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 Review: The Corporation


Movies

By Drog (Canada), Section Reviews
Posted on Mon Apr 11, 2005 at 09:59:12 AM PST

Last night on television, I saw part one in a three-part documentary entitled "The Corporation", written by Joel Bakan (who wrote the accompanying book "The Corporation: The Pathological Pursuit of Profit and Power") and directed by Mark Achbar (best known for the 1992 documentary "Manufacturing Consent: Noam Chomsky and the Media", which he co-directed and co-produced) and Jennifer Abbott (best known for "A Cow at My Table", a documentary about meat, culture and animals, which she produced and directed).

Visually, there was nothing special about this film, no breathtaking cinematography here. And the creators did not incorporate themselves into the film ala Michael Moore (of Fahrenheit 9/11 and Bowling For Columbine) and Morgan Spurlock (of Super Size Me) to appeal to a wider, more mainstream audience.

But it is brilliant, due to its ability to convey, rationally, coherently and captivatingly, its fundamental premise on the nature of the most important intitution in the world today -- corporations.

The film begins with a quick history lesson in how corporations were once merely institutions chartered by governments to carry out specific public functions, and how a 19th-century legal innovation led to treating them as legal "persons", entitled to the same rights and protections that people enjoy under the law.  If the corporation is a person, the film asks, what sort of person is it?

The answer, using four case studies and actual diagnostic criteria of the World Health Organization and the DSM-IV (Diagnostic and Statistical Manual of Mental Disorders), is incontrovertible.

It's a psychopath.

According to the DSM-IV-TR checklist, a person is a psychopath if they exhibit three or more of the following behaviours:

  1. failure to conform to social norms with respect to lawful behaviors as indicated by repeatedly performing acts that are grounds for arrest
  2. deceitfulness, as indicated by repeated lying, use of aliases, or conning others for personal profit or pleasure
  3. impulsivity or failure to plan ahead
  4. irritability and aggressiveness, as indicated by repeated physical fights or assaults
  5. reckless disregard for safety of self or others
  6. consistent irresponsibility, as indicated by repeated failure to sustain consistent work behavior or honor financial obligations
  7. lack of remorse, as indicated by being indifferent to or rationalizing having hurt, mistreated, or stolen from another

Citing numerous examples over the course of the film, its creators contend that corporations exhibit all of these behaviours. Corporations are purely self-interested, their only goal being to maximize wealth for its shareholders. In the pursuit of that single-minded goal, they recklessly harm employees and customers, and damage the environment. They have no empathy nor remorse, refusing to accept responsibility for their actions.

Aside from this simple and eye-opening analogy of the corporation-as-pyschopath, what makes this documentary great is its refusal to fall into the trap of demonizing the people working for and running these corporations. Former CEO of Shell, Sir Mark Moody-Stuart, is interviewed in the film and is portrayed as a very human character who is quite concerned with the environment. Ray Anderson, CEO of carpet manufacturer Interface Corporation, describes his environmental epiphany regarding the destructive and unsustainable nature of modern capitalism. "The notion that we can take and take and take and take, waste and waste, without consequences, is driving the biosphere to destruction," Anderson says.

The problem, contends the film, is not the people. It's the system, which is set up to make good people do bad things. Laws actually impose a legal duty on corporate executives to make money for shareholders. If they decide to engage in acts of social responsibility at the expense of profits, they will most likely be sued by their shareholders.

Despite its fair treatment of CEO's, the film is definitely an activist film, and makes no pretense at being otherwise. The official website states how to "get involved". and is hosting a live debate on May 7 entitled, "What Should We Do With The Corporation? Should we Reform (e.g. reward good management, make better business practices "good business")? Should we Regulate (e.g. create more democratic governmental controls, hold corporations accountable)? Or should we Rewrite (change the legal constitution of every corporation, eradicating their "personhood" status)?

What do YOU think we should do?

Related Media:

"THE CORPORATION (DVD, 2004)": Amazon.com, Amazon.ca, Amazon.co.uk

"The CORPORATION: The Pathological Pursuit of Profit and Power", by Joel Bakan: Amazon.com, Amazon.ca, Amazon.co.uk, Amazon.fr

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Part two (none / 0) (#1)
by Drog (Canada) on Thu Apr 14, 2005 at 09:40:23 AM PST

I watched part two "Planet Inc." last night on TVO. Excellent as well. This episode "looks at the scope of commerce and the sophisticated, even covert, techniques marketers use to get their brands into our homes." It shows how corporations control media and how corporations want to essentially own everything on the planet.

