Book notes
The New Corporation

The New Corporation by Joel Bakan

Read in December 2020

"Corporation's freedom detracts from our freedom, and it's a zero-sum game."

Today, half of the Americans can't pay an unexpected 400$ bill without going into debt or selling their possessions.

Despite medical technology advancements, deaths of despair (alcohol, drugs, suicide) are also all-time high.

Chapter 1: The New Corporation

Joel's impressions from 2019 Davos Economic Forum. Many tech-corporation leaders believe the current system is not viable, and we need to change it.

Klaus Schwab (the founder of the World Economic Forum and host of Davos) thinks the current "neoliberal market" is going down, and we need a new system called "stakeholder capitalism." It's a system where companies consider social and environmental values while making decisions.

Many executives attending the meetings in Davos also agree with this idea of the "new corporation.". A recent poll has shown that 80% of the business leaders in Davos reject Milton Friedman's premise to put shareholder value on top of everything. They think the business has broader accountability and opportunity in society. The way they speak also reflects the change is happening, and it's way better than 15-20 years ago.

CEO activism: Business is not only business. It's getting political as leaders are playing an active role in political issues. Corporations also raise their voices against police shootings, LGBTQ rights, women's rights, and the environment. Some of the 2017 Superbowl ads were denouncing Trump's polarization. They cheer for anti-globalization.

_Corporate Social Responsibility (CSR): _ is starting to emerge since 2005. It's about embedding social and environmental values into the operation. "CSR is within the purpose" of the new corporation movement. Profit is a result, but the purpose is the process of getting there.

However, Schwab also warmly welcomed Trump into the stage and presumed his disastrous tax bill would help businesses since it reduces the tax amount. Yet, it's against Klaus's ultimate goal of fixing the system.

While the tax reform was happening in 2017, even the "new" corporations lobbied for more cuts. Therefore, it's not a surprise for Schwab to thank Trump nor the business leaders to support his economic policies.

Pandemic shows how tax avoidance and cuts harm society by debilitating the quality of public health care. "Revenue-starved" public systems are inadequate to protect citizen's health and wellbeing. It shows corporations only care about CSRs when they don't lose profits and make more money for the shareholders.

Doing Well While Doing Good

The key concept should be "doing well while doing good." Making money through social and environmental issues rather than in spite of them. Electric cars, and similar earth-friendly products, for example.

The modern corporation was invented to raise money for growing industrial ventures (railways, factories, etc.). Corporate law is fundamentally about capitalism. It's designed to incentivize investment by promising "best interests" will be benefits for the shareholders.

Corporations and Hockey

Hockey is a violent game, where it's not discouraged for players to avoid physical intensity. They can be tough on the ice but different in real life. All hockey teams play by the same rules and rules profoundly shape their actions. Just like the hockey example, an individual might adopt different values on their personal lives from the institutions they work. Their own lights on every action do not guide them.

Chapter 2: Still Crazy After All These Years

It starts with an interview with Lord Browne, executive chair at L1, who was the chief architect of BP's safety culture. BP had the "Deepwater Horizon" disaster in 2010. Eleven workers dead and the oil leakage nearly destroyed the Mexican Gulf Ecosystem.

Browne seems to care about safety on a small scale (daily precautions), but they lack preparation for large scale problems such as plant safety. This omission leads to situations where we blindly wait for a disaster to happen.

Many companies promise that they're taking responsible actions, but the fact shows us they do it as it doesn't conflict with their interests.

The involvement of hydrocarbon companies made the Paris Agreement useless since they've lightened or removed action points that would make a substantial impact.

The real danger is when CEOs and government officials say they're taking action when in fact, nothing is being done apart from clever accounting and creative PR.

– Greta Thunberg

The inevitable result is a rapidly warming planet. Destruction of animal habitats is also bringing animals and humans into closer proximity. That, in turn, increases the chances of humans contracting zootomic infections.

Nutritional Promises

The nutritional promises made by corporations are also showing a sign of doing well rather than going good.

The beverages produced by Coca-Cola, Nestle, and Unilever are claimed to help efficiently take the required nutrients, especially for people in poverty. However, each drink's serving contains roughly the entire maximum sugar intake per day recommended by the World Health Organization.

Doing Well by Doing Bad

  • Volkswagen and the defeat device.
  • Johnson&Johnson and the medicines that contain harmful nickel/chromium particles.
  • BP's and the Deepwater Horizon.

Breaking the law for the sake of generating more revenue has become a typical pattern. After all, it's a basic calculus. Most profit-oriented corporations don't hesitate to pay fines for their harmful actions, as long as those actions contribute to their wellbeing.