This commonsense standard is not new. It is rooted in traditional reasons why states allowed business corporations in the first place. Americans have always been suspicious of government-created advantages built into those corporations. We used to do a much better job at making sure that the public benefits of a corporate charter outweighed the public harms. Current corporate law still reflects remnants of this approach, and at a minimum we should insist that our public officials start enforcing that law again.
For example, as discussed, in virtually every state, even Delaware, the ability to operate as a corporation, or the corporate charter, is “subject to dissolution or the revocation or forfeiture of the corporate charter.”10 The Delaware Constitution (Article IX, §1) requires that the General Assembly “shall, by general law, provide for the revocation or forfeiture of the charters or franchises.” The law authorizes the Delaware attorney general to file a petition in state court to revoke a corporate charter in cases of “a sustained course of fraud, immorality or violations of statutory law …,” or “misuse” of a corporate charter.11 “Misuse” includes corporate crime: “Continued serious criminal violations by corporate agents in the course of the discharge of their duties could very well constitute the misuse of a charter.”12
An example of a charter revocation request filed by Free Speech for People and Appalachian Voices concerning Massey Energy Company based on its criminal and immoral conduct as a corporation is included in the Resources at the back of this book. The Resources section also contains links to frequently asked questions about charter revocation.
Remnants of nineteenth- and twentieth-century corporate law, though, are not enough. We need to modernize the corporation to serve our present needs. After Citizens United, for example, Kent Greenfield and others proposed that states change their charter laws to make clear that no corporation is authorized to spend corporate money to influence elections.13 Others have proposed that once corporations reach a certain size, they must apply for a new charter every twenty years after showing how they have served the public interest over the past twenty years.
Some alternative incorporation laws emerging now offer an even better approach. Increasing numbers of states, including Virginia, Maryland, New Jersey, and Vermont, have recently enacted incorporation laws for “benefit corporations” or “B corporations.” Under these laws, benefit corporations “must create a material positive impact on society and the environment, consider how decisions affect workers, community, and the environment, and publicly report their social and environmental performance according to third-party standards.”14 These and many other reforms would make corporations work well for their owners and employees, the public, the economy, and the earth. That is the least that we should expect when we grant the government favor of incorporation.
Principle Two: Incorporation Is a National or International Matter
No single state, be it Delaware or any other, should make the rules for multinational corporations. With Delaware making the rules for most global corporations, a few legislators and judges representing 900,000 people set the course for the lives of 310 million Americans and the rest of the world’s people who bear the consequences of corporate power. That’s not democratic, fair, or wise. When some states try to improve corporate law, large corporations play the states off one another to get the most corporate-friendly law. If Delaware decides that its corporate law requires managers to consider not only profit but also workers, community, the environment, or other criteria, corporations can reincorporate in another state with lower standards. The corporation does not even have to move its headquarters or offices; its lawyers simply file some paperwork.15
This kind of shell game should be outlawed. Once corporations reach a certain size and operate in countries around the world, why should we leave the rules of the road for the corporation to one state? Uncontrolled corporate power is methodically taking national and international treasures away from all of us: our government, our wealth, the Gulf of Mexico, the Appalachian Mountains, water in the ground from New York to Texas, the air, the land, and more. We should have national standards for large multinational corporations. This could be done either by way of a federal incorporation law or by federal law that sets minimum (but not maximum) standards for state incorporation laws used by corporations operating in interstate commerce.
Today, at least for publicly traded corporations, the Securities and Exchange Commission (SEC) provides some federal oversight of corporate affairs, but this limited oversight is focused on protecting shareholders rather than society. Still, providing shareholders with information and a say with respect to corporate political influence would help. Socially responsible investment firms and other shareholders are increasingly active as shareholders to demand disclosure of policies and accountability for corporations. This shareholder consciousness about the consequences of corporate conduct and active involvement in improving that conduct is essential.
“Shareholder democracy” has been difficult as a practical matter because of the control of large corporations by its executives and frequently too-cozy boards of directors. After Citizens United, some members of Congress proposed a shareholder approval requirement for any political expenditure by corporations. And the SEC recently developed a rule requiring publicly traded corporations to give shareholders a say in the nomination of board members, rather than be presented with a slate to rubber-stamp.16 You may not be surprised by now to hear that this reform is going the way of so many others in our country. The U.S. Chamber of Commerce sued the SEC to block the rule, claiming that any requirement that corporations include shareholder-nominated directors in the corporations’ proxy statement violates the corporations’ First Amendment rights. The corporations won again: In August 2011, the U.S. Court of Appeals in the District of Columbia struck down the new SEC requirements.
