The Corporation and the Individual

In January 2010, the US Supreme Court removed the traditional legal limits on political contributions by corporations. The reason given was to guarantee equal freedom of speech to corporations as well as to individuals as provided by the US Constitution. This opened a floodgate of money coming from all kinds of organizations to politicians for promoting their own special narrow interests.

Is this a wise move? The freedom of speech is basically meant for individuals when the Founding Fathers hammered out the Constitution in the mid 1700s when modern corporations did not even exist. The intent was to protect the rights of the individual in order to safeguard freedom and democracy.

Should we treat a corporation as an individual as far as rights are concerned? We should not for all practical reasons. I’ll tell you why.

To understand the differences between the rights of a corporation and the rights of an individual, the first thing that comes to mind is the balance of power. I don’t need to tell you which one has more power no matter which angle you look at it. Obviously, the corporation has overwhelming power compared to the individual. Now which side should the law stand for? If the law aims to render any justice at all, it should stand on the side of the individual while ensuring that the rights of the corporation are neither infringed nor expanded. Treating both sides equally means favoring the corporation more than the individual because of the lopsided balance of power between the two already existing.

A corporation can easily live more than a hundred years while most individuals cannot. That’s why in all democratic countries, the law does not recognize joint ownership of an estate between an individual and a corporation with the right of survivorship. The reason is that the corporation will end up owning the estate after the individual dies but seldom the other way around, which is very unfair to that individual.

What is the basic working principle of democracy? It is simply one man, one vote; and also, the majority rules without resort to violence, suppression, or corruption. The litmus test for a true democracy is how much the individual vote is respected, and how the rights of an individual are protected. A country cannot claim to be truly democratic if a rigged election occurs within its borders.

An organization consisting of more than one individual with similar objectives must have more power derived from the size of number. A corporation is an organization with a single business objective and plenty of money, too. This gives it even more power. Power carries with it all kinds of advantages. Power even becomes evil if it is being abused as you have seen so often everywhere. There is a saying that absolute power corrupts absolutely. If you care to look around, you will find many governments, political parties, big corporations, and even some individuals possessing near absolute power, but causing their own downfall eventually.

A corporation is organized as a pyramid where the Chief Executive makes all major decisions supported by the Board of Directors normally appointed by him (or her). The individual employees, whether happy or not, happen to be just working there, and are subject to hire and fire. This makes the employees dependent on the corporation for their livelihood. Ordinary investors are mostly small shareholders who have no say in company management although they may think they have. Thus the corporation is by no means a democratic organization. The chief executive can rule with an iron fist, or can make the corporation a kinder and gentler one depending on his/her integrity and conscience.

A corporation has limited liability. That means when it goes bankrupt, the creditors can only claim its remaining assets. The top executives and the board of directors are not responsible to pay its debts, even though they have run the corporation to the ground. Very often, they wind up getting golden parachutes as severance pay. This irresponsibility and unaccountability belong to the rights of the corporation protected by law. What about the employees? They lose their jobs when the corporation dies. What about the small investors? Their investments will vanish as the share price drops to zero. When a corporation dies, the few top officers get away nicely while the great majority of people suffer.

What if a corporation thrives? The same lopsided consequence happens that a few top officers reap most of the fruits, leaving the remainder to be shared by the employees and the small investors. Is this fair game? You may argue that corporations add jobs to the economy, yes but only in good times. However, the bulk of the jobs created in the US, about 60%, come from small businesses, not big corporations. Big corporations fire workers under all sorts of conditions including re-organization, merger, takeover, and declining profits. A surviving small business seldom fires workers.

Let’s go back to the issue of political contribution. In the US, corporate contributions to politicians amount to billions of dollars annually. The legal term for this activity is lobbying, which is in effect legalized bribing and corruption. What do the corporations want? First, they want the politicians to relax or eliminate any laws that inhibit their operations. Second, they want the politicians to keep a low corporate tax rate. Third, they want new laws to favor their own business.

As you are aware, the corporate objectives seldom coincide with the public interest. Since corporations have plenty of money to bribe, the public cannot compete with them for the attention of the politicians or legislators. For the public, one man only casts one vote. Furthermore, the votes have to be organized to be delivered on election day. For the corporation, although not entitled to vote, it votes with its money as directed by the chief executive, and most politicians welcome it.

So you see money corrupts votes. How can you rectify this imbalance that threatens democracy? The solution is to limit corporate contribution to politicians to take the money out of the equation. A corporation cannot be treated the same as an individual because corporate influence is so much bigger due to the money involved.

(July 2011)

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One Response to The Corporation and the Individual

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