Premises of Corporate Behavior

PREMISES OF CORPORATE BEHAVIOR

By Roland Watson

Corporations, as presently designed, are a marvelous legal structure. First, like people, they have full rights to free speech and legal action. Secondly, they live forever. Barring failure or acquisition, they are eternal. Executives may come and go, but the company lives on.

One reflection of this immortality is an extension of their premise: corporations must attempt to grow profits forever. But as we have seen, this premise is flawed. They can only grow profits if demand keeps growing, if we are persuaded to consume more (corporations require materialism), and if we have more children (they encourage overpopulation). But the earth's resources are limited. We are rapidly consuming all of them now. Eternal growth is absolutely contradictory with a world of finite resources.

Corporations also have a number of other premises, although they may be unstated. For instance, corporations, like people, are also risk-averse. They too are afraid of the unknown! They are afraid to do anything different, to diverge from the standards of behavior of other corporations. In this way, they follow the pack, and demonstrate that they are as conformist as we are. Of course, the consequences of this risk-averse behavior are often the opposite of what was intended. Corporations regularly follow each other over the edge, in one way or another, such as by getting caught up in acquisition fever, or by investing great sums in the newest "hot" part of the world, or by taking on too much debt. Then, after the hype subsides, they find that their acquisitions do not make business sense, the hot part of the world is also extremely risky, and that they can't pay off the debt.

Corporations refuse to accept what is commonly considered to be the basic principle, or tradeoff, of business, which is known as risk versus reward. The idea is that if you want to make more money, or a greater percentage return, you have to take more risk. And this is true: it is an inviolable principle. Yet corporations regularly try to avoid it. They want to make a lot of money, but they refuse - they think they can refuse - to bear the risk.

Their solution is to increase their control, or market power, in other words their power over their customers. They attempt to create a situation where we must accede to their terms. The primary way they do this is by seeking to minimize their exposure to competition. They attempt to create market monopolies or, less favorably, oligopolies: markets with only a few suppliers. They accomplish this through predation of, or collusion with - as in the creation of cartels, and the practice of rigging bids - their competitors.

To put this in an earlier context: corporations are opposed to market efficiency. They do not want markets where there are many competitors and it is difficult to make a profit. They will do anything they can to prevent this from happening, including eliminating the competition through acquisition or merger, and through this collusion and conspiracy.

Also, this explains the love that corporations have for technology. New technology represents new, less efficient markets. This is why they are so adamant that we need their new technology; why they push it on us so hard. In most cases we do not need the technology. But they do, since this is one of the few ways that they can stay ahead in the competitive game.

Computer software is a perfect example of the use of technology to create a new market, and to expand our needs. Suppliers regularly release new editions of software, and then encourage us to upgrade to it. (This is another type of planned obsolescence.) For example, you might want a simple word processor, a typewriter that remembers and that you can use to edit your text, but instead you get Word Infinity Plus One, which enables you to run your own publishing company. Also, for such an application you want to concentrate on your words, what it is that you are trying to say, but such complicated software tends to shift your attention to the way you present your words, to their appearance, rather than their actual content.

Another aspect of the desire of corporations to achieve market control is that they invariably become inflexible and rigid. They are opposed to change, and this often leads to an internal culture of intolerance and negativity. Also, externally, they seek to quell all dissent, all opposition, and in this regard, unlike their predecessors, governments and religions, they are very successful.

Corporations appropriate, they co-opt, all potential and actual sources of rebellion. In general terms, each new generation is conditioned more intensively than the last. In addition, the few real rebels, such as our modern poets, the rock and rollers, and rappers, are turned into corporate spokespeople. It seems that no one (or very few) can refuse the paycheck and stay true to their principles. They say: "Gee. For that much money I can do what I want, and buy what I want, for the rest of my life. And it's so nice to be popular! Where do I sign?" Those people who could make a difference, don't. They are bought out: it is high-stakes prostitution, pure and simple.

To return to a corporation's legal structure, the most important aspect of it is that they have "limited liability." In theory, this is a technical term: it means that the investors in a corporation are not held personally responsible for its actions and debts, above and beyond the amount of their investments. In practice, however, it means much, much more: it means that all of the people associated with a corporation, particularly its executives, cannot be held liable for anything, except the most extreme criminal acts. They are not held responsible, by law!

Corporations are basically free to do what they want, without considering the consequences. They have been granted an exception to the fundamental rule of life, and this means that we must pay their costs. They also exist outside the system of social checks and balances. The problem of unethical corporations, or businesses, was not viewed as a significant concern in Jefferson's day. Ironically, the only remaining check on corporations is with lawyers; they can be sued. But, with their economic power, their highly skilled in-house and external counsel, and their political allies, the political power that they have gained through their economic power, they are a formidable opponent.

Why, then, would I suggest that they be the target, with us, as individuals, as the enforcers? The answer is that we do have this ability. Corporations, although they do their best to obscure the fact, are the institutions that are most susceptible to democracy, to participative democracy. Through our consumption patterns, to which they must respond, we can bend them to our will.

The question is, are we up to this voluntary action, or are we truly sheep with corporations as the modern lions? Only time will tell, but one thing is in our favor. Being an activist through exercising consumption preferences requires the least effort of any type of activism. You do not actually have to do anything, such as cast a vote. The only requirement is that you not do something, specifically, that you not buy the products of objectionable companies.

All this requires is education, about which corporations are responsible for which social costs and ills. And such education is already available, to a degree, through media criticism of the actions of specific corporations (think of the Exxon Valdez disaster), and through the efforts that more active activists make to publicize corporate misdeeds.

As proof that we do have the power, and as an example of it in action, activists in August 1999 won a major victory against the retail chain Home Depot. Home Depot is "the largest retailer of old-growth forest products in the world," and they announced that they would "stop selling products from endangered forests." Activists opposed this unethical retailer, spread the word to the general public, and together we forced it to end its part in this type of environmental exploitation. Further, this effort "exposed the market place as the weakest link in the chain of global forest destruction by ripping away the veil that allows consumers to unwittingly purchase old-growth forest products." (Home Depot Victory, Jennifer Krill, Earth First! Journal, November-December 1999, page 13)

Our strategy, therefore, has two parts: bringing pressure to bear on unethical companies through our consumption patterns (and other activist tactics), and also by redirecting government to get it to do a better job protecting us, instead of, as it often does now, siding with the corporations against us. And, of course, through both of these steps we want to encourage the corporations to reform themselves.