So long as the rules for corporations are quietly made by corporate lawyers in Delaware, in arcane SEC rulemaking, or by over-zealous judges imposing their own corporate policy preferences, necessary reform for the kind of sustainable economy that we need in the twenty-first century will be difficult to achieve. More businesses and people, however, are determined to change the rules, and the Resources section at the end of the book has links to groups working on corporate charter reform, corporate accountability, and new corporate rules that will work for everyone.
Step 3: Freedom and Fair Elections
The third action piece, after the People’s Rights Amendment and corporate charter reform, might be referred to as “cleaning the swamp.” You should be able to run for office without groveling to corporations and the rich. You should be able to vote for someone who does not have to grovel and owe allegiance to corporations and the rich. We expect and demand public financing of our roads, canals, airports, armed services, and schools because we want those to serve all of the people. Why should we not insist on public financing of our elections so that all of the people can participate?
That’s what millions of Americans think, and that’s why the Fair Elections Now Act nearly passed in the House of Representatives after Citizens United. Public financing of federal and state elections is essential if we do not want elected representatives owing fealty only to corporations and the top sliver of American wealth.
Several states, including Maine, Arizona, Wisconsin, and North Carolina, as well as cities and towns, already have some form of public financing. This has helped open up government and elections to people who might not make the “heavy hitter” list of donors who give $50,000 a year to politicians. Under most public finance approaches, when a candidate can demonstrate support by some significant number of people who may not have thousands of dollars to contribute but can pitch in small donations to a campaign, some public money is triggered to match the small donors.
Under Maine’s Clean Election Law, for example, a clean-money candidate for governor can qualify for public funding only after meeting two conditions. First, the candidate must collect
at least 3, 250 contributions of $5 or more from registered Maine voters. Second, this “seed money” must amount to at least $40,000, it must come from individuals only, and no contribution can be more than $100.17 The thresholds and funding are much less, of course, for state representative candidates. Lo and behold, candidates and elected officials are very interested in the views of thousands of Maine voters who might have only $5 or $50 to pitch in.
This public funding is available to any candidate, regardless of point of view or political persuasion. The result is that well-qualified people can run for office without pandering to the corporations and the rich, and they can offer good ideas that are not necessarily those of the two dominant political parties. Once in office, clean election representatives can focus on the people’s business, rather than spend all their time chasing heavy-hitter and corporate money for the next campaign.
Americans across the political spectrum favor public funding rather than corporate and wealth funding of elections, and we should push to get this overdue system in place as fast as possible. Yet even as so many are working to get the Fair Elections Now Act through Congress, the corporate plutocracy is attacking even the limited public financing available now. On June 27, 2011, the Supreme Court obligingly struck down Arizona’s system of allowing slightly more public funding where an extraordinarily rich or well-funded candidate spends extraordinary amounts in an election.18 The idea behind the law had been to let people have a real choice and to hear from all sides in an election. Yet in this case, the 5–4 corporate majority on the Supreme Court that used rhetoric in Citizens United to suggest that under the First Amendment there never could be “too much speech” when corporations funded the “speech” struck down Arizona’s law on the grounds of “too much speech” because the Arizona people had chosen public funding of that speech. So much for the purported paramount goal of fostering more information and more points of view.
Americans cannot afford to accept these results and our corporate-dominated status quo. Public funding of elections can clean the swamp of dirty, corporate-driven elections. Disclosure requirements that provide people with information about which candidates are corporate-funded will also help. As we have seen, however, much of the corruption- and greed-driven decline for America and the world results from what happens between elections. When corporations can spend billions of dollars on lobbying and the rest of us are more or less shut out, we have a critical problem.
Pushing for all of the reforms described in this chapter will redefine what is considered normal in Washington and in state capitals. Lobbying practices today are not “normal.” Bribery is bribery. It should be a scandal, not a yawn, when politicians act like Billy Tauzin (the congressman who delivered the Medicare law for the pharmaceutical companies) and Phil Gramm (the former senator who became UBS vice chairman after stripping America of protections against financial collapse). Politicians who do that, and the corporations that pay them to do that, should not only be shamed; the individuals should be jailed and, the corporations, dechartered.
To be clear, I am not calling Tauzin and Gramm criminals. Like anyone else, they are presumably innocent until proved guilty of a crime, and they have not been accused of committing any crime. That’s the problem. What they did was only shameful, low, heedless, unpatriotic, and selfish, rather than illegal. But we should change the law so that it would be a criminal act for members of Congress to go on to work as lobbyists for companies or industries that benefited from the government during their term of service. Whatever happened to the model politicians, from George Washington to Harry Truman and Dwight Eisenhower, who served their country and then returned, happily and quietly, home?
