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Review of The Corporation, by Joel Bakan

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I have just finished The Corporation, a book by University of British Columbia law professor Joel Bakan. It is an excellent book, very readable and accessible, and I recommend it to all who are interested in the state of our world. The book has also been made into an award winning documentary.

The basic premise of the book is that, as the corporate legal entity under present law is considered a person, then that person, based upon it’s personality and characteristics, is a psychopath.

Bakan bases this viewpoint on a number of things but putting the question to a Psychologist and expert on psychosis, the assessment was as follows. The Corporation is:

Irresponsible – it puts others at risk in pursuit of its own goals.
Manipulative – it manipulates people an opinion in pursuit of its goals
Grandiose – it always insisting that it is the best
Reckless – it refuses to accept responsibility for its actions
Remorseless – it cannot feel remorse
Superficial – it relates to others always in a way that does not reflect their true selves
Put this all together, and you have a psychopath.

An important point to make at this stage is that the argument that Bakan makes in the book is that not necessarily are all corporations psychopaths, but that it is the very organizational structure of the corporation which makes it a psychopath. This quite simply is based on the fact that the corporation’s single and solitary goal is to create profit and increase share value, all other concerns are secondary.

The sole responsibility of the officers of the corporation is to serve the interests of the shareholders, and most often the shareholders interest is to increase their share value. Altruistic desires and social responsibility do not increase the corporation’s bottom line, necessarily, and thus such actions are in effect banned for the officers that run the companies, whether these officers may desire to be more socially responsible or not.

An example that Bakan uses is the story of Anita Roddick, founder of the Body Shop. Roddick always refused to separate her personal values from her business, indeed, that is what made the Body Shop different; that it was a kindlier, gentler corporation. It was, and Roddick was extremely successful using this business model. Then in 1982 an initial public offering of Body Shop stock was floated on the London Stock Exchange; the money raised was needed to grow the business. Later, in the 1990’s the company began to have troubles, and came under pressure from stockholders to revise it’s business model. Outside managers were brought in to head the company and it was reorganized to make it more efficient. Roddick to her credit responded to the changes by working hard to maintain the companies progressive values and programs. Things came to head when during the Seattle protests against the WTO, Roddick wanted the Body Shop to take a public stand against the meeting, but the company leadership refused. “Roddick then realized that her once maverick, eccentric, unusual Body Shop had become all to usual” Bakan writes, she now looks at the initial stock offering as a “pact with the devil”. The underlying moral to this story is how no matter how altruistic the goals of the executive they must always ultimately succumb to the will of the corporation goals of increasing shareholder value and the bottom line.

I do not believe that all corporations are bad, for some I think that their social responsibility is truthful, most often this is the case when social responsibility happens to also be good for the bottom line. An example is Toyota and their spearheading of the drive to get more hybrid vehicles on the road, and success in engineering the technology to make that possible. Yes, Toyota serves to gain quite a bit by selling hybrid cars and licensing the technology to other automakers, but spearheading such a new technology (new at least for the marketplace, if not for engineering) is a great risk for a company, with quite a lot of capital needed to back up those goals. I still believe that corporate officers can be visionaries and socially responsible. On the other hand, I also believe that some corporations are Hannibal Lecter incarnate.

So what to do? Bakan doesn’t propose a world without corporations as some on the far left might advocate. He admits that corporations are here to stay, at least for a long time. But an important point that he makes is that the corporation is given its existence by laws, and that same law which creates the corporation can also dissolve it. And as well, as it is the law which dictates the structure of the corporation, and what the corporation can or cannot legally do, through political action to alter those laws the people can work to attempt to control the power of the corporation, at least in a functioning democracy.

In the end the book advocates a set of approaches for control the Frankenstein we have created. First is improve the regulatory system; give government more teeth in order to regulate the corporation to protect citizens, communities and the environment, next is strengthen political democracy; elections should be given back to the public and corporate manipulation of politicians should be curbed, next create a robust public sphere; we should think twice before the march down the road of privatization, some institutions should be protected from the potential vices of the capitalist system, and finally, challenge international neoliberalism; nations should work together to change the ideologies of international institutions such as the WTO and World Bank away from market fundamentalism.

While I may not believe in everything that the book advocates, I do believe in much of it. And Bakan uses a number of interesting and moving stories to present his case. I very much recommend the book; the subject matter is ever more important in the wake of somewhat recent corporate scandals, and the frightening power of the corporation internationally.

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  • http://w6daily.winn.com/ Phillip Winn

    I haven’t even read the book, and already I’m agreeing with the way you’ve described it. A corporation acts like no sane person, and publicly-traded corporations even less so.

    It’s always been amazing to me how a group of essentially-honest people can form a company and collectively make incredibly poor decisions that none would make individually.

    Thanks for what sounds like a balanced review of an interesting book.

  • http://users.abac.com/homer John St.John

    I have ordered the corporation and should read it before offering a review.
    He is correct that the corporation is a Frankenstein monster, but I do not see any way that it can be reformed any more than Frankensteins creation could have been.

    Issac Asimov’s robot had the prime directive–“do not harm a human being”. The unstated prime directive of the corporation is “the bottom line before anything”. It was created to avoid investor liability by separating ownership from liability. This can not be done under common law. If you own a pit bull who eats a neighbors child; you are liable and not the mutt.

  • http://users.abac.com/homer John St.John

    The essential problem of the corporation is that it is not owned. Nobody owns a corporation: neither the controlling interests, nor the ordinary portfolio owner. Common stock does not give the stockholder any ownership. He is actually a limited partner and is entitled to a share of the profits. A limited partner is not allowed to interfere in any way with the running of the business.

    Everyone in a corporation is an employee and the employee selected by the Board of Directors to take liability is the CEO. That is why CEOs are paid so well and why a good CEO like Chainsaw Al is a sociopath.

