Joel Bakan is a professor of law at the University of British Columbia. His latest book is The New Corporation: How “Good” Corporations are Bad for Democracy, from which this essay is adapted.
On April 19, 2019, the Business Roundtable, led by JPMorgan Chase’s Jamie Dimon and composed of more than 200 of America’s top CEOs, heralded the dawn of a new age of corporate capitalism. Henceforth, the CEOs proclaimed, the purpose of publicly traded corporations would be to serve the interests not only of shareholders but also of workers, communities and the environment. The declaration capped a two-decade-long trend of corporations committing to become caring and conscientious actors – ready to lead the way in solving society’s problems.
I call it the “new” corporation movement.
For those within the movement, who occupy the rarefied heights of elite corporate boardrooms, life has been good. Over the past 20 years, productivity was up. Profits were up. Stock prices broke records. Innovation seemed boundless. New ways to make money were discovered each day. No doubt the coronavirus pandemic tamped down the rise, and it may be a while before corporations regain their full swagger. But they almost certainly will (and some already have) – especially as governments shower them with bailouts and infusions of cash.
Less certain are the fates of the vast majority of people whose lives became increasingly precarious as Wall Street soared, and who now suffer inordinately from the pandemic. Over the past two decades, workers’ wages stagnated, inequality spiralled, public services were shredded, good jobs and unions disappeared, and people worked harder for less pay and with less security (if they worked at all).
Today, millennials are the first generation in U.S. history to be worse off than their parents. Proper health care and housing are beyond the reach of many, and mortality rates in the United States began rising in 2014. Racialized minorities are inordinately victimized by poverty and police brutality. Growing social division fuels hate and stokes the rise of xenophobic demagogues. And climate change ravages the planet with ever-deadlier wildfires, floods, droughts and hurricanes.
Despite their claims to be ready to help (which only grow louder as the pandemic progresses), “new” corporations cannot solve these global ills.
But more important than that, “new” corporations are a large part of the reason things have gotten worse. Despite all the shiny talk of conscientious commitments, the publicly traded corporation (hereinafter “the corporation”) hasn’t changed, at least not fundamentally. It’s the same as it was 20 years ago when I first diagnosed it as an institutional psychopath (in a book and a film called The Corporation) – though now, admittedly, it’s more charming. Which makes it even more dangerous, as it seduces us to drop our guard.
Casting themselves as good actors, corporations cajole governments to free them from regulations designed to protect public interests and citizens’ well-being, claiming they can now be trusted to regulate themselves. They take over public services – such as schools, water systems and social services – saying they can run them better and more efficiently than governments. They push for tax cuts, promising jobs and other societal benefits in return. The result? Governments retreat from governing, corporations take greater control, and we end up as a society that no longer just has corporations but that is corporate – the reason, I claim, “good” corporations are bad for democracy.
In short, the “new” corporation has become the velvet glove that contains the fist of corporate power.
To find out more about “new” corporations, I went to Davos, Switzerland, to attend the 2018 meeting of the World Economic Forum (WEF). Created and run by economist Klaus Schwab, the WEF’s annual Davos meetings bring together world leaders and corporate elites to champion a vision of corporations that has them solving, rather than causing, the world’s most pressing problems. Mr. Schwab says today’s corporate capitalism – “neoliberal,” as he describes it – is dangerously broken, a “free market on the rampage, a brakeless train wreaking havoc.” We urgently need “new thinking on how we combine or how we blend moneymaking and social responsibility,” he told me, the reason “we at the World Economic Forum engage companies in corporate global citizenship.”
While at Davos, I attended the meeting’s main event, a speech by U.S. President Donald Trump. Waiting in line before it began, I noticed a woman wearing a T-shirt emblazoned with the slogan “Not My President.” The woman’s name, I learned when I walked over to talk to her, was Anya Schiffrin, a professor at Columbia University. I told her I thought she was brave to wear that T-shirt, especially since protests are banned in Davos during the WEF meeting. “We have to do something,” she said as the man standing next to her nodded enthusiastically. That man was fellow Columbia professor and Nobel Prize-winning economist Joseph Stiglitz, Dr. Schiffrin’s husband.
The previous night, I had watched Dr. Stiglitz fume against Mr. Trump’s economic policies. We were in a dark, low-ceilinged room in the basement of a shabby restaurant on the outskirts of town, attending a reception hosted by the Institute for New Economic Thinking. Crowded with sombre-looking economists, the reception felt like a secret meeting of dissident intellectuals (which, in fact, it was). Dr. Stiglitz’s speech was followed by equally worried words from fellow Nobel laureate Michael Spence and then Robert Johnson, president of the Institute. Like the other economists in the room, Mr. Johnson dismissed the shibboleths most Davos denizens take for granted. When I asked him later about one of those in particular – the “new” corporation – he said it was a diversion, mainly about corporations “pretending what’s good for them is good for us.” His skepticism made me wonder why he was there. So I asked him. “Davos collects a body of very influential people,” he told me. “If you can have influence here, you can have great impact. I think it’s worth a try, but I don’t come here expecting great success.”
From the attention Dr. Schiffrin was getting in the Trump speech line, it seemed at least her “Not My President” protest was having some success. Which isn’t all that surprising. Few among the Davos crowd openly admit to liking Mr. Trump. His economic nationalism and xenophobia – not to mention his crude and unsavoury character and antics – clash with their enlightened cosmopolitanism.
More their style is our own Prime Minister, Justin Trudeau, who had spoken earlier in the week, reciting his usual progressive, feminist and globalist notions, along with the very-Davos idea that corporations need to give back, be part of the solution and serve a social purpose.
