Can Corporations Become Enlightened?

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Can Corporations Become Enlightened?
A Buddhist Critique of Transnational Corporations

By David Loy

Butterfly: The Journal of Contemporary Buddhism

Copyright 2001

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"We have given corporations dominion over the sustaining of our lives. They have become sovereign citizens and we have become consumers. They concentrate power and wealth. They design and shape our society and world. They carve our goals and aspirations. They shape our thoughts and our language. They create the images and metaphors of our time, which our children use to define their world and their lives. In other words: what corporations do well, what corporations are designed to be, is the problem." Richard Grossman [1]

What is globalization, and what does it mean for our lives? There is no simple answer to these questions because there is no such "thing" as globalization. Globalization is a complex set of interacting developments: economic, political, technological and cultural. This paper attempts to bring a Buddhist perspective to bear on what is probably the main agent of globalization, on an institution which has more day to day influence on our lives than any other except governments: corporations, especially transnational ones. I propose to think about what corporations are, from a religious, particularly a Buddhist, perspective. Despite their enormous and increasing impact upon all of us, we know surprisingly little about them -- that is, about what they really are and why they function the way they do. In 1995, only 49 of the world's 100 largest economies were nations; the other 51 were corporations. Malaysia was number 53, bigger than Matsushita (54) but somewhat smaller than IBM (52); Mitsubishi, the largest corporation on the list, was number 22. Total sales of the top 200 transnational corporations were bigger than the combined GDP of 182 countries -- of all except the top nine nations. That is about thirty percent of world GDP. Yet, those corporations employed less than one-third of one percent of the world's population, and that percentage is shrinking. [2]

In the United States, the largest 100 corporations buy about 75% of commercial network time and over 50% of public television time as well. [3] This means that they decide what is shown on television and what is not; it has become their "private medium". Corporate mergers and buyouts also mean that the nation's radio stations, newspapers, and publishing houses are owned by a decreasing number of conglomerates increasingly preoccupied with the bottom line of profit margins. In short, corporations control the U.S. "nervous system", and increasingly our international one as well. It is amazing, then, that we hear relatively little about what corporations do -- which seems to be the way they like it. Newspapers and television news are full of the speeches and meetings of government leaders, even as globalization of the world economy reduces their power to direct their peoples' destiny. The main point of this paper can be summarized very simply: today, thanks to spreading ideals of democracy, states are increasingly responsible to their citizens, but whom are transnational corporations responsible to?

One of our problems today is that, in our preoccupation with present consumption and future possibilities, we tend to lose the past -- that is, our sense of history. If you want to understand something, one of the first places to look is at its history, which can illuminate aspects that we otherwise overlook or misunderstand... So I hope you will indulge me while I present a short history lesson. What does history teach us about corporations and their responsibilities?

Incorporated business enterprises, with legally limited economic liabilities, began in Europe. The earliest record I have found of such a corporation is from Florence, Italy, in 1532. Both the date and place are very interesting. Columbus had "discovered" America in 1492; just as important, Vasco da Gama had sailed around Africa to India in 1498 and returned with cargo worth sixty times the cost of his voyage. A profit of 6000%! You can imagine what affect that had on the dreams of Italian merchants. However, there were some problems. First, it was extremely expensive to outfit such an expedition, so very few people could afford to do so by themselves. Second, such voyages were extremely risky; the chance of a ship sinking in a storm or being taken by pirates was considerable. Third, there were debtor's prisons -- not only for you but also for your family and your descendants -- if you lost your ship and could not pay your debts.

The solution to these problems was ingenious: legally limited liability. Unlike partnerships, where each partner is legally responsible for all business debts, limited liability meant you could lose only the amount you invested. Such an arrangement required a special charter from the state -- in Renaissance Italy, from the local prince. This was convenient not only for the investors but for the prince, because a successful expedition increased the wealth of his territory -- and because he got a big cut of the profits for granting the charter.

What is the relevance of all that now? It shows us, first, that from the very beginning corporations have been involved in colonialism and colonial exploitation -- a process that continues today under a 'neo-colonial' economic system that continues to transfer wealth from the South to the North. Although they have plenty of help from the World Bank and the IMF, corporations continue to be the main institutions that supervise that process.

