Showing posts with label Europe. Show all posts
Showing posts with label Europe. Show all posts

Friday, May 23, 2014

If a Corporation is a Person, Can a Corporation become Enlightened?

I've taken a break from writing for a few weeks and this article is a non-sequitur, something my goofy mind threw up to me from below. I made the mistake of catching it and chewing on it, so now I have to spit it out. So, here goes.

I believe I've read somewhere that the first corporations in western history were formed around exploration and commerce, viz., the East India Company and its Dutch equivalent. I believe these, like Sir Walter Raleigh, were given a royal charter or permission to trade in the name of and with the protection of their respective governments (in return for wealth and favor, of course!).

In any case, I know enough about state-chartered corporations to know that corporations exist as creatures of law by the various state legislatures. Corporations are deemed "persons" who can be sued and can sue in turn and do various other "corporeal" acts otherwise reserved for human beings.

Our capitalist culture has some of its philosophical roots in Adam Smith's hypothesis that individual self-interest operates for the good of all. From this comes the idea that competition is a good and efficient mechanism for the allocation of goods, services and scarce resources. An entire genre of behavioral philosophy, culture and psychology was given birth from this premise which was given a mighty push by precepts derived from evolutionary biology, aka, "survival of the fittest." Class warfare and, in general, materialism as the greatest good for the greatest number all owe their social legitimacy to the basic idea that struggle and competition bestow benefits of economic efficiency and prosperity upon society.

Not long ago (2010) there was a United State Supreme Court ruling that more or less lifted the limits previously imposed upon corporations in respect to their contributions to political campaigns. I think it was a free speech question but I assume it is predicated on the legal premise that corporations, are "persons" (and thus entitled to free speech).

Many sincere people around the world are concerned that corporations, especially those that operate in the global sphere, are in a position to outwit the various governments in whose jurisdictions such corporations conduct business. Some larger than many governments and are far more sophisticated, as they can hide resources by moving them around the globe. Many people and groups with whom I have a natural philosophical affinity accuse global corporations of all manner of deceptive practices and environmental neglect. I am not prepared to comment on any specifics and even if I did I would be quoting other people for I have no personal experience or expertise in these matters. In any case, for my point here today, it's not necessary.

What occurs to me is to reflect that the very existence of the corporate form stems from the social contract: which is to to say, from government "fiat." Without the laws that permit these creatures to even exist, they, well, wouldn't exist and wouldn't "enjoy" the benefits of various legal protections, as you and I do.

If therefore we in society are concerned that corporations have gotten too large and too powerful relative to their historical overseer -- the various levels of government -- then we should modify their privileges. We don't need to argue whether corporations are a person or have rights of free speech. We can perhaps reform their capitalist heart in the following manner:

Their power lies in their ability to raise capital on the stock exchanges around the world. Adam Smith's idea of "self-interest" was, I believe, never intended to encourage or praise rapacious or exploitative behavior. No intelligent person of goodwill would have espoused greed an an instrument of social goodwill!

As a man of the Age of Reason (and Enlightenment), I assume he meant (or should have!) "enlightened" self-interest! I think many corporations, at least in America and Europe, try to hold their corporate employees to a decent standard of integrity and enlightened self-interest; some, presumably, only pay lip service to such ideals. (I'm not in a position to know or say more or less than this.)

Local, state, and federal government agencies don't seem to have enough "police" and economic power to balance the global muscle of some of these corporations. Besides, I, for one, would hesitate to give government more power both in principle and for the fact that "buying" of politicians is one of the key forms of abuse of corporate power. I think that in exchange for having access to the capital markets, these self-same corporations can be made to expand their own, internal decision making to include their natural constituencies. Let me explain:

An economic enterprise utilizes capital, natural resources, and labor. (I added resources to the traditional explanation.) Such an enterprise makes an impact upon society and upon the environment as a result of its commercial activities. To pass an ever increasing number and complexity of laws to regulate a corporation's social and environmental behavior seems, to me at least, to operate under the law of diminishing returns.

