"Statutes have become so broad and sweeping that they let a corporation do just about anything it wants... State law does not and cannot exert any real controls. Corporation statutes and most judicial decisions largely tend to reflect the interests and orientation of management or, to use another popular term, insiders. In short, state law has abdicated its responsibility. As a result, only federal law can handle the situation."
Fast forward to 2013 -- federal law has fallen even further behind the challenges presented by today's corporations. America is now "Corporate America." Commercialism is rampant throughout our culture. Corporations are considered "persons," -- entitled to many constitutional rights of actual persons without any of the legal consequences. Corporations can pour endless funds into political campaigns. Their executives regularly step through the "revolving door" into high government positions. Companies such as ExxonMobil, Pfizer, DuPont, Citigroup and Lockheed Martin act like they are above government authority. And big banks are "too big to fail." In the 21st century, the global corporation is deplorably close to being above the rule of law. So much for "a mere legal description."
The time for federal chartering of corporations is upon us. Meaningful federal chartering could improve corporate accountability to owner-shareholders, employees and the public. It is a concept that has been around since nearly the birth of the nation -- in fact, James Madison warned of the dangers of big business, stating that companies "would pass beyond the authority of a single state, and would do business in other states." Twice, Madison proposed that Congress be given the authority to "grant charters of incorporation in cases where the public good may require them and the authority of a single state may be incompetent." A formal vote on these proposals was never taken -- some argued it was unnecessary while others suggested it might lead to monopolies. The idea reemerged in the early 1900s with Presidents Roosevelt, Taft and Wilson all supporting federal corporate chartering as a tool of accountability. The idea continued to be bounced around throughout the 20th century, but nothing ever came of it, and corporations have grown much larger, more conglomeratized and less accountable as a result. In 1976, I, along with Mark Green and Joel Seligman, wrote the book Taming the Giant Corporation which focused on this potentially transformative idea. Congress held hearings, but no federal chartering law was created.
Large corporations have essentially become private governments with an enormous effect on the lives and livelihoods of Americans, but without any accountability to them. The words "corporation" or "company" do not exist in our constitution! This is the antithesis of democracy -- a corporate state run by the few without the consent of the many. The restraint once offered by economic risk has been offset by limited liabilities, government subsidies and bailouts. The power of an effective federal chartering system could instill a new culture of restraint and good behavior within the corporate world, to force corporate bosses to answer to shareholders, to prohibit corporations from lobbying and contributing to electoral campaigns, and from obstructing regulators -- in short, to "constitutionalize the corporation." Corporate attorney Robert Hinkley wrote of ideal corporate charters: "the duty of directors [is] to make money for shareholders, '...but not at the expense of the environment, human rights, the public health or safety, the communities in which the corporation operates or the dignity of its employees.'" Perhaps most importantly, federal charters could end the "legal speak" that has awarded perpetually living, profit-driven corporations even more rights than those held by individual citizens.
A modern federal chartering agency with comprehensive authority could enforce the agreement between government and business to the benefit of the public interest. It could put an end to the wheeling and dealing that corporations use against state governments. And such an agency could be open and accessible to citizen concerns.
Legal speak aside, perhaps a more definitive description of the corporation is the one given by writer Ambrose Bierce -- a corporation is "an ingenious device for obtaining profit without individual responsibility." By supporting meaningful, constructive federal charters crafted to reflect good business practices and American values, we can weaken the corporate domination that now threatens our democracy.
For more on how federal chartering can curb corporate power, see the chapter "Create National Charters for Large Corporations" of my new book, The Seventeen Solutions: Bold Ideas for Our American Future. Available and autographed from Politics and Prose, an independent book store in Washington D.C.