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There clearly is a difference between a small cooperative oil company and Exxon. There clearly is a difference between a small telephone company in Nebraska and I.T. & T., sprawling worldwide from Belgium to Chile.
There clearly is a difference between du Pont and a small producer of plastic.
Economically, there's a difference in terms of control over markets or sharing in an oligopoly situation. Politically there is a difference in terms of the influence over Government and Government's
response to these corporations.
I challenge any economist or lawyer to be able to show this committee any Government policy which prevents small business from going bankrupt; yet big business now is too big to go bankrupt. It goes to Washington instead.
If you are a big enough corporation, you are too big to fail. The Congress knows that and the executive branch knows that. That is a transcendence of the market system. That is a recent development in terms of its decisive predictability, whether it is any large corporation, even ones which are properous such as Exxon which has been on corporate welfare from the Federal Government for decades through tax
preferences, import quotas, and other facilities.
Westinghouse Corp. now having trouble selling its unbuilt, floating nuclear plants wants the Federal Government—in a letter from the president of Westinghouse, Mr. Kirby, to the Federal Government, on May 1975—to buy these floating nuclear plants and lease them back to the utilities. Mind you, there was a time when a company which had no product, which Westinghouse does not have—it has never built a floating nuclear plant, doesn't even know if it will float—a company that has no product and no firm customers would call it a day and go and produce something else. Instead, Westinghouse goes to Washington.
Economic size in the control over 'both economic and political factors is significant. Economic size in terms of the merger or influence with Government forces, protecting these corporations from market forces and shielding them with taxpayers subsidies is of significance.
The new technology gives these corporations a different significance as well. A hundred years ago, no matter how much a company may have aspired, it could not effect the ozone level. A hundred years ago, it was not possible to distribute a drug worldwide in a few weeks once it was ready to market, and possibly damage thousands of people.
A hundred years ago, it was not possible to challenge the very integrity of the thin slice of life around the Earth, where 4 billion people live, a slice comprising about 3 to 4 miles of the usable air, water, and soil.
A hundred years ago, it would have been inconceivable in this countrv for corporations to be in collusion with the CIA, to be in collusion with other forces making our own foreign policy for us without our knowledge or review.
A hundred vears ago, it would have been impossible for corporations to discount the health and safety of future generations as plutonium can for 200,000 years.
A hundred years ago, corporations were different. The only thing that hasn't changed is the State of Delaware and its lowest common denominator, money.
In the United States, the historie challenges to corporate power have been four: The populous progressive challenge with direct democracy techniques such as initiative, referendum, recall; and different modes of economic organizations such as cooperatives.
The second was the regulatory Government challenge. That is, the regulatory agencies, the alphabet agencies, starting with the ICC.
Third was the labor union challenge.
A study of how corporations have responded to these challenges is a study of how Mandarin China absorbed its challengers centuries ago.
The corporate income tax becomes the corporate sales tax passed on to the consumers. The law of contracts is subverted or made a mockery, whether between military contractors in the Pentagon or the contract of adhesion that is imposed upon consumers with uniform provisions industrywide on a take-it-or-leave-it basis.
The regulatory protections have revolved too heavily upon the ability of corporations to control the political processes to almost name the political appointees to these agencies and to surround these agencies with overwhelming corporate manpower.
The consumer environmental approach arises out of the context of these other legacies. It is trying to make the regulatory agencies work, in a context where it is almost impossible for these regulatory agencies to be free of their corporate influence.
The labor unions traditionally have been reduced to bread and butter issues so narrow that they don't include consumer advocacy, or antitrust, or the role of corporations generally.
In some areas, these unions have been transformed back into de facto company unions on many issues; and in other areas, they have stuck to such a narrow trajectory that they have lost their potential as a serious countervailing force to corporate power, except at the conventional bargaining table, and even that is limited with only one out of four workers in this country belonging to a union.