    Corporations should not be taken over by the government; they should be taken by their employees as the Argentine pottery workers did. The corporation should become a cooperative. This would solve the problem of ownership and no one would get hurt. The investors would be investors,as they are anyway, and the owners would be the workers.

    The Mondragon coop in the Basque sector of Spain has been manufacturing machine tools and appliances for twenty years and even have their own banks. They are running into trouble now because of the corporation outsourcing for cheap labor and raw materials.

    We must turn a predatory organization into a social organization.

  • sydney

    Excellent book review!

    I agree 100% with Bakan’s view of Corporations. I also agree with his view that Corporations are here to stay.

    However, why is that Americans are so opposed to those approaches that Bakan outlines for controlling the psychopathic nature of corporations?

    What have we to gain by controlling them? What have we to lose by not controlling them? Isn’t the choice obvious?

    The bush Government has done more than most administrations to REMOVE these controls. Americans don’t seem to care.

    It’s a major socialist belief in Canada that Capitalism needs to be controlled to a certain degree, and that controlling corporations is central to this process.

    What does Dave Nalle and some of the other corporate whores have to say about this :-) I’m very curious.

  • http://indiescribe.typepad.com Scott

    Thank you all for your compliments on the review.

    As to your questions and concerns, Prof. Bakan in his book does quite a good job to discuss some of these issues. I am not a pure socialist, and in the province in which I live (BC) we are going through an election presently, and I will probably vote for the more conservative leader, mainly because I believe that privatization does have its place. But like Bakan argues in the book, we have to be careful how far we take privatization; some institutions needed to be institutions which serve the public, and not the bottom line. And interestingly enough this is an issue that it is at the top of the headlines in the U.S. with Bush proposed privatization of Social Security. This whole question is an important discussion indeed!

  • http://users.abac.com/homer John H. St.John

    The corporation is the best of all of the books that I own dealing with the corporation problem. Thom Hartmann’s book Unequal Protection is another good one. However when I turn to the last pages looking for a solution, there is nothing there that makes sense to me.

    Benito Mussolini’s definition of fascism was the best: “fascism is the marriage of corporation power with state power. If our government is not married to the corporations, it is certainly shacked up.

    All of the Farben companies survived the war, and Mitsubishi as well as the Italian corporations are still in business. Ford and General Motors as well as GE and IBM helped put Hitler in power and we know where they are.

    I also believe that the key to ending corporations is a dearth of understanding that the corporation business form is fundamentally illegal.
    Seperating ownership from liability is a subterfuge to avoid liability.

    Nobody owns a corporation and someone has to own the damned thing. The only way this can be done without revolution is for the workers who now are running the thing to be given ownership. This would not take anything away from anyone
    and investors would still be investors, and get their fair share of the profits.

    There is a new union movement coming with the split of major unions from the AFL CIO. When John L. Lewis’s mineworkers split from the AFL and started the CIO they built industrial unions. This split is going to build something also. I hope they take the lessons of the Argentinian workers Take.

  • hank

    Good book. Review is unintentionally confused, if not precisely confusing, grammatically speaking.

    It’s unfair to Dr. Frankenstein, by confusing the man with his creation. The analogy breaks down because a person created the monster, and corporations are monsters created by people, then later given status _as_ people under United States law by two court cases, one of which didn’t really do that, the second of which said the first court did, and made it so.

    If Dr. Frankenstein’s monster had a name, it’d be easier to refer to it without confusing its creator with his creation.

    If Dr. Frankenstein had created the Munster Family, including Uncle It, then he would be It’s creator. Since he did not, the exceedingly rare spelling “It’s” has no proper use anywhere in the review.

  • Sigit Kurniawan

    Yup, this book said about the grand ism which penetrated and destroed all of our elements of live. It named Neoliberalism.

  • http://none.com Bob A. Booey

    Phillip Winn is such a Communist, for the love of Rand :)

    In all seriousness, I haven’t read the book, but I thought the documentary based on this book was pretty good.

    I think the DSM-IV diagnosis schtick is pretty clever and they make a pretty good case for it.

    I did watch the extras at the end of the DVD and I thought Bakan and the producers had very few ideas on how to move past corporations or limit the harm they do to society.

    They present a good critique, but don’t provide many answers for reform.

    That is all.

  • Mahi Shah

    “Corporation” by Joel Bakan, is a wonderful book that reveals the real face of it by diminishing its outerlook which everybody sees everyday and believes in it……

  • pamina

    The title of this review is incorrectly punctuated. The title gives the impression that the reviewer is Joel Bakan. Can be changed to “Review of Joel Bakan’s ‘The Corporation'”.

  • ABrady

    Scott wrote: “But an important point that he makes is that the corporation is given its existence by laws, and that same law which creates the corporation can also dissolve it.”

    It is highly unlikely that the law that created the corporation will dissolve it, simply because corporations have no real existence in law. Corporations exist only in contemplation of law (Darthmouth vs. Woodward) therefore corporations that were given existence by law were given such existence illegally.

    Corporations are not in fact, or in law, persons. They were made persons because without personhood they would have no rights. Only people have rights. No law can change that. First corporations became natural persons (via the 14th amend) then they became artificial persons via legislative acts government. What kind of person is a corporation, natural or artifical, and where is the Act of Congress making it either one?

    Corporations came into existence by corrupt justices of the supreme courts and our government, which by the way is also a corporation.

    Corporations and free persons cannot co-exist in the same nation, and that is the only reason they were given personhood. If it wasn’t for the help of corrupt supreme court justices and government corporations would have no “legal” existence, simply because, as the Darthmouth court stated above, corporations exist only in contemplation of law. A corporation is an artificial being (being does not mean person).

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