But what if the very management of that corporation included persons who represented the interests of employees, vendors, the environment, and the consumer? They need not be given shares of stock because they can, by virtue of the regulatory requirements of the capital markets, be given a voting place on the Board of Directors of each corporation. There's no requirement that a member of a board of directors has to own stock in the company.

The agency overseeing the exchange where the corporation seeks to be listed would have to oversee the selection and behavior of the non-shareholder members of the board, but that seems far less onerous and feasible than passing more laws and giving more police power over such corporations, especially when they conduct activities in other countries beyond the reach of our laws.

What if the board of directors of such a corporation were required to have one-third of their number elected by shareholders in the traditional way; one-third elected by a combination of employees (including so-called contract employees otherwise barred from employee status) and vendors (excluding vendors effectively controlled by the corporation); and, one-third representing social interests such as the environment and consumers? (Government is by necessity a regulator. It is not appropriate to have board representation.)

The employee group of directors together with the shareholder-elected board members would appoint the social group. The stock exchange could set standards for the qualifications and relative make-up for the social group and for the process through which employees and vendors are represented. In some corporations environmental concerns are few while others such concerns are great. For some corporations (exporters or financial entities) there may be few real "consumers." A degree of finesse would be required.

Non-shareholder board members would be required to submit annual reports (publicly available) to the stock exchange that discloses their voting record, their investigative and oversight efforts, and their summary of the corporation's success in its relations and impact upon the groups and interests represented. The corporation would be required by the exchange to make some reasonable allowance for the costs of the oversight by these board members (including suitable staff and access to data), just as allowance is provided for the cost of outside financial auditors. (But more than just auditors are needed for, decade after decade, financial auditors have proven themselves ineffective.)

But what about a director's fiduciary responsibility to look after the interests of the corporation? Well, good question! Remember our definition of "self-interest" (the enlightened version, that is)? The "best interests" of the corporation are achieved when the interests of all stakeholders are taken into account and balanced appropriately. Indeed, the support, approval, and goodwill of employees, vendors, and consumers and the health and well-being of neighbors and the environment help ensure the long-term survival and success of the venture. Naturally, compliance with all just laws is a given, though only a baseline, insufficient in itself, for success.

Up until now I believe outside interest groups (like environmentalists) either make a lot of noise with boycotts and media to crash the party of shareholder meetings or they have to acquire blocks of stock (or both). It takes a lot of "noise" to make anything happen in such an adversarial environment. But with this approach as I propose it, each major corporation will be empowered to consider the greater impact of its actions. Bottom line, short-term profits are no profits at all if they amount to thievery of a sophisticated kind. Rewarding a long-term view stabilizes the economy and society as well.

You might object that such otherwise competing interests might paralyze decision making. Yes, that possibility exists but there are some of us who believe that such corporations are already too large and cumbersome. Enlarging the scope of their interests might exacerbate the slowness of decision making and response, but such is the price for due consideration of legitimate interests in a large and publicly held institution of any kind. Let the race go to the swift. It does now, anyway, doesn't it? Innovation seems to come primarily from the lone wolves and small operators. The one has immense resources (and commensurate responsibilities), the other, flexibility, creativity, and swiftness! (Economically, they need each other.)

What about our concept of "private property." Would such a proposal rob shareholders of their financial interests? Why? It is common for corporations to enlist the counsel of all manner of public figures or esteemed business associates to guide them. There's no requirement that board members or officers be shareholders. Such boards in reflecting a wider scope of interests would be in a better position to resist the pressure to reward officers with obscenely high salaries. (While a separate proposal and subject, I don't see why the privilege of access to capital markets doesn't also justify some basic limits on the ratio of officer salaries to rank and file.)

I would imagine that financial exchanges in Europe would be even more inclined in this direction (if they've not done so already). Perhaps also, Japan. China remains a feral nation (why do we pretend, otherwise?), so I doubt they would do anything more than superficial. Nonetheless, the American financial markets alone are substantial enough still to weather this en-lightening-up.