They interviewed the investigative reporters from Fox News who tried to run the story on how the Monsanto rBGH (bovine growth hormone) was not as safe for human health as they said. But when Fox got threatening letters from Monsanto's lawyers, they freaked and told the reporters to not run the story, then to change the story. It went through eighty-some edits, I think. Eventually the reporters were fired for not agreeing to falsify the report. The FDA never admitted to its being pressured into accepting rBGH despite Canada and Europe not accepting it due to what they say is clear evidence that it makes the milk unsafe for public consumption.

They also look at the whole issue of corporations patenting every gene that they can figure out the purpose of. And corporations controlling water supplies. It's all very scary, in my opinion.

Strengthening long-term owners (none / 0) (#2)
by QuickFox (Sweden) on Fri Apr 15, 2005 at 09:12:23 AM PST

From your description I get the impression that the documentary concludes that all corporations are psychopathic because for each symptom there are many corporations showing that symptom. By that reasoning, all humans would be psychopathic, because for each symptom there are many humans who show that symptom.

To claim that one particular corporation is psychopathic you need to show that that particular corporation shows three or more symptoms.

I'm not denying that we have a very serious problem here. It is bad. And I'm quite sure there are lots of companies that do show three or more symptoms.

I just want to adjust the perspective.

It's also important to keep in mind what corporations are for, why they exist, what you can and what you can't expect of them. It isn't the goal that they show moral responsibility etc.

This is of course one of the main causes of the problems. Still, one must keep this in mind, else one can't see the problems and their causes clearly. Don't be surprised that corporations act the way they do, because it's to be expected, it's what they are.

But the fact that a company is organized as a corporation is not in itself a problem. Small family businesses are very often set up as corporations, at least here in Sweden they usually are. Then the owners are few, they know their staff and their clients, they feel personal responsibility and moral obligations, they plan for decades the way you do with a family business, and so on. Certainly there are lots of bad owners, but I get the impression that the vast majority of owners try to be very responsible. When mistakes occur, it seems to me that the cause is usually stupidity, incompetence, bad luck etc, far more often than it's a callous lack of caring for the fellow man. For such companies to be psychopathic you need psychopathic owners.

The problem that we see today appears because ownership is getting spread ever more thinly. When a large proportion of owners are daytraders and other short-term owners, whose only interest is a short-term increase in the value of their shares, they enforce an extreme short-term perspecitve that can be very destructive in the long run.

Paradoxically, as ownership becomes more democratic, in the sense that everyone can own a share and it's not limited to big capitalists, this reduces personal responsibility and accountability. The human caring that some people would expect as "the people" takes over does not appear. In fact it can't.

Maybe things would get better with reforms in the rules of shareholder's voting, designed to strengthen those shareholders who have a long perspective. As it is now, the basic rule is that you get one vote for each share that you own. Suppose arrangements were made so you could tie up your ownership for many years into the future (meaning you couldn't sell your tied-up shares during all those future years), and then you'd get one vote per share and year. If you buy only ten shares, but tie them up for ten years into the future, you get a hundred votes.

Next year, if you still wanted to have ten votes per share you'd have to push the end of the tie-up period one year forward, else you'd get nine votes per share. It should always be the number of future years.

This would dramatically strengthen the vote of those who care about the long-term perspective. With a long-term perspective you tend to care much more about the employees, the customers, the long-term reputation of the company, etc. Companies owning natural resources such as forests, mines, dams, oil wells etc would care much more for the environment, not just for reputation but to keep their investments profitable in a long perspective.

Note that parents investing for their children -- something many parents do -- could very well tie up the ownership for twenty years or so. Though every parent would usually be a small owner, together they'd be a strong influence.

This kind of investment for children's sake, made with children's future in mind, with votes greatly strengthened by multiplying shares by future years, could very well have a dramatic influence on company policies.

I don't know how you would tie up ownership in a legally binding way. I can see lots of problems with that. But if that can somehow be arranged, I think this way things might improve a lot. It wouldn't be perfect, but I'm pretty sure it would be much better.

-- Give a man a fish and he eats for one day. Teach him how to fish, and though he'll eat for a lifetime, he'll call you a miser for not giving him your fish.

