Arguments Against Corporate Power in Joel Bakans The Corporation - Book Report/Review Example

Arguments against Corporate power in Joel Bakan’s book The Corporation XIAOMENG SUN (211904919) AP/SOSC 1349 Introduction to Business and Society (ESL) Kean D.Birch Robin Verrall 14/02/2014 Arguments against Corporate power in Joel Bakan’s book The Corporation The book The Corporation: The Pathological Pursuit of Profit and Power, by Joel Bakan, is about the corporate world as being pathological institution that is portrayed as a person that dangerously overpowers people and societies through actions which can be considered illegal and immoral. However, an objective critical look at this book shows that there are many shortcomings in the book; the author of the book failed to give an unbiased view of the corporation’s purpose. This paper critically analyzes the arguments against corporate power in the Bakan’s book. The paper aims at vitiating the Bakan’s arguments and showing that corporations are not as tyrannical as Bakan argues. The main theses on which Bakan builds his argument is the claim that, the modern form and structure of corporations enables the corporations to exploit the members of the society in which the corporations exists, and also the shareholders of the corporation. To arrive at this conclusion, Bakan traces the history of corporations, right from the first corporation, South Sea Corporation, formed in the late seventeenth century in USA up to the corporations in the early twentieth century. In the first chapter of his book, Bakan contends that the corporations in the seventeenth and the early eighteenth century were under strict statutory restrictions. Bakan then goes ahead to explain the rapid change in the state’s control of corporations that characterize the modern ultra-powerful corporations. Bakan argues that the need for capital to finance railways in the United States and also in the United Kingdom led to the formation of limited liabilities corporations in USA and in UK. This move was aimed at attracting investors into providing capital, through corporations, for the constructions of railways. Also, both the US and the UK passed favourable laws on state-corporation relationships during this period of time. To cap it all, Bakan points to the USA Supreme Court ruling that recognized corporations as persons, and gave them individual rights. Bakan argues that this ruling marked end the of the state’s control of corporations, since the corporations now were regarded as an individual, and the corporations therefore had legal rights upon which the state could not infringe. Bakan is of the view that it is the misuse of this autonomy and legal rights by the corporations that turned the modern day corporations into merciless tyrannies. In nutshell, these are the main ideas upon which Bakan builds his arguments on modern day corporation as a tyrannical psychopath. But a critical analysis of the arguments expounded by Bakan in support of his views in this book will show that Bakan’s arguments are flawed and incorrect. To begin with, a critical analysis of Bakan’s argument that corporations have tyrannical legal power shows that Bakan is wrong on this point. As we have just seen, Bakan’s claim that corporations have tyrannical legal powers hinges on the fact that corporations are legally recognized as individual persons, and they therefore have legal rights that the state cannot take away from them. Corporations are indeed legally recognized as autonomous institutions, but this does not mean that the corporations are free to exploit people (Bradshaw, 1981). Just as individual persons have basic inalienable rights but they are still under statutory laws, corporations also are regulated by statutory laws and they must operate according to the constitution of the state where they operate. The legal rights and the autonomy granted to corporations by the state revolve around the liability of the shareholders in the company- i.e. the loss incurred by the company cannot lead to loss of personal properties by the investors other than what the investors have put into the company. On other matters however, corporations must strictly adhere to the statutory laws and any form of breaking of the statutory laws can lead to prosecution of the corporation. Bakan’s claim therefore, that corporations have legal power to exploit their shareholders or the members of the state in which they operate is not true. The laws governing state-corporation are not made by the corporations but by the state, corporations therefore have no powers of their own, other than the legal power that they have been given by the state. Bakan therefore is wrong on this issue. The second issue raised by Bakan in relation to the corporation power and autonomy is that there is need to overhaul the structure of the modern corporations because, in his view, on matters of aberration and in an event of a conflict between state and corporation, the corporation will always have an upper hand because of the legal autonomous powers that corporations have been granted by the state. This view again is obviously untrue because the legal rights given by the state to the corporations are limited, and do not make corporations uncontrollable by the state. The legal rights that corporations are granted by the state are limited and meant to ensure that corporations run well, there is no way therefore these limited rights can prevent state from controlling corporations. The corporation of course can indirectly influence the making of such laws through lobbying, but never directly. Bakan’s view on this issue therefore is not true. From the above analysis of Bakan’s arguments in support of his claim that corporations have tyrannical powers, it is crystal clear that Bakan’s symbolism of corporation as a psychopathic person exercising his tyrannical powers over the society is a misleading symbolism. This is because, first of all, there is no way a corporation can operate as a psychopathic person because they are regulated by the state in their various operations. The freedom given by the state to the corporation is never absolute- Corporation should always operate within the dictates of the constitution of the states where they operate (Ronald, 