The Federal chartering proposals rise before this background. It is against a background of a huge body of empirical information showing rampant corporate crime, an epidemic of late only because it was disclosed; showing manhandling of shareholder rights and a progressive atrophy, even in theory, of their status; showing exploitation of taxpayers, consumers, and the community; showing such gross insensitivity as to result in a refusal to inform workers of the lethal chemicals or gases that they have been working closely with on a dayby-day basis.
Also controlling small business. Small business doesn't speak up as much any more because it is indentured in many of its activities through franchise agreements, exclusive supplier contracts, and other abilities of the principal corporations to determine the fate of small business.
You have here, Mr. Chairman, the constituencies in America which should control the economic system, consumers, shareholders, taxpayers, workers, small businesses, instead what has happened is rather
ingenious. Nobody can accuse the corporate system of not being resilient. What happens is that even the abundant economic wealth to which workers have claim is stripped from their control, $180 billion worth of pension funds. They have a claim to these pension funds, give or take a few abuses; but they don't have control over the use of these pension funds. The same is true with the taxpayers revenues. In a rather bizzare way, these corporations have either owned what consumers control, or control what shareholders own. For example, consumers control automobiles and houses all over the country. They don't own most of these automobiles or houses. Shareholders are supposed to own the corporation, but they don't control the corporation.
Let me briefly describe these proposals because they are proposals and they will be subject to discussion pursuant to the committee's working on more specific legislation.
Federal chartering brings the law up to date with economic, political, technological reality. Its thrust, contrary to its detractors, is not principally regulatory. Its thrust is to give sufficient information, rights, and remedies so that aggrieved groups and/or individuals can initiate on their own the processes of change and justice.
Again, we must keep in mind the major constituencies: Shareholders, consumers, workers, taxpayers, community residents, and small businesses. This is what the antitrust laws should be doing by policing the market from monopolistic practices. For example, they give small businesses or other businesses the opportunity to at least let the market do what it can do. It can't do everything, but it certainly can do something. But there have been too many obstructions placed in the way of private antitrust lawsuits to permit this self-help instrument to work.
The market can generate some efficiencies, but it cannot take care of future generations, for example, who are not around to prevent pollution now that they will suffer from later.
So, the thrust of Federal chartering is a shift to develop a parallel accountability pattern outside the regulatory process insofar as that is possible. For example, more shareholder rights, more shareholder information, more shareholder connection with a board of directors under cumulative voting is going to permit more shareholders to stop the looting of their assets or the disregard of their rights.
It is very significant and many corporate lawyers will tell you, as you have already heard, that if shareholders don't like it, they can just get out. That, of course, is a perfect argument for perpetuating corporate tyranny.
The whole thrust of our democratic system is that if you don't like what's going on, you can stay in and fight. You don't have to get out and leave the domain to the culprits.
The proposals in the shareholder context include constituency directors. We think that board of directors must not only have general duties, but must have specific duties to develop within the corporation specialized obligations at the highest level in such areas as sales, finance, research and development, environment, consumer, worker rights, and other major activities.
In that way it isn't just this vague, amorphous corporation, that someone is asking to be accountable. It is particular segments within the corporation that have specific accountabilities. It also permits an abolition of the most rigid, totalitarian system that comes under the guise of democratic elections, namely, the corporation's electoral process.
The corporate electoral process is an imperfect carbon copy of the way the Kremlin conducts its own elections. In fact, the Kremlin might have learned from the corporations how to develop its processes.
As long as the advocates of present corporate power want to argue retaining the status quo, they have to answer two major legitimacies that they are under, among others, if they say the shareholders are the final arbiters, then they have to ask why the shareholders don't have the rights to stay in and arbitrate right through to the replacement of the executives and board of directors without being stifled by a clearly rigid system where the rulers of the corporation can perpetuate themselves, using the corporation's money in a proxy system that is an absurdity.
They also have to explain the other legitimacy of the corporation; and that is risk-taking. The giant corporation now is moving into a process of eliminating risk. Hundreds of hearings in the congressional arena in the last 20 years have as their major theme the elimination of corporate risk.