Corporations (none / 0) (#3)
by you look like a nail (Canada) on Fri Apr 15, 2005 at 10:30:23 AM PST

From your description I get the impression that the documentary concludes that all corporations are psychopathic because for each symptom there are many corporations showing that symptom. By that reasoning, all humans would be psychopathic, because for each symptom there are many humans who show that symptom.

One important point here is not that corporations are exhibiting this behaviour, but that the legal framework surrounding corporations encourages this behaviour, and indeed makes this behaviour all but inevitable.  Some corporations will be exceptions to this behaviour, but the fact that they are exceptions and not the rule is a serious problem.

Paradoxically, as ownership becomes more democratic, in the sense that everyone can own a share and it's not limited to big capitalists, this reduces personal responsibility and accountability. The human caring that some people would expect as "the people" takes over does not appear. In fact it can't.

There is a principle in ethics and group psychology (whose name I can't recall, which prevents me from linking an article discussing it) which describes how groups of people can exhibit extremely antisocial behaviour when there is no specific delegated responsibility.  For example, there was an instance in which a woman was attacked in a neighbourhood and a number of people living in the area noticed it, but the woman bled to death before anyone called 911, because everybody assumed someone else would do it and so nobody bothered to get involved. Large corporate structures avoid personal responsibility in favour of devolved general responsibility, which directly leads to this sort of behaviour.

Maybe things would get better with reforms in the rules of shareholder's voting, designed to strengthen those shareholders who have a long perspective. As it is now, the basic rule is that you get one vote for each share that you own. Suppose arrangements were made so you could tie up your ownership for many years into the future (meaning you couldn't sell your tied-up shares during all those future years), and then you'd get one vote per share and year. If you buy only ten shares, but tie them up for ten years into the future, you get a hundred votes.

This is an interesting idea but I don't know how practical it is.  With large corporations, there are usually only a few holders of significant quantities of stock, and many of those holders are often corporations or similar organizations themselves.  Further, quite a bit of stock ownership is for purely financial reasons; someone putting money into a retirement fund managed by a financial group will end up owning various stocks, but probably isn't terribly aware of specifically which ones and would have a great deal of difficulty exercising voting rights to those stocks, if they were inclined to do so, which most people wouldn't be.  

Unfortunately, I expect that this rule would just end up adding another trick to the toolbag of large corporations competing with one another, and not benefit society at all.

I think that the big problem is one of personal responsibility.  If you want to encourage more socially conscious behaviour for corporations, then make individuals within that corporation personally responsible for the behaviour of the corporation.  If the behaviour of a corporation has personal legal ramifications for its controllers, ethics suddenly becomes a much more important factor.  The continued existence of a corporation should also be a legal subject for ethical violations; right now corporations have no economic incentive to think long term.  I think there needs to be one, bound into the law governing corporate creation, behaviour and regulation, targetting the continued viability of the corporation as a business enterprise directly.

-- Your Reality Check is in the mail.
[ Parent ]

A long perspective everywhere (none / 0) (#6)
by QuickFox (Sweden) on Sun Apr 17, 2005 at 07:14:04 PM PST

There is a principle in ethics and group psychology [...] which describes how groups of people can exhibit extremely antisocial behaviour

Lynching is another example of extremely antisocial group behaviour, more actively evil.

In my opinion another example, not actively evil in the same way, is the United States' ridiculously strong and self-destructive overreaction to terrorism.

there are usually only a few holders of significant quantities of stock, and many of those holders are often corporations or similar organizations themselves.

The corporations that own corporations have policies. If these policies have a long-term perspective, their investments will reflect this.

The corporations that own corporations have owners. Somewhere along the chain there are people owning shares. If everywhere those people who have a much longer perspective get a much stronger vote, this will have an influence. They'll vote for boards of directors that will keep the long-term perspective in mind, the company's policies will reflect the will of the owners, the investments of the company will have to follow the policies, and so on. It will propagate along the chain.

The law does not say that the company must sacrifice long-term profit for the sake of short-term profit. If the owners choose long-term profit the company must comply.

someone putting money into a retirement fund managed by a financial group will end up owning various stocks, but probably isn't terribly aware of specifically which ones [...]

At least here in Sweden there are plenty of so-called ethical funds, which have various ethical principles. For instance none of these funds will invest in tobacco companies, some will not invest in nuclear energy, some pay special attention to how workers are treated in the companies they invest in, and so on.

