BOOK REVIEW
The Corporation: The Pathological Pursuit of Profit and Power, by Joel Bakan.
Constable and Robinson, October 2004.

With the possible exception of government, the institutions that have the greatest influences on our daily lives in developed countries are large corporations. In the US, it is possible to argue that there is now a sort of confusion between the roles of government and those of corporations - even to the point where people have become muddled about the boundaries between their roles as citizens and those as consumers.

The Corporation, written by Joel Bakan, who is Professor of Law at the University of British Columbia, is a well written and accessible account of the rise and rise of the entity the corporation from its early days to the full flowering of its global power. It is also a story of how one of economic mans' great innovations, an institution that could raise large sums of capital and deploy them to create products and services on a scale previously unimaginable, has run out of control. In this sense, the book is a kind of chronicle of how power and wealth have corrupted organisations that were set up to benefit mankind and have ended up as amoral institutions, driven by the pursuit of profit and power.

The central argument in the book is that the corporation has managed over time to shake off many of the legal constraints that bound it, and with that, any compelling need to behave as a moral entity. The age of market forces and deregulation, especially in the Anglo-Saxon world, has benefited corporations immensely, to the point that the power of really large global corporations probably exceeds that of any one national government.

Bakan argues that the law has granted the corporation the status of a 'person' and as such, it should be recognised for what it is - a psychopath. The book reveals that the corporation has a legally defined mandate to pursue its own self-interest regardless of the often harmful consequences it might cause to others. Examples of corporate acts include the killing of thousands by Union Carbide at Bhopal, the potential ravaging of the Alaskan ecology by BP, numberless acts of corruption and swindling of customers by the financial services industry, the exploitation of poor people in the developing world in sweatshops, and smuggling cheap cigarettes to developing countries. The list can go on and on, and we haven't even begun to consider the behaviour of many corporations towards their employees.

At the centre of the argument is the overriding duty of companies to serve the interests of their shareholders by maximising their profits. Bakan argues that campaigns by companies to be good 'corporate citizens' are in reality only window dressing, to the extent that Corporate Social Responsibility generally stops short of the boundary of actually reducing profits. He cites BP, often regarded as an example of enlightened corporate behaviour, as ignoring the impacts of its drilling and exploitation of Alaskan oil, because curtailment would damage profits.

Two points arising from this book struck us as particularly alarming: First, the influence of large corporations on politicians and the political process in the United States. It is now undoubtedly the case that under current rules, no politician can be elected in the US without corporate sponsorship - and both candidates in the recent presidential election were heavily subsidised by big business - as were candidates for Congress and the Senate, as well as more local posts. It is equally clear that corporate support comes with strings, if not ropes, attached. So President Bush is heavily in hock to big oil, the media and many other industries, whose interests will certainly diverge, sometime, somewhere, from those of citizens at large.

The UK is not immune to the pressure of large corporations and wealthy individuals that own some of them, despite the fact that the rules governing party contributions and political advertising are quite restrictive. Many top politicians have close relationships with companies and wealthy individuals - and the rewards to come from directorships, advisory positions and the like can be lavish for retired senior politicians. This makes mainstream politicians remarkably timid when it comes to restricting the activities of corporations and their leaders.

The second point is more worrying still. Large corporations in the US have been agitating for what they describe as a 'partnership' relationship with government to ensure that regulatory regimes meet the objectives of citizens and corporations. Bakan regards this development as deeply subversive, as the only institution with the legitimate right to represent the interests of citizens is government - and any confusion of the roles of government and corporations could be the thin end of a very sinister wedge.

We may have reached the point where the greatest hope of reining in the power of corporations lies not with national governments, certainly not those of smallish, Anglo-Saxon countries like Britain, but with multi-national institutions like the EU. Certainly, British governments must be very aware that it is quite possible for large financial institutions to migrate with their capital to centres other than London. This may help to explain the timid behaviour of regulators like the Financial Services Authority.

Bakan rightly makes a distinction between the values and behaviour of many individuals who work for large corporations and those of the corporations themselves. Most top managers that we have known are not bad people, but it is still possible for individuals to sanction acts by their companies that they would not if they were acting as individuals. A very good example concerns an ex-colleague who is now a passionate opponent of an ecologically dubious development that he pursued with vigour when he was a top executive.
As an ex-director of large public companies, the author knows how easy it can be to blur the differences between personal values and the actions of the corporations for which one works.

A criticism of the book might be that it does not adequately explore the relationships between investors and the financial markets and those who run large corporations. The book gives the impression that corporations are more autonomous than they are in reality, and underplays the impacts of investors' needs on corporate behaviour. If this is so, the most powerful corporations of all are the huge investment banks that dominate the financial markets and which have been the subject to much criticism for their often corrupt and dishonest behaviour. Very scary!

In fact, it is possible to speculate that many corporations would pursue more socially responsible agendas if it were not for the relentless pressures on their top managers to maximise profits coming from the investment markets. Maybe we are witnessing another very black consequence of the notion that corporations' primary purposes are to maximise shareholders' wealth. Maybe the victims of sweat shops are simply slaves to 'shareholder' value - without the real shareholders knowing about it. It would be interesting also to speculate about the attitudes of Wall Street institutions if the Union Carbide plant had been situated in the financial district of New York rather than Bhopal, India.

'The Corporation' is the basis of a documentary film of the same name. Colleagues who have seen the film have commented that it goes over the top in its criticism of corporations. If this is so, it is a pity, because the central theses of the book merit more consideration.

In the spirit of further exploration of the themes in The Corporation, we have jumped at the offer of a colleague who works as a business psychology consultant to write an essay on their experiences of working as a trader and banker in London and New York. Our friend says that her period of employment has given her rich experience not only of the corporate values and personalities of financial services companies in regard to their customers, but also as employers. Her experience and psychology Master's equips her well to comment on the psycho-pathology of the financial services industry, so we await her contribution with eager anticipation.

Further interest might come from more conversation with a free-lance psychologist who has been assessing investment bankers. He commented that it was almost possible to write one assessment that would adequately describe the profiles of the six most recent candidates that he has just assessed, so markedly similar are their psychological characteristics and values. A whole industrial sector full of clones! Just think how hard it would be to really bring about change in the behaviour of an industry manned by people like this! Watch this space!