What I am essentially saying is proposing a broader standard of what constitutes success and what constitutes self-interest. The time is nigh. A corporation that takes a balanced and fair approach to considering the well-being of all of those segments of society (employees, vendors, consumers) and the environment it affects is far more likely to survive, flourish and grow. Substituting long-term success for mere short-term profits, profits, as it were, everyone, including the corporate shareholders who stick with it. The line between speculation and investment lies, in no small measure, on the timeline of one's holding period.

Well, that's as much time and effort as I am willing to put into this subject. Perhaps you'll agree or think it's interesting, or goofy, or even a good idea.

Sayonara dear friends and on to more meditative subjects.....

Nayaswami Hriman, CPA

Friday, September 23, 2011

After the Fall - The Road Ahead?

What lies ahead of us after the Fall? What Fall, you may ask? America and European nations stand on brink of a fall in currency values and wholesale economic paralysis. No matter what form it takes: hyper-inflation, deflation, partial or complete, the results will affect everyone to varying degrees.

What, then, may the road ahead of look like after "the Fall?" We see the American Congress (seen as a symbol of American public opinion) in paralysis. Some say the government should uphold spending as a safety net to wholesale collapse. Others say continued spending in the face of such immense debt and deficits is irresponsible and, itself, responsible for wholesale collapse. As I have written previously, it probably doesn't make much difference as the result is the same.

For today, however, I want to roll the film ahead and peek behind the curtain of the road ahead. What are the consequences of a new economy in which the central government plays a greatly reduced role in the lives of its citizens (whether in America or in Europe)? Here are some possibilities:

1.     So long as major war(s) are not imposed upon us, we can expect a great reduction in public and governmental willingness to intervene militarily in off shore wars. If things go this direction (and not towards MORE international warfare), the reduction in military spending for personnel, facilities, and weaponry will result in the unemployment of thousands, with a concomitant ripple down affect.
2.     We saw how World War II was a major economic engine that drove the 1930's Depression from the national scene. While the Depression was not necessarily the cause of that war, we might see that a worldwide economic collapse or stagnation might generate warfare especially around energy resources, or as a window to more effective and devastating acts of terrorism. When things are tough at home, uniting against a common "enemy" can be "good" politics and "good" economics, if you know what I mean.
3.     Social services and support systems will be greatly reduced in their funding. Charity will shift to the private sector, the individual, and to the nonprofit sector with the result that many otherwise on some form of relief or subsidy will have a difficult time. Social unrest is certain to result and polarization of public attitudes towards the poor will certainly make things even more difficult.
4.     A renewed emphasis on both individualism and cooperation will surface. Faith-based groups, ideologue-based groups (green or cause oriented), and local partisans will form to tackle various needs and causes. 
5.     A large increase in part-time or shared jobs, telecommuting and other forms of shared, partial, or results-based (commissions, e.g.) jobs will occur. The trend to the use of subcontractors will continue to accelerate.
6.     Private, corporate, union and nonprofit pensions will be reduced.
7.     Despite the glut of homes on the market, more people will live together, whether related or unrelated.
8.     A small but growing exodus out of the cities will begin in the face of unemployment and harsher living conditions, including scarcity of food, social instability, and cost of utilities.
9.     The trend toward personal or small farms will accelerate. 
10. Communes, cooperatives, co-housing, and intentional communities will become visible and will grow in number and influence.
11. Small numbers of westerners will move to other countries and expatriates of such countries currently living in the west will return to their country of origin.
12. Government spending will shift toward infrastructure and jobs, and away from social services. 
13. A rapid increase in the use of barter clubs will be seen.
14. The high cost of public transportation may be strangled by lack of public funding and interest. Low-cost individual transportation systems (from bicycles, motorcycles, smart cars and hybrids), including telecommuting and living near one's workplace, will increase.
15. Energy conservation will become high profile and high priority in all sectors. 
16. Agri-business will lose substantial subsidies provoking more instability in food prices and boosting interest in individuals growing their own food (and locally grown produce).
17. Immigration into the U.S. will slow due to slow economy and tightened security and public attitudes.
18. Alternative forms of currency (not just bartering) will pop up here and there, greatly enhanced to the extent internet remains stable. 
19. Government efforts to regulate will become increasingly ineffective. Regulatory power will shift to the state and local levels, but even here, will be lax or inconsistent from place to place. Crime or lack of conformity to laws and regulations will skyrocket. Society will become far more random and chaotic while yet free and enterprising.
20. Travel will be greatly reduced and more emphasis will be placed on local recreation, sports, and holidays. People will tend more to stay at home or local.
21. Home improvement projects, especially low-cost and energy-efficient (with rapid payback), will accelerate.
22. Real estate prices, in general, will remain low, stable, or dropping for years to come (with various exceptions of course!) Commercial real estate will be the next sector to drop hard and fast. Malls will be devastated and big-box shopping will move even more strongly to the internet (assuming the internet remains reasonably stable).
23. A new growth industry in trade and labor skills will slowly build. Jobs in small manufacturing activities will slowly begin to build momentum as the economic and energetic incentives to make things locally or nationally grows.
24. A trend toward simplicity in technology, lifestyle, and household products will begin.
25. The trend toward non-impact exercise and interest in yoga and meditation will grow at an accelerating rate. Fewer people will be able to afford or have interest in high-tech gymnasiums, pools, and equipment.
26. Public interest and acceptance of non-sectarian spiritual values, beliefs, and association will begin to rise. This will threaten mainline and sectarian oriented churches and institutions. Mainline churches will suffer in membership and revenues, although there will be exceptions and some push-back as members turn increasingly to their faith for comfort.
27. Trend toward alternative health care and naturopathic and energy healing will increase rapidly both for economic reasons and for the lack of satisfaction with allopathic solutions.
28. Health care industry will be devastated, whether private or public due to economic pressures.
29. It would seem that conflict and instability in less developed countries around the world will increase. But this will be mitigated (perhaps) by economic paralysis. We will probably see an inconsistent and spotty pattern of conflict alternating with reconciliation, both at more local levels with less interference from developed countries. 
30. Against the prior point is an increase in the intensity of competition for natural resources among all countries and especially the (relatively) richer nations.
31. Increased attention and commitment to alternative energy sources will be slowed by economic troubles creating an inconsistent stop and start pattern of research, development and implementation around the world. Necessity will be the mother of invention and solutions will tend to be more local than global.
32. Lifestyles in developed countries hard hit by economic troubles will tend to polarize but in general will move towards traditional, universal, and simpler values: health, commitment, saving, hard work, community and family. I avoid the label here of conservative in favor of natural, balanced, and sustainable living in all levels: earth-oriented, health-oriented, family-oriented, community-oriented, and church-oriented values and lifestyles.
32.5 The public school system in America will continue its steady decline. Committed parents will continue to look for alternatives but economic woes will make traditional private school increasingly out of reach. Tutors, small non-profit schools staffed by dedicated staff and volunteers, after-school enhancement activities, character and holistic education, home schooling, and volunteer associations will sprout everywhere. Online and internet alternatives, especially in higher grades and education, will skyrocket almost as fast as costs and prices.
33. The BIG IF'S that can drastically affect all of the above are as follows: war, plague, and natural catastrophes.
34. War between nations is not difficult to imagine when global conditions become stressed and competitive. Terrorist use of small nuclear devices could wreak havoc and great suffering.
35. Pandemics are constantly being touted as just around the corner. Millions could be affected.
36. Natural catastrophes are seen, by the public at least, as increasing in both frequency and intensity of devastation. Predicted sunspot activity could herald global disaster for telecommunications, travel, and energy production. Meteor hitting earth is a popular fear as is a shifting of the poles (perhaps as a result of the former).
37. When the time arrives for a general subsiding of our troubles on earth, it seems that humanity will so yearn for peace, health, and prosperity that a long and gradual period of relative security and peace would undoubtedly result. 
How long a time frame is all of the above? Well not short like a recession, certainly. The trends above are long-term but are listed because I feel that in the few years ahead of us we will be able to discern their appearance. Those who live with faith, share with love, pray with devotion, and act courageously and creatively will fare well, spiritually for sure and likely in most other ways as well.

May we live in God's light and peace as His children!

Nayaswami Hriman