Second, it shows us that from the very beginning corporations have also had an incestuous relationship with the state. In the sixteenth century nation-states as we know them did not exist. Rulers generally were too limited in resources to exercise the kind of sovereignty that we take for granted today. The state as we know it today -- politically self-enclosed and self-aggrandizing -- developed along with the royally-chartered corporation; you might even say they were Siamese twins inescapably joined together. The enormous wealth extracted from the New World, in particular, enabled states to become more powerful and ambitious, and rulers assisted the process by dispatching armies and navies to 'pacify' foreign lands. As this suggests, there was a third partner, which grew up with the other two: the modern military. Together they formed an 'unholy trinity,' thanks to the new technologies of gunpowder, the compass (for navigation), and this clever new type of business organization which minimized the financial risk. In short, the modern nation-state and its military grew by feeding on colonial exploitation, in the same way that chartered corporations did. [4] This incest needs to be emphasized because we tend to forget it. We distinguish between government and the economy, but at their upper levels, there is usually little effective distinction between them. Today governments still get their royal share of the booty -- now it is called taxes. On the one side, states today need to promote corporate business because they have become pimps dependent upon that source of revenue; on the other side, transnational corporations thrive on the special laws and arrangements with which states promote their activities. As Dan Hamburg, a former Democratic representative from California, concluded from his years in the U.S. Congress: "The real government of our country is economic, dominated by large corporations that charter the state to do their bidding.

Fostering a secure environment in which corporations and their investors can flourish is the paramount objective of both [political] parties." [5] The same is true internationally. Almost everywhere, globalization means that the interests of politicians who control nations are increasingly intimately entwined with those who control corporations. In most countries the elite move back and forth quite easily from one to the other, from CEO to cabinet position and back again; naturally they identify with each other's interests. Think, for example, how much U.S. foreign policy today is determined by the desire to open foreign markets (and raw materials, cheap labor, etc.) to U.S. corporate penetration. Occasionally there have been exceptions to this cozy relationship -- genuinely populist leaders, for example -- but they tend not to last very long.

This brings us back to the question of corporate responsibility. A royal charter listed a corporation's privileges and responsibilities. It has been said that the history of corporations since then is a history of their attempts to increase their privileges and reduce their responsibilities. One important step in reducing that responsibility was the introduction of the joint stock company; the first English one was chartered in 1553. One's shares in a corporation could now be bought and sold freely, even to someone in a foreign country. The stock market has since become an essential feature of every developed economy, of course, and of most developing ones. Consider, however, the effects of this development on responsibility -- on the ethical consequences of business activities. Legally, the primary responsibility of a corporation is not to its employees nor to its customers but to its stockholders; after all, they own it. What does it mean, then, when those stockholders are anonymous, scattered here and there, most living far away and with no interest in the corporation's activities except insofar as they affect its profitability?

Compare the situation of a smaller, locally owned business. Suppose you are a master carpenter living in 16th-century Italy. If business is good you might employ several other carpenters and apprentices. You may treat them badly -- long hours, low wages -- but it will be difficult to escape all the consequences of that. You and your family live above the workshop, or around the corner; your wife sees the wives of your senior workers, may socialize with them; your children probably play with their children, perhaps take lessons from the same teachers. You worship in the same church, participate in the same festivals. My point is that in such a situation economic responsibility is local and not so easily evaded. Everyone in the town knows how you treat your workers, and that affects your reputation -- what other people think about you and how they respond to you.

Contrast that with what happened, say, at Bhopal, India in 1984, where it is now believed that up to 10,000 people died and another 50,000 permanently injured in the world's worst chemical disaster, when a Union Carbide plant leaked toxic gases. Although we do not know who they are, it's safe to say that the stockholder owners of Union Carbide were elsewhere, living in various places around the world; and that (although, exceptionally, a few were outraged enough to protest) the large majority felt no responsibility for what happened. The people responsible for managing Union Carbide also live and work far away. Whatever legal liability a corporation may have -- usually only financial -- is quite different from having to live with the consequences, and this difference has a great impact upon the way that impersonal institutions like corporations can conduct their business. It is important to understand that the Bhopal problem was not primarily a technological one, as we tend to think (one of the 'inescapable dangers' of modern life), but one of responsibility -- of corporate immorality. The gas that escaped is so volatile and dangerous that normally it is not stored but immediately made into a more stable compound. It was stored improperly, without being refrigerated. The emergency release valve was not working. There had been prior problems and accidents but recommendations resulting from those incidents had not been implemented. There were no plans or exercises for emergency evacuation; no training or information had been provided to the municipality about the gas and how to respond to such an accident... Now consider: if the CEO of Union Carbide had been living next door to that plant, with his family, would those conditions have been permitted to continue?