2012). Corporations can only act as a psychopathic person if the law of the state in which they operate allows them to do so; otherwise it would be illegal for the corporations to act so. Also, as we shall see later in this paper, it is not true that corporations always operate like psychopathic person in pursuit of profits. Many corporations impact positively on the lives of their shareholders and in the lives of the persons in the communities in which they operate. This therefore shows that Bakan’s generalization of corporations as being psychopathic person is unfair and untrue. Of course there are some wayward corporations that, out of disregard for the laws of the hosting country, may act as a psychopathic person in pursuit of profits, but it is not all corporations that act in this manner. Bakan’s imagery therefore of corporation as a psychopathic person is not apt, the imagery is misleading. Bakan is wrong therefore on this issue. Besides using the powerful imagery of a psychopathic person in demonising the corporations for being tyrannical and insensitive to the needs and the interests of other people, Bakan emphasises further the point that corporations are driven by self-interest and that they don’t care about the interests of other people. But contrary to this view, as Banerjee argues in his book, Corporate Social Responsibility: The Good, the Bad and the Ugly, a critical examination of corporations and political bodies through research provide an insight on how large corporations and Labour Unions working with political bodies tend to work very closely and political bodies may in return provide protection to them creating triangle relationship where there are players, lobbyist, corporations, and congressional committees. This fact therefore shows that corporations aren’t as callous and insensitive as. Benerjee says the following on state-corporation relation, “big corporations work closely with the Labour Unions and political organisations, and the government for that matter, for the good of the state where they operate” (Benerjee, 2009). Besides, through corporate social responsibility requirement, many corporations impact positively on the lives of the members of the society, for instance through offering education scholarships to children from poor families. If corporations were as insensitive as Bakan wants us to believe, then they would not collaborate with the government and the Labour Unions for the common good of all the members of the state, also, corporations would not honour the corporate social responsibility demand. Bakan’s argument on this view therefore is flawed. Another point made by Bakan in castigating the corporations for being tyrannical in their relationship with the members of the state is that corporations are built to externalize their own costs. These externalities are basically those costs which harm the environment and standard of living. Bakan makes a compelling argument in chapter three of this book on the issue of externalizing costs. Bakan argues that corporations are externalising machines that wrecks havoc on almost all aspects of our life, i.e. corporation activities impact negatively on our environment, health and even our wages (Bakan, 2004). Bakan argues that corporations make all these destructions on our life with impunity. Some of the terms of externalities that Bakan talks about include, Production, transportation which may be used to increase profits, or used in retailing, use or disposal from class to the other. However, a critical view of Bakan’s argument against corporations externalizing their activities shows that externalizing of activities is not after all a bad thing and that it helps in distribution of wealth in a society. This is because through externalizing its activities, the corporation gives the members of the public an opportunity to participate in the corporations activities and therefore be able to benefit from the proceeds of the corporation (United Nations, 2004). Limited liability corporations give the members of the public an opportunity to invest in the corporations, and through these kinds of investments the poor people are able to have a share in the super-profits made by big corporations. Were it not for externalizing their operations, the poor people would not be able to invest in the corporations. For this reason, although of course there are some negative sides of corporation externalizing its operations, there is also big advantage of a corporation externalizing its operations. The negative effects of a corporation externalizing its operations can be dealt with through effective statutory legislations that regulate the operations of corporations, (Kevin, 2004, pg.89). Bakan’s criticism of externalization of operations by a corporation therefore is not justifiable because the advantages of the externalization of operations by a corporation far outweigh the disadvantages of the same. Related with the issue of externalization of activities by corporations is the issue of cost-benefit analysis in determining the safety measure to take in a given situation. On this issue, Bakan contend that the use of cost-benefit analysis by corporations in determining the kind security measure to take is immoral and compromises the security of the stakeholders of the corporation and also the security of the other members of the whole society. Bakan argues that this is because the security of the people should override any other interest. Bakan therefore concludes that the cost-benefit method of determining the security measure to be taken by a corporation is an exploitative method and should not be used. A critical analysis of this view however shows that, the cost-benefit method of determining the type of security measure to be taken by a corporation is not immoral and exploitative as Bakan argues. This is because one of the main objectives of any corporation, just like any other business organisation is to make profit. For this reason therefore, corporations cannot fail to use the method of cost-benefit in determining the security measure to adopt in its operations. Failure to use this method can lead to massive losses to the corporation, and this may ultimately lead to the collapse of the corporation. Bakan’s criticism of