|WHO'S IN CHARGE HERE by Andrew Bard
The law might treat corporations as if they were persons, but they are really just the instruments of real, flesh-and-blood people. Right? Not necessarily. Take Exxon. (Please!) Who owns Exxon? The answer, in a way, is both nobody and everybody. It is "nobody" in that no single person owns as much as 5% of the company. Exxon, the lineal descendent of Rockefeller's Standard Oil, is nobody's baby. It is "everybody" in that more than a third of the company is owned by institutions like pension funds. There is a good chance, if you are a working American, that you own a little bit of Exxon. The rest of the stock is directly owned by countless individuals all over the country. So it might be said that "we" own Exxon. The polls show that Americans care deeply about the environment, and that they are willing to make economic sacrifices to protect it. Doubtless Exxon's owners are richer than a purely representative sample, but I would wager that the owners of Exxon are as concerned about the environment as Americans generally. Maybe even moreso, since the environmental movement tends to be stronger in our wealthier classes. But whatever the environmental values of Exxon's owners as a group, for practical purposes the owners are essentially impotent to impress upon "their" corporation the imprint of their values. Though the stockholders theoretically have ultimate control of their company, this power almost never has any practical meaning. Stockholder initiatives virtually never pass, for it is hardly possible to get the attention of the innumerable stockholders and to weld them together as an organized force. Power devolves to some proxy committee appointed by management. Only the takeover game --in which someone commanding enormous resources goes over the head of the managers to make the stockholders an offer they cannot refuse-- can challenge the impregnability of management. Who runs the company? A group of managers that can virtually appoint the Board and, except under extraordinary circumstances, can perpetuate itself indefinitely. Does this mean that we can hope that Exxon will act with genuine environmental concern, if only the management happens to be made up of people who take such values to heart? Such a hope is likely to be in vain for two main reasons.
The modern corporation is therefore like a giant machine, utilizing the energy and creativity of human beings, but largely immune to the intrusion of the full range of our human values.
First, management speaks of its responsibility to stockholders, but construes it in the narrowest of terms: to make stockholders richer. As human beings, the stockholders may have other concerns as well. Given a choice, they might be willing to give up a dollar in earnings to make all of Exxon's tankers double-hulled. But these concerns and that willingness have no way of expressing themselves. As the stockholders are reduced to their pecuniary interests, the bottom line is reduced to the bottom line. Thus, while privately-owned corporations often make genuine sacrifices for the sake of their communities, the public-spiritedness of our giant publicly-traded companies tends to be a form of public relations. Not so much real giving as a form of investment. The second reason it is vain to hope management might represent the full range of our human concerns derives from the self-perpetuating nature of the management system. The kind of people who rise to the top of these industrial bureaucracies are hardly a random cross-section of humanity. Not only does the system select a particular kind of man --willing to sacrifice a great deal to win-- but it also shapes those it selects, socializing them into a corporate culture where profits are the way score is kept. Believing winning is the only thing, these corporations not only refuse to behave responsibily in unilateral ways that might hamper their competitiveness. They also typically lobby strenuously against laws that would make everyone, including their competitors, clean up their smokestacks, make their cars safer, build tankers more soundly, etc. The modern corporation is therefore like a giant machine, utilizing the energy and creativity of human beings, but largely immune to the intrusion of the full range of our human values. Now comes a dramatization of this confrontation between our humane values and our profit-making corporate machine. Later this month in Houston (April 25), the Exxon Corporation will hold its annual meeting. Stockholders have managed to place on the agenda a half-dozen initiatives to have the corpoation "exhibit commitment to the environment," to place on its board representatives of environmental interests, to work to reduce the company's emission of CO2, etc. The proposals are, by and large, gestures rather than binding policies. But they are gestures that would be welcome from a company that, in the past year, spilled 11 million gallons of oil into Alaskan waters and that, in its inadequate clean-up effort, showed more contempt than remorse. (Not to mention Exxon's disastrous fire in Louisiana and its other big spill in New York harbor.) However fitting such gestures would be, Exxon's Board is recommending they all be rejected. "Our environmental policies are fine" is the gist of their rebuttals. Barring a miracle, the Board will prevail. Valdez or no Valdez, it's business as usual. The nation's cry of the heart cannot penetrate the inner sanctum of the corporate machine. The machine is inexorable because we are so fragmented. If enough of us could organize as stockholders, the corporation could be compelled to change directions. If enough of us could organize as consumers to boycott Exxon, our cry would be in a language even the Board could understand. If enough of us could organize as voters, the rules of the economic game could be strengthened and be more vigorously enforced to protect this planet. But for the many to unify is always a rare event. And so these self-perpetuating organizations of vast power are free to roll on according to their own logic-- our creations but beyond our effective control. We're Exxon. We're doing just fine.
Andrew Schmookler is working on his next book, The Illusion of Choice: How the Market Economy Shapes Our Destiny.