Moreover, Union Carbide never apologized for the accident, evidently because there were some legal implications at stake. Instead, company executives in India spread rumors that a disgruntled employee had caused the disaster, but no evidence to support this were ever provided. This inability to apologize is precisely my point: it is intrinsic to the nature of large corporations that they cannot be responsible in the way that you and I can be. Dr. Rosalie Bertell, who directed the International Medical Commission to Bhopal in January 1994, was asked how the Bhopal disaster has changed the way multinationals operate abroad. Her reply is sobering: "I don't think it has, and that's scary. I think that most of them think that Union Carbide got away with it, and maybe they could get away with it. I think the effect has been minimal." The accident cost Union Carbide nothing: it settled all claims for $470,000,000.00, which was covered by its insurance. [6]

We begin to understand how "a principle purpose of corporations is to shield the managers and directors who run them, and shareholders who profit, from responsibility for what the corporation actually does." [7] We also begin to understand why we should speak of transnational corporations rather than multinational ones. Early corporations transcended local communities; today the largest, most powerful corporations transcend responsibility even to nation-states and their citizens. In their preoccupation with profitability, they have learned to play off nations and communities against each other in order to obtain the most favorable operating conditions -- the biggest tax breaks, the least environmental regulation, and so forth. This is a significant development: although corporations and nation-states grew up together, in some important respects they have become de-linked. Today corporations are freer than nation-states, which remain bound by their responsibilities to their own borders and peoples. Corporations have no such fixed obligations. They can reinvent themselves completely, in a different location and even in a different business, if it is convenient for them to do so.

So, then, what is a corporation? To become incorporated (from the Latin corpus, corporis 'body') does not mean, of course, that a corporation gains a material body. You cannot point at a corporation, because it has no physical location. In principle, at least, corporations are immortal. You can point to a building that is owned or used by a corporation, yet that building can be sold without affecting the legal status of the corporation. Everything can be replaced -- all the people working for it, all the material resources owned by it, the type of activities it engages in, even its name -- while it remains essentially the same corporation.

That is because a corporation is not a thing but a process. Like the physical bodies of living things, a corporation is a dissipative system. That is, it must take in energy from the outside (e.g., raw materials), which it processes in various ways (e.g., manufacturing). In order to continue "living" indefinitely its income must equal its expenditures. In addition, like other living things, this process is subject to the law of entropy: although value-added products may be produced (e.g., manufactured goods, or, for humans, a cultural product such as a book or work of art), energy is consumed in the process.

It is already evident that there is an parallel here with human beings. Our physical bodies are also dissipative systems that absorb energy (from food) and use it for physical and mental activities. In addition, from a Buddhist perspective this parallel is even deeper, for in one important respect we humans too are fictions according to the Buddhist teaching of anatman, 'non-self.' Buddhism teaches that our sense of self is a delusion -- what might now be called a 'construction' -- because the feeling that there is a 'me' apart from the world is mistaken; our sense of 'I' is an effect of interacting physical and mental processes that are part of the world. Although counter-intuitive and difficult to understand, this teaching of anatman is essential to all schools of Buddhism, and enlightenment includes the realization that 'my' self is 'empty,' for 'I' am a manifestation of the world.

This similarity between corporations and people -- both being 'empty' dissipative systems that nonetheless have a life of their own -- raises the question whether corporations are subject to the same type of problems. According to Buddhism, the primary cause of our human problems is greed; sometimes ignorance is mentioned as well. Is this also the problem of corporations? It is the nature (or natural tendency) of our minds never to be satisfied with what we have, but always to want more. The tendency of corporations to grow and seek ever-greater profits implies a similar problem. When we consider the Buddhist solution to this problem, however, we realize the vast difference between corporations and us.

The difference is that corporations are legal fictions. Their 'body' is a judicial concept -- and that is why they are so dangerous: without a body, they are essentially ungrounded to the earth and its creatures, and to the pleasures and responsibilities that derive from being manifestations of the earth. You may prefer to say that corporations are unable to be spiritual, for they lack a soul; but I think it amounts to the same thing. As the example of Bhopal shows, a corporation is unable to feel sorry for what it has done (it may occasionally apologize, but that is public relations, not sorrow). A corporation cannot laugh or cry; it cannot enjoy the world or suffer with it. Most of all, a corporation cannot love. Love is realizing our interconnectedness with others and living our concern for their well-being. Such love is not an emotion but an engagement with others that includes responsibility for them, a responsibility that if genuine transcends our own selfish interests. If that sense of responsibility is not there, the love is not genuine. Corporations cannot experience such love or live according to it, not only because they are immaterial, but also because of their primary responsibility to the shareholders who own them. A CEO who tries to subordinate his company's profitability to his love for the world will lose his position, for he is not fulfilling that financial responsibility to its shareholders.

To make the same point in a more Buddhist way: despite the talk we occasionally hear about 'enlightened' corporations, a corporation cannot become enlightened in the spiritual sense. Buddhist enlightenment includes realizing that my sense of being a self apart from the world is a delusion that causes suffering for the world and me. To realize that I am the world -- that I am one of the many ways the world manifests -- is the cognitive side of the love that such a person feels for the world and all its creatures; that realization and that love are two sides of the same coin. Legal fictions such as corporations cannot experience this any more than computers can."