Yet Mr. Trump, the first sitting U.S. president to give a speech at Davos, was the biggest draw of the week. The queue to get into his speech, unusually long and cranky (members of the world superelite don’t like waiting in line), began moving slowly after several delays, and we entered the auditorium serenaded by the regal strains of a brass band from the local canton’s militia. Once we were seated, Mr. Trump strode onto the stage accompanied by Mr. Schwab. Seemingly oblivious to the two men’s presence the band played on, while they stood there awkwardly for a cringingly long time.
When the music finally stopped, Mr. Schwab stepped to the podium to introduce Mr. Trump. Mr. Schwab was widely expected to create some distance, albeit diplomatically, between himself and the President. But instead, he fawned over Mr. Trump. “I’m aware that your strong leadership is open to misconceptions and biased interpretations,” he said, seeming discombobulated when his words were met with hisses and boos. “So, it is so essential,” he continued, his voice becoming louder and a bit shrill, “for us in the room to listen directly to you.” And then he said this: “On behalf of the business leaders here in this room, let me particularly congratulate you for the historic tax reform package passed last month, greatly reducing the tax burden of U.S. companies.”
Now, to put things in perspective, Mr. Trump’s tax bill, which he first promised as a candidate in 2016, and then pushed through Congress in December, 2017, arguably reflects precisely the free-market-on-the-rampage, brakeless-train-wreaking-havoc capitalism Mr. Schwab condemns and works to change. As Dr. Stiglitz remarked after Mr. Trump’s speech – I caught him hurrying along the concourse outside the auditorium, looking angry and energized – the tax bill would gut public funding for, among other things, education, health care and regulatory enforcement, thereby “distorting the economy” and “undermining prosperity and productivity.” So why, I asked Dr. Stiglitz, would Mr. Schwab say what he said about Mr. Trump’s tax reforms? Dr. Stiglitz paused for a moment, shook his head and then said: “I was shocked by Klaus’s endorsement of the tax bill.”
But perhaps he shouldn’t have been. After all, Mr. Schwab was only expressing the obvious gratitude of the business leaders in the room for a tax bill that provided huge windfalls to corporations and their shareholders. Jamie Dimon’s JPMorgan Chase, for example, saved US$5-billion in 2019, part of the US$32-billion combined savings of top U.S. banks resulting directly from Mr. Trump’s cuts. Though no Mr. Trump supporter, and a noted leader of the “new” corporation movement and advocate of corporate social responsibility, Mr. Dimon extolled the tax bill. More generally, big business’s posture toward Mr. Trump was neatly summed up by a CNBC website headline and bullet point: “Often Critical of Trump’s Rhetoric, CEOs in Davos Have to Admit They Like What They See … Bristling over some of his social rhetoric, CEOs have embraced tax reform and economic policies under Trump.”
Indeed, as Mr. Trump’s administration prepared to implement his 2017 tax plan, big corporations – including notable “new” corporations such as Coca-Cola, General Electric and IBM – lobbied intensively, and successfully, for even more cuts, securing new exemptions that reduced to almost nothing their tax liabilities for offshore profits, saving them tens of billions of dollars and allowing some of them, such as Google, to abandon elaborate offshore tax-avoidance schemes.
There’s no surprise here. For decades “new” corporations have aggressively schemed to avoid taxes, and thus deprive governments the revenue needed to pursue social and environmental goals – the very goals those corporations purport to champion. Corporations squirrel away profits in offshore tax havens, manipulate laws with complicated subsidiary regimes and lobby governments to cut taxes.
Why would these companies not want lower taxes? For decades, they’ve reaped record profits from tax-reduction strategies while imposing costs on citizens and society – all the while telling us how much they care.
Recently, those costs on citizens and society were horribly on display, especially in the U.S., as death, suffering and economic hardship followed governments’ bungled response to the coronavirus pandemic. Corporate-driven tax cuts were part of the reason government action was so woefully inadequate. Those cuts led, in turn, to spending cuts – to health care, hospitals, social services and emergency preparedness – which in turn caused, among other things, shortages of testing kits, medical supplies, hospital beds and health care workers.
In short, the pandemic painfully revealed how the same tax cuts pushed for and yielding profits for “new” corporations also starved governments of the revenue needed to protect citizens in the face of a global crisis. It’s true that some companies extended a helping hand – Amazon chief executive Jeff Bezos, for example, donated US$100-million to food banks (an amount equalling roughly 11 days’ worth of his personal earnings) – but such help represents far less than their savings through tax cuts and avoidance. “If Bezos really wanted to be socially responsible,” former secretary of labour Robert Reich told me, “instead of contributing to food banks, he would lobby for higher taxes on himself and all of the other billionaires in America so that we have enough money to provide what everybody in this country really needs.” Indeed, it’s telling that the United States’ superrich boosted their collective fortune by US$248-billion during three of the pandemic’s worst weeks while tens of millions of ordinary citizens suffered, some dying, because revenue-starved public systems were inadequate to the task of protecting citizens’ health and well-being.
“New” corporations may care about social and environmental values. But they don’t want to pay taxes to protect and promote those values. That seems like a paradox, but it’s not – at least not once we accept that while corporations have changed, even quite significantly, they have not changed fundamentally. Making money for themselves and their shareholders remains their top priority. They may care, it’s true, but only to the point such caring cuts into profits. Then they stop caring.
And what’s true for taxes is true for everything else: While corporations may pursue social and environmental good, they’ll only do so in ways and amounts that are likely to help them do well. And they’ll continue to do bad when that is the best way for them to do well. Corporations embrace social and environmental values to help them make more money – not to make less of it. “Doing well” always sets the limit for “doing good.” And that’s a profound limit.
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