Editor's Page -- Capitalism At A Crossroad?

Dec. 21, 2004
It may be time to rethink a corporation's purpose.

Reports from the World Economic Forum, held earlier this year in New York, suggest that the concerns of anti-corporate, anti-globalization protestors detailed in our article "Beware the Coming Corporate Backlash," have started gaining the attention of the world's business, political and intellectual elite. Discussions about growing discontent with the current economic playing field and what to do about it were a major theme of the influential 31-year-old gathering for the first time. As the global decision makers search for answers, they should read Marjorie Kelly's recent book, "The Divine Right of Capital: Dethroning the Corporate Aristocracy" (2002, Berrett-Koehler Publishers Inc.). In the book, the founder and publisher of Business Ethics magazine puts forth something that the delegates to the Forum have just begun to look for: a cogently presented reason for the growing anti-corporate, anti-globalization sentiment, and a way to address it. Kelly argues that the current system has given rise to discontent because it is designed -- and codified by law -- she points out, to maximize returns to the shareholders (those who provide capital) at the expense of other constituencies: the workers, the environment, the community. The result, she says, is hardly surprising. Those with capital to invest reap the rewards, gaining wealth; those without steadily lose ground, a process she says "privatizes the gains, and externalizes the costs." To fix the problem, she wants nothing less than to change the definition of the corporation by changing the legal mandate that corporations must maximize returns to shareholders alone. Doing this, she says, will give rise to "economic democracy, a new economic order that respects the workings of the market, while reclaiming its gifts for the many rather than the few." While corporate executives' initial reaction might be to shrug off such a radical solution, her proposal was endorsed, at least theoretically, in 2000 by a vast majority of Americans answering a BusinessWeek/Harris Poll. The poll asked people to choose which of these two statements they support more strongly: "Corporations should have only one purpose -- to make the most profit for their shareholders -- and pursuit of that goal will be best for America in the long run." -- or -- "Corporations should have more than one purpose. They also owe something to their workers and the communities in which they operate, and they should sometimes sacrifice some profit for the sake of making things better for their workers and communities." An eye-popping 95% chose the latter. Whether you're inclined to reject Kelly's ideas out-of-hand or agree with her, the book is worth reading. It's an intelligently written, challenging romp through history, philosophy and economics that will give you insight into the protestors' concerns and give you ideas about how to address them. Patricia Panchak is IW's editor-in-chief. She is based in Cleveland.

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