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Spring Books

Controlling corporate power

By Lawrence E. Mitchell
Yale University Press, 320 pages, $27.95


With the publication of this book, Lawrence E. Mitchell joins a long list of authors and social critics who are seeking to define and ameliorate one of the most critical problems facing our planet today: the growing power of the global corporation over our livelihood, our health, our community, our democracy and our lives.

As Mitchell states, “In September 2000, Business Week published the results of a poll which found that fully three-quarters of Americans believed that their lives were too dominated by business, and that the same number agreed with Al Gore’s aggressive stance against big business.”

Among the findings were that 66 percent of Americans believed that “large profits are more important to big companies than developing safe, reliable, quality products for consumers.”

Adding to the disenchantment is the perception that companies often buy their way into government. “The poll found a general perception that business had grown beyond the capacity of government to control it, creating a dangerous power imbalance in American society as well as in the rest of the world, an imbalance in which American business is perceived to overwhelm local sovereignty and culture for the sake of increasing profits.”

There is now a widely perceived notion that there is something terribly wrong with our present business system dominated by the American modeled global corporation.

While many other social critics question the global order and even capitalism, Mitchell limits his critique to present American corporate law and the social and business imbalances emanating from it. As he says, “Everyone more or less agrees that capitalism in some form or forms is indeed to be the order of the day, and so I will begin by taking the hegemony of capitalism as fait accompli and a desirable one at that.”

As for the corporation, he says, “While I have described the central problem as structural, many of my suggestions will not address corporate structure at all. There is much that works well in the American corporation, and much of it lies in the very same structure.” Even so, Mitchell has a good grasp of the problems facing us and admits that the American corporate model that we are increasingly exporting worldwide is not sustainable and needs to be fixed. But he limits his solutions to finding ways to empower workers and to reforming corporate law, an area he knows well.

Being a lawyer who gave up a lucrative practice to teach corporate law, he is on solid ground. His reforms are well thought out and presented in a way that laypersons can understand. As for the problems, he grounds corporate irresponsibility in our unique American culture with its dysfunctional obsession with liberty and individualism, its strong emphasis on rights, and its blind faith in the “free” market. When you tie these to a couple of Supreme Court decisions that gave corporations personhood and granted them limited liability (they are only responsible for damages in the amount of their assets) you have a system with few checks and balances. These decisions have made American corporations the perfect externalizing machine, and “they proudly in the name of profit maximization, the sacred watchword of American business, increase their profits by transferring much of the cost of business to those who are vulnerable to corporate power.”

One of the main problems Mitchell sees with the current American business system is its obsession with short-term profit. He believes that it is the legal structure of the corporation -- grounded in American social thought and attitude -- that has led to stock price maximization, an ethic that puts money and the bottom line above all other considerations. This trend is now in the driver’s seat and is out of control.

Government has forsaken its role as regulator, and management is trapped into making money in the short run at the expense of planning for the future. Many factors have contributed to this, including a dramatic increase in institutional stock traders, a rise in day traders and an increasingly unrestrained capital market where profit and greed prevail. Mitchell contends that it is not so much a problem of bad actors, although there are some, but rather a structural problem where managers have no choice if they are to survive.

Mitchell describes the harm this system is doing to workers who are simply an expendable cost of doing business and trained in command and control. He credits this system with the growing inequality of earnings, the loss of cohesion of our social fabric and the disappearance of trust in the workplace. American business is one of the most top heavy in the world with excessive supervision. A study showed that slightly over 33 percent in the nonagricultural workforce was supervisory in some way. And because the American corporation is such a powerful entity, it is pushing its values to all of society to the point where it is destroying our social fabric. The growing trend toward privatization, which Mitchell does not mention, is bringing more and more of our common endeavors, from education to water delivery systems, under the thumb of this American corporate model.

So what are the Mitchell remedies?

  • We must change the way we treat workers: Consider workers a capital asset rather than an expense. Include them in decisions and share the benefits of greater productivity with them. Build trust in the workplace.
  • Sever the relationship between managers and stockholders. Let managers manage while holding them accountable. Mitchell recommends a complete separation by eliminating stockholder voting but considers this too radical. In a more conservative vein, he recommends stockholder meetings and elections once every five years instead of yearly.
  • Eliminate some of the pressures for short-term profits by changing the period of reporting profits from quarterly to one year and include quality measurements as well as money. Bring the government back in to change the requirement of these accounting records.

Lawrence E. Mitchell has indeed made a significant contribution to understanding the problems and has suggested possible reforms to a corporate system that is running amuck. Because of his grounding in corporate law and his understanding of the structure of the current corporate system, he has provided a unique piece to the growing literature.

One weakness to the book is that he has largely ignored the fact that the U.S. government has become the handmaiden to the corporation. Because of the way we finance our elections, corporations effectively control both political parties in the United States through their obscene campaign contributions. All of the reforms suggested by Mitchell would require changes in present laws that neither political party is likely to enact. Indeed with the breaking of the Enron scandal, it is becoming increasingly clear how dangerous it can be when, in the words of Nancy Allen, media coordinator for the U.S. Green Party, “unrestrained corporate greed is joined at the hip with the legalized bribery and influence-peddling that passes for government these days.” Mitchell’s suggestions are a good first step but, without campaign finance reform, nothing will ever change.

Dee Berry is co-coordinator of the Progressive Party of Missouri.

National Catholic Reporter, February 1, 2002