Friday, April 18, 2003

Despairing Globally, Hoping Locally

Marjorie Kelly muses on corporate purpose legislation...
Beneath the radar of mainstream awareness, something remarkable is arising. It’s a promising new path for systemic corporate reform, not at the federal or international level, but at the state level. This may be the last place we think to look for corporate reform. But it should be the first, since it is states that charter corporations and have the power to redefine the terms of their existence.

This is a highly interesting theory...to implement corporate reform at the state level in direct opposition to the trend towards the WTO, which is definitely a move away from democracy and civil participation.


Fundamental change may be coming within reach. In California – where the state legislature is controlled by Democrats – corporate purpose legislation was introduced Feb. 21 by Senate Majority Whip Richard Alarcon (ACCENT OVER O) (D-San Fernando Valley). While current law says directors must maximize profits for shareholders, Alarcon’s Good Corporate Citizen bill (SB 917) says companies may not do so at the expense of the environment, human rights, the public health, the community, or the dignity of employees. The attorney general could bring civil action against violators. Under certain conditions, directors would be personally liable.

It’s hard to overstate how profoundly this could change corporate behavior. Instead of rubber-stamping whatever actions fatten the bottom line – keeping a dirty power plant open, or laying off 10,000 – directors would be asking about impact on employees and the public good. They’d be trying to avoid social harm, because their own pocketbooks would be at risk.

Alarcon says his bill may not pass in a single session. “Most significant changes in American law take some time,” he said. “But the discussion is as important as the end product.”

The question remains whether this would be the best long-term solution to the problem, and how it would be viewed through the lens of classical free market economic theory. Not that approval would have to be forthcoming, just how would such a change of economic policy be explained in terms of economics and politics.

I just discovered this movement towards corporate purpose legislation, and will be reporting back on it frequently, as well as exploring its philosophical, political, and economic implications.