Monday, 14 November 2011

Crisis of the Corporation: 1

Dr Michael Black introduces a series of articles on the mystery and crisis of the corporate relation.

The Occupy movement has gone global over the last several months, spreading from New York City to London, to every developed country on the planet. Despite the cultural diversity in which it is taking place and the variety of objectives expressed by the participants, every location seems to have the same focus: mitigation or destruction of the power of the corporation. Whether the language is that of economic equality, environmental sanity, political freedom, or personal fulfilment, the object of ire, fear, and reform always includes the institution of the corporation, not merely as a symbolic element in global destruction but as the primary instrument of individual repression and social division in modern life.

But what is a “corporation”? There is something mysterious at the heart of the corporation that eludes purely secular analysis. There are many forms of human organization we understand relatively well: partnerships, clubs, nation states, and so on. The distinguishing feature of a corporation – a limited liability company, for example – is that it somehow possesses an identity, a life, independent of its members. It can act through its members, whereas in the other cases it is the members who act through the association, either individually or collectively. This is expressed in law in a variety of ways, but the most important is the rule that the corporation has its own interests, values, or criteria of choice, which are not those of its members. This is universally accepted without
question. It is the formal method by which dominium (management) is separated from usufructus (benefit) and is the essential mark of the corporate relation.

The unavoidable question is therefore what is the measure of benefit for this independent entity? All corporate members have a responsibility for answering this question, in fact for agreeing answers to this question. Thus there is a relationship of mutual submission required among all members of the corporate entity. This is the essence of its strangeness and its genius. When that essence is forgotten or undermined the corporation becomes a social monster. That is what has happened in the modern world.

What the protestors have in common is their hatred of a particular social relationship, a relationship of exploitation. The corporation is responsible for the exploitation of employees by employers; of the environment, though the creation of cost “externalities” which must be paid for by others in the short-term economic interest of the corporation; of national governments, which are forced to compete in a regulatory race to the bottom in order to keep in corporate favour; of customers and suppliers, who do not have the economic power to resist corporate demands for inhumane prices and unsustainable conditions; of the political system, through intense lobbying and funding for candidates; of those whose capital is physical, particularly those whose only capital is their own bodies, by the owners of financial capital; and of the global legal system, through the formulation and enactment of legislation favourable to the maintenance of corporate power.

Like the institution of the State, which frequently has transformed its function from one of ensuring justice for its citizens to one of exercising the grossest injustice, the institution of the corporation has been deformed from one that promotes the practice of communal love to one that rewards the practices of hate: careerism, self-serving rationalization, and unbounded greed. If the heart of our society is troubled, it is due in large measure to this deep-seated corruption of the corporate relationship, without which it is unlikely that any other institution in modern society can perform its true role.

Recovery of the authentic corporate relationship is in the first instance a spiritual task, which can only be understood theologically. The very essence of this relationship, the separation of managerial control from beneficial interest, is an ancient theological idea which has been refined and developed over millennia. This separation implies and demands not the power of authority but the power of submission – of seniors to juniors, of strong to weak, of articulate to inarticulate, of rights to needs, of self-interest to the interests of others, and ultimately to the interests of the divine. Power does not flow downward as if from a central source; it is created and recreated precisely in the recognition and literal incorporation of the interests of others. It is the power of the Shekinah in ancient Israel, and the Trinity in Christian doctrine – the divine exemplar of self-giving love in its relationship with creation.

Such a relationship can never be adequately captured in law or enforced through regulatory action. (In the words of C.S. Lewis, “You cannot make men good by law: and without good men you cannot have a good society.”) Ultimately the problem is not one of formulating law at all, but of cultivating the essential habits of the corporate relationship: authentic humility demonstrated in the public renunciation of self-interest; uncommon courage in forthrightly articulating the unique criterion of the corporate interest; the creative ability to recognize this criterion as a uniting force among competing alternatives; the willingness to be judged in terms of these primary corporate tasks by others who share in the corporate relationship. This is the essential rationale of the corporate relation.

So corporate reform is a critical part of any programme for social improvement. But this reform cannot be brought about by legislation or regulation. It is a reform that must start with the heart not the head, with the spirit not the flesh, and with a suspension of the rationale of hierarchy and commercial thinking. Ultimately the corporation is about the relationship among human beings. Re-discovering what this relationship can be is deeply personal.

Dr Michael Black is Research Fellow and Librarian at Blackfriars Hall, Oxford. He was formerly with McKinsey & Co., later Managing Director of the American Stock Exchange International, co-founder of Corporate Performance Systems and Senior Vice-President of CSC Index, and Director of Corporate Development at Lotus Cars.

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