But indeed the problem is that lots of people people putting money in retirement funds will not care about such things if it'll cost them money. While they'll feel that others should be ethical -- for instance they'll be outraged if their employers treat them unfairly and if they hear of companies acting immorally -- they'll still feel that they themselves have every right to maximize their own profit, and won't feel any obligation to choose ethical funds if ethics interfere with profits.

Tragic.

Even so it seems to me that with my model they would look for a fund that maximizes their long-term profit. They'll want to have more resources when they retire, not day by day.

Unfortunately, I expect that this rule would just end up adding another trick to the toolbag of large corporations competing with one another, and not benefit society at all.

How would this happen?

-- Give a man a fish and he eats for one day. Teach him how to fish, and though he'll eat for a lifetime, he'll call you a miser for not giving him your fish.
[ Parent ]

Corporations (none / 0) (#7)
by you look like a nail (Canada) on Mon Apr 18, 2005 at 06:13:30 AM PST

In my opinion another example, not actively evil in the same way, is the United States' ridiculously strong and self-destructive overreaction to terrorism.

That's an interesting point.  I would argue, though, that the US reaction isn't a question of groups reacting irrationally, but rather is more an expression of the way that American culture works and the way that Americans (broad generalization alert) tend to think about the world.  As evidence I would point to the fact that an awful lot of Americans, when dealt with as individuals and not as part of the group, believe entirely in what their government is doing on their behalf.  I think that those of us in other cultures tend to look at it as being something bizarre or wrong, when in fact it's just really a forceful reminder for us that the culture differences between us are bigger than we might have realized.

At least here in Sweden there are plenty of so-called ethical funds, which have various ethical principles. For instance none of these funds will invest in tobacco companies, some will not invest in nuclear energy, some pay special attention to how workers are treated in the companies they invest in, and so on.

But indeed the problem is that lots of people people putting money in retirement funds will not care about such things if it'll cost them money.

Yep, we have ethical funds here as well.  I'd be interested to see what the numbers are for investment in those funds vs investment in other funds.  Your point about the triumph of performance over abstract ideals of ethical behaviour is very well taken.

Unfortunately, I expect that this rule would just end up adding another trick to the toolbag of large corporations competing with one another, and not benefit society at all.

How would this happen?

Large company A and large company B both hold 30% shares in large company C.  Large company A wants to buy out C, and B wants to stop them.  A 'vests' their shares in the long-term mode you've outlined and thereby multiplies their voting block size relative to B, allowing A to vote C in a direction favourable to its designs at B's expense.  For large company A, this long-term vesting becomes the price tag for its control move.  It gets the company, but has to live with being invested there for x years in the future.  That's not an unreasonable tradeoff.

-- Your Reality Check is in the mail.
[ Parent ]

That's the purpose (none / 0) (#8)
by QuickFox (Sweden) on Wed Apr 27, 2005 at 04:42:26 PM PST

A 'vests' their shares in the long-term mode you've outlined and thereby multiplies their voting block size relative to B, allowing A to vote C in a direction favourable to its designs at B's expense.

That's not a bug, it's a feature. Ownerships will often become long-term precisely through that process.

Takeovers also happen today, but without the long-term effect. For example, today A could offer unusually high prices for more stock.

However, in your example, if A can tie up its ownership, what's to stop B from doing the same? If they don't want to do that, seemingly they're short-term investors. Good riddance.

For large company A, this long-term vesting becomes the price tag for its control move.  It gets the company, but has to live with being invested there for x years in the future.  That's not an unreasonable tradeoff.

Yes, it has to live with this. This means that, in order to protect its investment, it has to think long-term. It must, it's the only way it can protect its investment.

Investment companies, whose business is to own and buy and sell other companies, will have to make long-term investments all the time if they want to stay in the game. And so they'll have to think long-term.

That's the purpose. It's the feature. I don't see how this particular consequence is a problem.

-- Give a man a fish and he eats for one day. Teach him how to fish, and though he'll eat for a lifetime, he'll call you a miser for not giving him your fish.
[ Parent ]

Corporate Mentality (none / 0) (#9)
by you look like a nail (Canada) on Thu Apr 28, 2005 at 06:35:16 AM PST

That's not a bug, it's a feature. Ownerships will often become long-term precisely through that process.

This doesn't make sense, though.  The problem you're trying to correct is that large corporations behave asocially and only think short-term.  To correct this, you're proposing to encourage them into long term business deals?  This isn't going to force them to think long term, it's just going to force the consequences of their short term thinking to be played out over the long term.

