Developing a Corporate Conscience

man at podiumAs Justice Stevens said in Citizens United v. Federal Election Commission, “the corporation has no conscience”. Our founding fathers did not anticipate the proliferation of corporations. The Constitution and Bill of Rights did not address the rights and responsibilities of corporations. This has been left largely to the Supreme Court, which has gradually endowed the corporation with many of the rights of personhood, without addressing what corresponding moral obligations to society such personhood requires. That task has been left to us, the people. It is no longer the king who endows the corporation with its charter, but We, The People, through our elected representatives and government agencies.

We, The People, have begun to ask whether or not there is a more responsible way to organize our commercial collectives. The fundamental question that the benefit corporation movement, conscious capitalism (see: consciouscapitalism.org), and even Occupy Wall Street are all trying to answer is: How can we best endow the modern corporation with a robust social and planetary conscience so that it can not only act appropriately as a responsible global citizen but also optimize profits for shareholders, its owners?

Addressing this question requires an understanding of the historical context of the evolution of the corporation. Benefit corporation legislation may, in fact, represent another evolutionary advance in capitalism. It’s helpful to understand that, although the corporation has evolved over the centuries since its invention as a mercantile agent of empire of the kings of Europe, it remains a construct of the Middle Ages at its core. As such, its basic legal architecture still reflects the exploitative, mercantile consciousness of the monarchs of that era who created it. Benefit corporations, conscious capitalism and OWS are all part of a larger impetus to endow the modern corporation with legal architecture, operating principles and values that reflect and support a sustaining, planetary consciousness, and a more holistic corporate conscience while retaining its best attributes.

To make a long story very short, monarchs would charter corporations, such as the Hudson’s Bay Company, to gain dominion over foreign lands and provide additional sources of revenue for the royal treasury. HBC, for example, at one time controlled 15% of the landmass of North America for England. The last thing the king wanted was for a corporation to become a rival source of political and economic power so the corporation was separated from its conscience and intelligence. If the corporation misbehaved, the king could simply revoke the royal charter. With the king serving as the external conscience and intelligence, the corporation was essentially lobotomized to optimize it to serve its mercantile and territorial purposes and to prevent it from becoming a political or economic rival to the king. For those interested in a more detailed history, you can download the epilogue from Great from the Start on the Free Downloads page of this website.

This form of corporation is one of man’s most successful social inventions and has been enormously effective as an agent of progress. The echo of its original mercantile dynamic is still reflected in the common assumption that corporations exist solely to maximize profits for shareholders and in the accepted legitimacy of the common practice for corporations to externalize the negative consequences of their behavior on society and the environment. These constructs were appropriate and worked well in a world with infinite resources and a commons with perceived limitless capacity to absorb the effluent of corporate activity, but breaks down in a massively interdependent global economic system with finite resources and an overburdened commons. In short, the basic corporate form provides only primitive architecture to support the activation of the collective intelligence, conscience and consciousness of the people within the corporation. The shadow side of this architecture is a vulnerability to sociopathic behavior (e.g. Enron) when the leaders have no moral scruples.

A quiet legal revolution has been underway in the United States to develop a corporate conscience. Thirty one states have adopted what are called “constituency statutes”, which empower directors to consider the interests of a corporation’s stakeholders, in addition to shareholders, in the exercise of their fiduciary duties. Benefit corporations, which generally require corporation to provide a material positive impact on society and the environment, represent another evolutionary step towards helping the corporation develop a conscience.

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