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Corporations Rule the Waves

Corporations Rule the Waves

The modern for-profit corporation – with its characteristics being (1) a government-created legal entity (2) with multiple owners (3) who have no personal liability for corporate acts and (4) whose ownership interests (stock) are transferrable – can be traced to European expansionism. In 1600 Queen Elizabeth I issued a charter to the British East India Company giving the new corporation a 15-year trade monopoly. East India investors made lots of money, but Elizabeth’s underlying purpose was growing British influence in what would become the Crown’s largest, most lucrative colony. Early corporations in the United States also had limited grants of power and were expected to advance specific public purposes. The idea that for-profit corporations, all of whom are created and protected by government, had to justify themselves by serving the public good eroded over time, and most of us now accept for-profit corporations as amoral entities whose basic purpose is to enrich shareholders through applying corporate assets to business opportunities.

The United Nations Environmental Program Finance Initiative traces its roots to 1991 as a public-private effort to reduce environmental damages caused by the world’s largest corporations. UNEP estimates over $2 trillion as the world’s 2008 costs of “externalities” from the world’s 3,000 largest public corporations. “Externalities” are costs to the public, such as global warming from greenhouse gases, which are not paid for by the generators of those costs. The failure of national governments to reduce worldwide carbon dioxide emissions, despite treaty commitments and much talk, has led some to advance for-profit corporations as planet rescuers. The approach has some appeal; for-profit corporations are theoretically immortal, surviving the deaths of founders and shareholders, and logically should have long term perspectives. Some corporations may, but others are certainly run by mortals who emphasize quarterly profit reports over broader issues.

Unless good corporate environmental stewardship is rewarded by markets, I think it’s unrealistic to expect for-profit corporations to lead us into sustainable natural resource consumption. It’s more appropriate for governments to level the playing fields by requiring responsible behavior from everyone; businesses should not have to operate under competitive handicaps from exceptional good citizenship. This admittedly is a huge problem; there is no world government capable of enforcing restrictions on a country’s greenhouse gas emissions or other externalities. I’ve often heard the argument that new American environmental restrictions would be useless, because China builds a new coal-powered, CO2-emitting, electricity plant a week, and no one outside China can do much about it. But we should take lots of bites at the climate-change apple, and it may be that the very smart men and women who lead top corporations will get together, with UNEP as a start, and move the world for all of us.


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