Remember: while it would make sense for them to respond to this change by thinking long-term, the whole problem is that they're not good with long term consequences.  Any consequence that isn't going to show up on their next two quarterly balance sheets isn't going to affect their behaviour.

If Corporation A wants Corporation C, it's possible that they're interested in taking it over and running it in an equitable, profitable and sustainable matter.  But if they are, then they aren't one of the corporations you're worried about so there's no point in trying to change their behaviour.  If they're not, then they're going to strip C of its assets and turn it into a holding company or tax write-off, in which state it can persist for the long term without doing them any harm.  They still see a short-term benefit, the long term positive impact of their activity doesn't change at all ... how has this helped?

Yes, it has to live with this. This means that, in order to protect its investment, it has to think long-term. It must, it's the only way it can protect its investment.

No, it just means that it has to balance the positive (getting what it wants from the company) against the negative (being saddled with a corporate investment over time).  This isn't going to turn corporations into model citizens, it's just going to alter the pattern of acquisitions a little.  There will be fewer acquisitions of marginal value -- and even then I'm not sure.  After big corporation A has bought C and stripped it of everything worth having, it transfers it to internal division D who is doing well and uses the losses C is now incurring, since it's been reduced to a worthless husk, as a tax deferrment.  Big corporation A has now found a way to be doubly rewarded for its short term thinking.

Investment companies, whose business is to own and buy and sell other companies, will have to make long-term investments all the time if they want to stay in the game. And so they'll have to think long-term.

That's the purpose. It's the feature. I don't see how this particular consequence is a problem.

This plan won't affect companies who buy other businesses as an investment because they won't buy any company which requires them to do this.  They need to show a short term profit, a long term profit might as well be no profit as far as shareholders and the market are concerned.  This behaviour will then be used by companies threatened by unwanted acquisition as a poison pill defence.

I don't think it'll have the effect you expect on investment firms, and I don't think it'll have much of an effect at all on other corporations, unfortunately.

-- Your Reality Check is in the mail.
[ Parent ]

Moral responsibility (none / 0) (#4)
by Drog (Canada) on Fri Apr 15, 2005 at 11:18:45 AM PST

It isn't the goal that they show moral responsibility

This was the point of the documentary -- that we have setup an institution (corporations) so powerful that they are arguably more influential than governments themselves, yet constructed them such that by their very nature they are not only supposed to show moral responsibility, but can most often not show it even if they wanted to.

For such companies to be psychopathic you need psychopathic owners.

No, this was another central point to the film -- that the owners themselves are most often not to blame. They are good people forced to do bad things because acting in a moral way is usually at odds with acting in a profitable way.

[ Parent ]

Small family businesses (none / 0) (#5)
by QuickFox (Sweden) on Sun Apr 17, 2005 at 07:05:40 PM PST

No, this was another central point to the film -- that the owners themselves are most often not to blame.

That part of my comment was about small family businesses, for example a married couple owning and running a small restaurant with two employees. The owners -- the married couple -- will act responsibly because they have no reason not to. They are the sole owners. No crowd of shareholders puts pressure on them to act against their conscience and maximize profit at any cost. They choose psychopathic actions only if they are psychopaths themselves.

The vast majority of corporations are such very small businesses. At least here in Sweden that's the case.

It's just a detail of semantics. The problem isn't corporations as such. The problem is big corporations where ownership is spread thinly.

The laws and rules work fine for small businesses that have few owners who are all real people, people who feel personal responsibility, but they don't work fine for the big ones where ownership is spread thinly.

This was the point of the documentary

Yes, and my point was that, strangely, lots of people don't know this, or maybe don't understand it, and therefore expect these corporations to behave differently, or believe that the problem doesn't exist.

If you know and understand what a corporation is you realize that these corporations need something to check them and rein them in. Expecting them to regulate themselves does not make much sense.

Lots of people seem to be unaware of this and expect things you can't expect of these corporations.

-- Give a man a fish and he eats for one day. Teach him how to fish, and though he'll eat for a lifetime, he'll call you a miser for not giving him your fish.
[ Parent ]

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shingles timberline shingles Review: The Corporation | 10 comments (10 topical, 0 hidden)

World Forum Poll

What should we do with corporations?
Reform.
Regulate.
Rewrite.
Other (tell us).
Nothing. The system is fine.

Votes: 9
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