choice, it started killing them.
A few big companies make the same choice every day they continue to emit significant quantities of greenhouse gases or engage in other behaviour which causes severe damage to the public interest. The duty of directors to always act in the company’s best interests puts the survival of the corporation ahead of the protection of our environment and our communities. This is a programming error.
So, if you were a legislator today and had the chance to re-program the corporation, how would you do it? Would you want them to make money even if they were destroying the public interest or would you prefer a change where making money did not come at the expense of the environment, human rights, the public health and safety, dignity of employees or wellbeing of the communities in which they operate?
The key to better corporate behaviour is to bring more balance to the instructions the law gives corporate managers. The pursuit of corporate profit should no longer come at the expense of severe damage to the environment or other elements of the public interest.
I call this concept the Code for Corporate Citizenship (Code). It would prohibit any corporate behaviour which would severely harm the public interest, regardless of the financial cost to the company.
No one is in favour of big companies causing severe harm to our planet or other elements of the public interest. Re-programming the corporation to stop them from continuing will take away the excuse directors currently have to ignore the public interest. Instead, it will require them to respect it. This shift will eliminate the cause of climate change and make all companies socially responsible. It’s worth a try.
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