We should demand much stricter rules for disclosure but also for corporate lobbying spending itself. We should no longer allow government employees, including our representatives, to go back and forth, between government and corporate lobbying. We should have reporting and disclosure of every meeting our representatives have with lobbyists. We should ban the gift-giving, wining-and-dining, and junket-funding of our representatives by corporate lobbyists. Information in the Resources section will allow you to connect with others working to make these reforms real.
Inscribed high on the walls of the Jefferson Memorial in Washington is a more moderate version of Jefferson’s “water the tree of liberty with blood” recognition of the need to preserve a revolutionary spirit among the free people of America. “I am not an advocate for frequent changes in laws and constitutions,” wrote Jefferson. “But laws and institutions must go hand in hand with the progress of the human mind… . We might as well require a man to wear still the coat which fitted him when a boy as civilized society to remain ever under the regimen of their barbarous ancestors.”19
We now know, having seen the successful execution of the Powell-Chamber plan for a long corporate drive for power, that current interpretation of the Constitution does not simply reflect “the progress of the human mind.” The creation of corporate rights and the transfer of power from the people to large corporations did not happen because we, the people, now have a more enlightened view of free speech and the Constitution. Rather, we, the people, are on the receiving end of that well-funded, well-organized, years-long corporatist campaign to twist our Constitution and subvert our government of people.
Accordingly, this is not a mere policy debate. We face a constitutional struggle, a national struggle. If that struggle is to be won, the Constitution must be returned to a charter of rights of sovereign people, a charter in which corporations have no place. With the People’s Rights Amendment campaign and corporate and election law reform, we can return again to a government of the people. We will have preserved once again what the Founders’ generation called the rights of man and what we, after two centuries of hard work and improbable successes by the American people, can proudly call the rights of people.
Resources
Presented here are the following resources:
The People’s Rights Amendment
The People’s Rights Amendment Resolution
Frequently Asked Questions About the People’s Rights Amendment
Organizations and Links for Taking Action Recommended Reading
Free Speech for People and Appalachian Voices’ Request for Revocation of Massey Energy Company Charters
The People’s Rights Amendment
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Amendment XXVIII
SECTION I. We the people who ordain and establish this Constitution intend the rights protected by this Constitution to be the rights of natural persons.
SECTION II. The words people, person, or citizen as used in this Constitution do not include corporations, limited liability companies, or other corporate entities established by the laws of any state, the United States, or any foreign state. Such corporate entities are subject to any regulation as the people, through their elected state and federal representatives, deem reasonable and as are otherwise consistent with the powers of Congress and the States under this Constitution.
SECTION III. Nothing contained herein shall be construed to limit the people’s rights of freedom of speech, freedom of the press, free exercise of religion, and all such other rights of the people, which rights are inalienable.
* * *
The People’s Rights Amendment Resolution
* * *
WHEREAS,
We the people adopted and ratified the United States Constitution to protect the free speech and other rights of people, not corporations;
Corporations are not people; they are entities created by the law of states and nations;
For the past three decades, the Supreme Court has wrongly transformed the First Amendment and Constitution into a powerful tool for corporations seeking to evade and invalidate the people’s laws;
This corporate misuse of the Constitution reached an extreme conclusion in the United States Supreme Court’s ruling in Citizens United v. Federal Election Commission;
Citizens Uni
ted v. Federal Election Commission overturned long-standing precedent prohibiting corporations from spending corporate general treasury funds in our elections;
Citizens United v. Federal Election Commission unleashes a torrent of corporate money in our political process unmatched by any campaign expenditure totals in United States history;
Citizens United v. Federal Election Commission purports to invalidate state laws and even state constitutional provisions separating corporate money from elections;
Citizens United v. Federal Election Commission presents a serious and direct threat to our republican democracy;
Article V of the United States Constitution empowers and obligates the people and states of the United States of America to use the constitutional amendment process to correct those egre-giously wrong decisions of the United States Supreme Court that go to the heart of our democracy and republican self-government;
and
The people and states of the United States of America have strengthened the nation and preserved liberty and equality for all by using the amendment process throughout our history, including in six of the ten decades of the twentieth century, and reversing seven erroneous Supreme Court decisions;
NOW THEREFORE BE IT RESOLVED THAT WE CALL ON THE UNITED STATES CONGRESS TO PASS AND SEND TO THE STATES FOR RATIFICATION A CONSTITUTIONAL AMENDMENT TO REVERSE CITIZENS UNITED V. FEDERAL ELECTION COMMISSION AND TO RESTORE CONSTITUTIONAL RIGHTS AND FAIR ELECTIONS TO THE PEOPLE.
Corporations Are Not People Page 17