Traditionally, corporations were developed to give shareholders limited liability. Now, the corporations themselves want limited liability. They want it in the form of Government guarantees, in the form of protection from competition, in the form of limitations on products liability lawsuits. They want it in a whole host of forms which boil down to one precept: The giant corporation in America is striving relentlessly for a state of affairs whereby it can capitalize its profits and socialize its losses.
The Federal charter concept gives initiatory rights and remedies to shareholders, taxpayers relating to subsidy matters, consumers in terms of more information, more competitions, more class actions, to the community to defend itself from the systematic, no matter how inadvertent-poisoning of its atmosphere and environment, by companies such as Allied Chemical and its “crocodile bird” company; Life Sciences in the kepone tragedy; or Gary, Indiana, where United States Steel somehow thinks it owns the air and the water; or in Minnesota where Reserve Mining, a joint venture of Armco Steel and Republic Steel, has contaminated Lake Superior with microscopic asbestos fibers, as well as the drinking water and air in the area; and such examples flood this country.
The poisoned children, lead contamination in their bodies near El Paso, from the lead smelter; and so on, and so on, ad nauseum.
The concept of accountability to the constituencies that are abused directly is a concept square in the tradition of our legal evolution. To be sure, it uses the courts. To be sure, there are some agencies such as the SEC that have to lay down some functions and standards; to be sure there's nothing wrong with a government that is responsive to the people.
The extent of coercive impacts or nonconsensual relationships is the ethic out of which this proposal arises. Coercive impacts which harm people, which makes economies inefficient, which retard innovation.
I would like to say a word about innovation.
Traditionally, corporations have been associated with innovation. What they don't like to publicize is the innovation they have suppressed, whether it is safety systems in automobiles, cable TV in communications, satellite communications vis-a-vis A.T. & T., or solar energy which amounts to a technological abundance that threatens the relative technological scarcity characterized by capital investments in fossil fuels.
We must recognize this chartering proposal as a liberation of smallscale innovators who want to become more expansive and a liberation of small-scale business which is now under the heel of these giant corporate powers.
It is important, I think, to recognize that these giant corporations are not similarly viewed qualitatively in their impact. They have to be viewed quantitatively as well.
Exxon grossed $45 billion last year. In the Western Hemisphere in terms of gross revenues, that places Exxon in the following ranking: The U.S. Government first; Brazil, second; Canada, third; and Exxon, fourth. Texaco is coming up fast. You are dealing here with corporations that have achieved such market and such political power that they have been characterized as private governments. Private governments must be subjected to the rule of law.
Let me conclude on this note, Mr. Chairman, in the public health area, health specialists are beginning to be concerned about cancer as an environmentally caused disease. Almost every study that has been made on this subject comes down on the estimate that cancer-about 80 to 90 percent of cancer is environmentally caused. That means pollution, carcinogenic drugs, food additives, cigarettes, and the like; all of which are developed, promoted, or carelessly handled by corporations, including the relentless promotion to make millions of Americans addicted to cigarettes. Even the addiction area, in substantial part, can be laid at the door of these companies. So that the phrase "corporate carcinogens” is beginning to come into play. Corporations, with their pollution, worker hazards and additives, are a cause of cancer.
It almost sounds like something new. It almost sounds like the two words have never been juxtaposed. But there's nothing new empirically about those two words, because workers have been exposed to corporate-produced cancer for decades. What is new is that our perception of corporate impacts has not been fully reflective of the empirical reality because the facts are not getting out until recently; and when they do get out, they are not communicated in the intensive way that Morris the cat communicates its message to millions of Americans on television.
The perceptual development of corporate impacts is difficult to communicate only in a country where the communication systems are not amiable to the serious consequences of these impacts.
Indeed, in many ways we have to view corporate institutions as the most concerted, unified, and powerful source of influence in the country. Much of what Government does is derivative of what corporations ask Government to do or push Government to do. We know that. Labor unions themselves are often derivative of corporate power; and when have you ever heard of dissenting tendencies within giant corporations