There is a fundamental problem these days with economic policy - US corporations have run amok. No longer do they act in the national interest or even give a pretense of being good national corporate citizens. It's all about profits, maximizing profits. In fact, we are told that is a corporation's only responsibility. But is that really the case or have we been spun a lie so long and often we believe it to be true without question? How does the United States align it's Corporations to the interests of the nation?Link.
In a recent House Science Subcommittee hearing, American Decline or Renewal? – Globalizing Jobs and Technology, some these fundamental questions of corporate governance were addressed.it has gradually become clear to me that much of a nation’s economic strategy is embedded in the institutions through which that particular nation is governed, and that the existence of institutions imply a certain strategy- Dr. Bruce R. Scott, testimony before the Investigations and Oversight House Science Subcommittee.
From Dr. Margaret Blair, a law professor and economist, opening statement:I want to speak to you today on a question about the fiduciary obligations that corporate directors have, by law, in this country. In particular, I want to address a claim often made in the financial press, and by members of what a Delaware Court judge has recently called the “corporate governance industry.” This is the claim that corporate directors have a legal duty to maximize share value.Dr. Margaret M. Blair even wrote a book about it, Ownership and Control: Rethinking Corporate Governance for the Twenty-First Century .
What I hope you will take from my testimony today is that this claim is, at best, a misleading overstatement. At worst, this claim is simply false, but is often asserted as a weapon to try to persuade corporate managers and directors that they should take actions that benefit particular shareholders of a given corporation, regardless of whether those actions may impose high costs on creditors, employees, the communities where corporations have their operations, or other stakeholders, or sometimes even on the long run ability of the corporation itself to compete effectively for market share, or to develop the next technology
So, is everyone getting that? In order to sustain the United States as a Democracy versus a haven for multinational corporations akin to the No Man's Land of Oklahoma where outlaws were under no jurisdiction, had no consequence, we must make corporate entities accountable to the citizenry of the United States. We must realize not only can we do precisely that, we must do precisely that. We must hold and make these US based corporations responsible and responsive to the United States national interest.
Ralph Gomory said:We need to realize that the interests of the American global corporation, whose interest is profit, and the interests of most Americans, who want a higher standard of living, have been diverging.In other words, globalization is putting America at greater and greater risk by the very corporations it spawned.
So maybe this is a little hard to digest. Why are they bothering with such esoteric concepts? Well, after some pondering, it dawned on me that to enact dramatic, strategic trade and economic policy change, one must directly confront this false assumption that corporations must be like glorified Ferengi.
In order to convince lawmakers to pass legislation and enact policy we desperately need and also to console legislators, to assure such new legislation and policy would not be overturned in the courts, we must address these fundamental definitions of corporate history and governance.
Bruce Scott (read his entire testimony, watch the video) noted:Today’s global economy is much like the US in the later 19 centuryDr. Scott is pointing out today we are living in a corporate bandit outlaw haven. We're in No Man's Land with the multinational globalization corporate cartel, running amok, thumbing their nose at what is actually good for America.
In today’s economy, nations and states charter firms to compete in a global common, but no chartering authority exists that wields the political power to impose rules on these global markets. While there are rules for trade, the chartering of financial firms in particular invites a race to the bottom to escape taxes as well as regulations. At the same time, some countries are imposing conditions on foreign firms as a condition for doing business in their countries. This issue is particularly important in the case of a few very large countries, notably China.
These countries, with priorities that favor rapid growth, are using national power to partner with US firms on the condition that the latter move some of their activities to China. These countries are behaving much the way New Jersey did in an earlier era, taking advantage of an inadequately regulated common
And the kicker, Dr. Scott recommends:you consider reopening the question of a federal charter or license for US firms as a way to specify certain requirements for behavior
Prof. Scott's prepared testimony is here.