corporations’ use of cost-benefit analysis method in determining the security measure to take is therefore unjustified on this ground. Although the security of people also is of utmost importance, a corporation however cannot avoid using the cost-benefit analysis method in determining the kind of security measure to adopt. The use of cost-benefit analysis method however does not mean compromising the security of the shareholders of the corporation, after using the cost-benefit method in analysing the best security measure to adopt, the corporation should ensure that it has adopted the most effective measure that guarantees the security of the people (Kevin, 2004). Another point raised by Bakan in criticising the corporations for being tyrannical in their dealings with their shareholders and the other members of the state is that corporations have immense power over the society in which they operate, and that before corporations, the society is helpless. In supporting this view, Bakan contends that in the global corporate world, liberalization reigns and that there are no statutory rules governing the operations of corporations. Also, Bakan argues that the corporations that take responsibility for their actions do so merely because of media coverage so as to protect their image, but not because of any statutory requirement. Again, Bakan contend that the immergence of public enterprises and NGOs has made some corporations to be more accountable because the corporations want to protect their image; many corporations act responsibly because they are afraid of public enterprise organisations and NGOs having a negative image of them, ultimately making the whole society to have a negative image of them. As we saw above, it is not true that corporations yield immense legal power over the society. Corporations do not make laws of their own and they should strictly adhere to statutory regulations of the state where they operate. Bakan therefore is not right when he says that in the corporate world there are no laws regulating corporate operations. There are indeed regulations in every country regulating the operations of corporations, but because corporations are so powerful in terms of resources, money, corporations are able to influence the law makers to relax some regulations, thus having their way (Salamon & Siegfried, 1977, pg, 114). But it is not true that corporations have no corporate regulating laws. Again, although of course the media, the NGOs and the other public enterprises can make some wayward corporations to act responsibly, out of fear for negative public image, it is not true that the fear of public image is the only thing that makes corporations to act responsibly. Many corporations act responsibly because of the statutory regulations guiding them. Without statutory regulations guiding the operations of corporations, the rate of corporations’ exploitation of the people would be very high. It is not true therefore, as Bakan argures, that corporations yield immense power over the societies in which they operate. Another salient point made by Bakan in his criticism of corporation power is that corporations do not use the democratic method in their operations and in their relationship with the state. What Bakan means on this issue is that corporations use undemocratic methods in dealing with the state and in their operations. For instance, corporations use lobbying and donations to influence the state to grant them their wishes, e.g. to have the state relax some of the statutory regulations on corporation operations (Ronald, 2012). Also, corporations do not use democratic method for instance in fixing the prices of their products; corporations also do not elect their leaders democratically. For this reason, Bakan criticises corporations for being undemocratic in their dealings. A critical analysis of Bakans criticism of corporations for being undemocratic shows that Bakan’s argument is erroneous. This is because, first, there is nothing wrong with a corporation lobbying to have its way. As long as the corporation does not force the state to grant its wishes, the corporation is justified in lobbying and influencing the government to grant its wishes. The government, having been given the mandate by the people to ensure that the interest of the people is upheld, should ensure that it only grants corporations the wishes that do not jeopardize the interest of the people. Again, since corporations are profit-oriented, in electing their leaders they should use whatever method that serves them better and ensures that the corporation prospers and makes good profits. These facts therefore show that Bakan’s arguments on corporations for being undemocratic are erroneous. In conclusion, a critical analysis of the Bakan’s criticism of the corporate power shows that Bakan wasn’t only against the corporation power, but also against the capitalist system of economy. A critical analysis of the Bakan’s argument shows that the arguments revolves around the super-profits that the corporations make and the economic power that goes with it, but not the legal power that the corporations have. All the arguments that Bakan adduced in support of his argument that corporations have power are erroneous, this therefore indicates that what Bakan is against is the financial power that corporations have. References Bakan, J (2004).The Corporation: The Pathological Pursuit of Profit and Power. USA: Free Press Banerjee, S. B. (2009). Corporate Social Responsibility: The Good, the Bad and the Ugly. Northampton: Edward Elgar Publishing. Bradshaw, T. F., & Vogel, D. (1981).Corporations and their critics: issues and answers to the problems of corporate social responsibility. New York: McGraw-Hill Kevin, F. (2004). Corporate Power and Social Policy in a Global Economy: British Welfare Under the Influence. Bristol: The Policy Press. Ronald W, C. (2012). Corporate Power and Globalization in US Foreign Policy. New York: Routledge. Salamon, L. M., & Siegfried, J. J. (1977). Economic Power and Political Influence: The impact of Industry Structure on Public Policy. The American Political Science Review , 71 (3), 1026-1043. United Nations. (2004). Disclosure of Impact of Corporations on Society. New York: United Nations. Read More