Given this, that’s why the debate and movements related to the spirit and culture of distinguishing between a society oriented towards capital versus the people gets the necessary policy and political attention, especially ever since the idea of corporate entities operating as legal persons came into being. Because of this, many within societies prefers to see the relevance of companies within societies are judged based on principles of democracy, which include accountability, integrity, and transparency.
Corporate entities and human lives are greatly intertwined – corporate entities/companies as it is for humans are all persons in eye of the law. Companies are proportionally engaged in determining some key aspects of human lives – from where we sleep, to what we eat, what and how we wear, how and where we work, how we commune and communicate, sometimes to how we decide and govern ourselves, the list goes on and on. As it is for us humans, companies have their own rights and obligations, and armed with these “rights,” corporations have increased control over resources, jobs, commerce, political engagements, and even in the making of laws. And the fact that companies have limited liability – this somehow decreases citizens authority over them.
Let me draw our attention to statement that was issued sometime in 1981 and then later in 1997, and the other one that came in August 2019 — by the Business Roundtable, a group comprising CEOs of most of the largest corporations in the US.
This “Statement on Corporate Responsibility” reads: a group of the CEOs of the largest US firms, recognizes six constituencies – customers, employees, communities, society at large, suppliers, and shareholders – as forming the ‘web of complex, often competing relationships’ within which corporations operate. It accepts the idea that ‘shareholders have a special relationship to the corporation’ but doesn’t allow their interests to trump all others.”
Here is an excerpt from the Business Roundtable statement: “Balancing the shareholder’s expectations of maximum return against other priorities is one of the fundamental problems confronting corporate management. The shareholders must receive a good return, but the legitimate concerns of other constituencies also must have appropriate attention. Striking the appropriate balance, some leading managers have come to believe that the primary role of corporations is to help meet society’s legitimate needs for goods and services and to earn a reasonable return for the shareholders in the process. They are aware that this must be done in a socially acceptable manner. They believe that by giving enlightened consideration to balancing the legitimate claims of all its constituents, a corporation will best serve the interest of the shareholders.”
As it is, this statement is anchored on the need for rebalancing the share of income and wealth in favor of all stakeholders in the manner companies are governed, and hence the case for expand democracy in companies’ ownership and eventually finance and the economy. That is, if left unchecked — corporate greed and interests can destroy the social and economic fabric of communities, where a small group of people owning and running corporations make decisions that increasingly determine overall societies’ economic, social, environmental, governance, policy and political future.
As matters stands, the richest few own disproportionate share of global capital income – including capital gains, dividends, and interests.
While corporate profits that presently go to a small number of ultra-wealthy families are at or near an all-time high, returns on other corporate stakeholders – employees, governments, and other operatives within companies’ eco-systems as a percentage of economies do not match up.
And yes, it is also a fact that those who control these corporations have strong allegiance to profits, executive bonuses, and the value of shares of companies. What happens to employees, what happens to the environment, what happens to the community in which their corporations’ function, what happens to government tax revenue income matters very little.
This type of corporate entities operations, governance and ownership is not an economic model that is sustainable for the long end. Societies can do much better and cohesively while encouraging enterprising spirits and business success at the same time encouraging more transparency, accountability, payment of fair share of tax revenue to the government, etc.
The truth is, we can grow and develop in an economic model that create jobs, increases productivity while corporate are democratized by sharing part of their ownership stake with other stakeholders – employees, customers, suppliers, communities, governments, etc. and all have a say in the decision-making process that impacts their lives, and a fair share of returns to their involvement.
That’s why the US Business Roundtable issued the statement on the purpose of corporations that came in August 2019 redefining the purpose of a corporation to promote ‘an economy that serves all’, among others, it says: “[People] deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity. That the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment and economic opportunity for all.
Businesses play a vital role in the economy by creating jobs, fostering innovation and providing essential goods and services. Businesses make and sell consumer products; manufacture equipment and vehicles; support the national defense; grow and produce food; provide health care; generate and deliver energy; and offer financial, communications and other services that underpin economic growth.
While each of our individual companies serves its own corporate purpose but do share a fundamental commitment to all stakeholders. And so, they do commit to: (i) delivering value to customers; (ii) investing in our employees — starting with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world; (iii) dealing fairly and ethically with our suppliers — dedicating to serving as good partners to the other companies, large and small; (iv) supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses; and (v) generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate.”