That sums up the tragedy of economic globalization today: increasingly, the destiny of the earth is in the hands of impersonal institutions which, because of the way they are structured, are motivated not by concern for the well-being of the earth's inhabitants but by desire for their own growth and profit. "We are calling upon [those who wield corporate] power and property, as mankind called upon kings of their day, to be good and kind, wise and sweet, and we are calling in vain. We are asking them not to be what we have made them to be." [8] It is intrinsic to the nature of corporations that they cannot be responsible in the ways that we need them to be; the impersonal way they are owned and organized guarantees that such disappear.

One might argue, in reply, that there are good corporations which take good care of their employees, are concerned about their products and their effect on the environment, etc. The same argument can be made for slavery: there were some good slave owners who took good care of their slaves, etc. This does not refute the fact that the institution of slavery is intolerable. The analogy is not too strong. "It is intolerable that the most important issues about human livelihood will be decided solely on the basis of profit for transnational corporations." [9] And it is just as intolerable that the earth's limited resources are being allocated primarily based on profit for transnational corporations.

My Buddhist conclusion is that transnational corporations are by their very nature problematical. We cannot solve the problems they create by addressing the conduct of this or that particular corporation; it's the institution that's the problem. I do not see how, given their present structure, we can repair them to make them more compassionate. Therefore, we need to consider whether it is possible to reform them in some fundamental way or whether we need to replace them with better economic and political institutions: better, because they are responsible not to anonymous investors but to the communities they function in, and better because are motivated not by profit, but by service to the earth and the beings who dwell on it. As long as corporations remain the primary instruments of economic globalization, they endanger the future of our children and the world they will live in.

Notes
1. Richard Grossman, "Revoking the Corporation," Journal of Environmental Law and Litigation v. 2 (1996): p. 143.

2. "Corporate Empires," Multinational Monitor v. 17, no. 12 (December 1996). The information is from Forbes Magazine and the World Bank's World Development Report for 1996.

3. Jerry Mander, "Corporations as Machines," in Jonathan Greenberg and William Kistler, eds., Buying America Back. Council Oak Books (1992), p. 295.

4. The United States was born of a revolt against corporations, which had been used as instruments of abusive power by British kings. The new republic was deeply suspicious of both government and corporate power. Corporations were chartered by the states, not the federal government (the U.S. Constitution does not mention them), so they could be kept under close local scrutiny. The length of corporate charters was limited, and they were automatically dissolved if not renewed, or if corporations engaged in activities outside their charter. By 1800, there were only about 200 corporate charters in the U.S.

The next century was a period of great struggle between corporations and civil society. The turning point was the Civil War (1861-65). With huge profits from procurement contracts, corporations were able to take advantage of the disorder and corruption of the times to buy legislatures, judges, and even presidents. Lincoln complained shortly before his death: "Corporations have been enthroned... An era of corruption in high places will follow and the money power will endeavor to prolong its reign by working on the prejudices of the people... until wealth is aggregated in a few hands... and the republic is destroyed." Rutherford Hayes, who became president in 1876 due to a tainted election and back-room corporate-dominated elections, later declared: "this is a government of the people, by the people and for the people no longer. It is a government of corporations, by corporations, and for corporations."

Corporations gradually gained enough influence to rewrite the laws governing their creation: state charters could not be revoked, corporations could engage in any economic activity, etc. Their biggest success was in 1886, when the Supreme Court ruled (in Santa Clara County vs. Southern Pacific Railroad) that a private corporation is a "natural person" under the U.S. Constitution and thus entitled to all the protection of the Bill of Rights, including free speech. Given the vast financial resources of corporations to defend and exploit these rights, this meant, in effect, that corporations today are more free than any citizen.

In sum, during and after the Civil War there was a coup d'etat in the United States -- not a military takeover, but an illegal perversion of the institutions of state power. Except for a temporary setback during Roosevelt's New Deal (the 1930's), the United States has been governed by a corporate-state alliance since then.

5. "Inside the Money Chase," The Nation, (May 5, 1997): p. 25.

6. Information about the Bhopal disaster is from "The Bhopal Legacy: An Interview with Dr. Rosalie Bertell," Multinational Monitor 18, no. 3 (March 1997).

7. Richard Grossman, Corporations' Accountability and Responsibility, (unpublished.)

8. Henry Demarest Lloyd, Wealth against Commonwealth (New York: 1894), p. 517.

9. Herman E. Daly and John B. Cobb, Jr., For the Common Good (Boston: Beacon Press, 2nd ed. 1994), p. 178.