However, we cannot say that we were not warned about the risks of the current business model as Bakan points out. “Businessmen and politicians had been suspicious of the corporation from the time it first emerged in the late sixteenth century.” The design of the corporation, separating ownership and management, “was believed by many to be a recipe for corruption and scandal. Adam Smith warned in The Wealth of Nations (1776) that because managers could not be trusted to steward other people’s money,” “negligence and profusion” would inevitably result when businesses organized as corporations.”
The birth of the limited liability company in the mid nineteenth century was like adding fuel to the fire. Progressive deregulation, globalization and the formation of bodies such as the WTO have further transformed the system into a super-sized Molotov Cocktail.
Bakan goes on to credibly describe the corporation as a psychopathic entity in that its legal make-up compels it to focus on the interests of its shareholders (financial) and to externalize the costs of achieving this. These “externalities” include “destroying lives, damaging communities, and endangering the planet as a whole.” Furthermore, because corporations are legally obliged to look after the financial interests of their shareholders, any attempt to genuinely engage in Corporate Social Responsibility, a recently revived concept, should be considered illegal and immoral. Therefore, if CSR is largely seen as a PR exercise, it is because legally it cannot be more than this, unless it can be proven to be genuinely in the interests of shareholders.
Just as communism had its flaws, it is important for us to recognize the flaws of democracy and capitalism in their present forms, as the authors of Natural Capitalism point out:
“Churchill once remarked that democracy is the worst system of government – except for all the rest. The same might be said of the market economy. Markets are extremely good at what they do, harnessing such potent motives as greed and envy – Indeed, Lewis Mumford said, all the Seven Deadly Sins except sloth. Markets are so successful that they are often the vehicle for runaway, indiscriminate growth, including the growth that degrades natural capital.”
Natural Capitalism (Paul Hawken, Amory B Lovins, L Hunter Lovins) 1999
If this simple analysis helps to shed some light on the causes of our problems, wherein lie the solutions?
The first part of the answer comes from Mahatma Gandhi who said:
“The difference between what we are doing and what we are capable of doing would solve most of the world’s problems.” (source: The 8th Habit – Stephen R. Covey)
The second part of the answer comes from Albert Einstein who said:
“The significant problems we face cannot be solved at the same level of thinking we were at when we created them.” (source: The 8th Habit – Stephen R. Covey)
Unfortunately, people who attempt to do something to change the current reality are too often dismissed as “idealistic”. I do believe that there is much we can all do to help more people lead more effective and happier lives and to build a better future, whilst simultaneously bringing more meaning and happiness to our own lives.
One specific concept that attempts to address the problems highlighted above is to create a successful new company format. The constitution of this company would include some of the following aspects:
- Minimum 51% of profit after tax is allocated to “good causes”
- No dividends are ever paid to shareholders (NB. Shareholders could still benefit from medium-long term capital gains on share sales)
- Products & services are all based on natural, organic, fair-trade, environmental protection…..
- Company principles are Meaning, Inspiration & Effectiveness (Effectiveness is achieved by applying Stephen Covey’s 7 Habits, plus the 8th Habit)
- Employees will be well paid and highly motivated since they are working for something meaningful rather than simply building shareholder value.
This concept has unlimited potential. More and more new companies will start on such a model I believe. Existing companies cannot change the allocation of profits but will come to learn the benefits, indeed necessity, of being socially responsible rather than seeing it as simply a PR tool which the current legal framework and thinking dictates.