Corporations and the Future of Democracy

There are lots of ways that corporations threaten democracy. But they’re all, I think, rooted in one basic concept — the idea of limited liability. That’s the concept that the individuals behind a corporation can shield themselves from full financial responsibility for risks they take. The thinking is, if people can protect themselves from full liability, they’ll be willing to take greater risks and try new things. Limited liability encourages creativity and innovation. But limited liability is a double-edged sword.

Our topic this week is Corporations and the Future of Democracy.  That title suggests that corporations are a potential threat to democracy.  So we should start off by getting clear on what exactly a corporation is, and how it might threaten democracy.

There are lots of ways that corporations threaten democracy.  But they’re all, I think, rooted in one basic concept — the idea of limited liability.  That’s the concept that the individuals behind a corporation can shield themselves from full financial responsibility for risks they take.  The thinking is, if people can protect themselves from full liability, they’ll be willing to take greater risks and try new things.  Limited liability encourages creativity and innovation.

But limited liability is a double-edged sword.  It also enables corporations to do things like pollute and destroy natural environments without having to take full responsibility.  For example, if a corporation causes a million dollars worth of environmental damage, but only has a thousand dollars worth of assets, basically it can just go bankrupt and walk away from the problem.  Even if it doesn’t do that, the mere threat of going bankrupt can be used to negotiate in litigation.  Ironically, if a lawsuit against a corporation is too successful, the corporation can just declare bankruptcy, and the plaintiffs won’t get anything.

Even huge corporations with major assets can leverage the threat of bankruptcy to avoid liability for damage they cause. Remember the huge BP oil spill in the Gulf? The mere possibility of BP going bankrupt meant they were able to get away with causing all this environmental damage without being held legally responsible for most of it.

For this show, however, we’re interested in the advantages and disadvantages that corporations offer to democracies.  So we ought to say what we mean by a democracy. 

In a democracy, every eligible voter has one vote, and all matters of public policy are decided by majority rule.  Most democracies set some things aside as beyond the scope of majority rule, such as the Bill of Rights in the United States.  And many democracies have very undemocratic institutions in the middle of things — like our Senate, which gives the vote of a person from Delaware or Alaska about a hundred times more weight than the vote of someone from California.

Even in an impure democracy, a basic dynamic of politics is the search for votes.  Those who seek power — in state government, in Congress, or as President — have to get lots of votes.  And so people have a lot to say about how they’re governed, and that’s the basic idea of democracy.

Now you don’t need corporations to have your democracy undermined.  Anyone with a lot of money has ways of doing that.  Someone can use their money to buy or otherwise unduly influence the votes of the electorate.  And, in a representative democracy, they can also just bribe or otherwise unduly influence the elected officials.

Corporations raise the ante because, how ever rich individuals are, corporations can be richer.  And today, with huge multi-national corporations, there’s virtually no limit to the resources that a single entity like a corporation can bring to bear on the political process. 

That is precisely the problem with the Supreme Court’s Citizens United decision.  The Court held that corporations are persons, who have the right of free speech, and whose speech can take the form of money.  So they should be able to do things they’d previously been prohibited from doing – in particular, spending all they want on political campaigns.

But what does it even mean to say that money is a form of speech?  Or that a corporation — an entity with no thoughts, feelings, emotions, or intentions — is a person?  Should a non-breathing creation of the law have most of the rights — but few of the responsibilities — of a human citizen?

Photo by Sean Pollock on Unsplash