May 23, 2024
Dear Friends,
Although it sometimes seems like just yesterday, my book When Corporations Rule the World was released into the world in 1995—29 years ago. It remains the book for which I am best known. Available in many languages and addressing questions much on people’s minds, the book quickly became an international best seller.
The world was then just awakening to the devastating consequences of growing corporate control of the global economy. Today, many of the economic system disfunctions I raised then remain and, in some cases, have become even more problematic and wide-spread.
The ever-more daunting barriers to a better future continue to trace to the abuses of power of transnational corporate monopolies. We are dealing with a corporate form designed to serve colonial extraction in the imperial era we must now put behind us.
The focus of my work since the book’s release has been on framing and advancing an alternative future devoted to the wellbeing of Earth and its people, a future we now call an Ecological Civilization.
— David Korten
The Essential Corporate Transition:
From Imperial Shareholders to Community Stakeholders
David Korten | May 23, 2024
The global interdependence of modern society requires that we work together in historically unprecedented ways to secure the wellbeing of all in every aspect of life. More than four centuries ago, we invented the legal instrument of the corporation as an institutional form to bring large numbers of people together around a unified purpose.
This instrument was originally created to pursue new opportunities presented by the imperial era of the time. Its specific form was consistent with the wishes of the imperial rulers then in charge.
The context has now changed dramatically. We have a continuing need for institutional forms that facilitate large scale cooperation. But we must rethink and redefine the corporate form in ways appropriate to our current needs and circumstances.
As defined by The American Heritage Dictionary, the corporation is:
“An entity such as a business, municipality, or organization that involves more than one person but that has met the legal requirements to operate as a single person, so that it may enter into contracts and engage in transactions under its own identity.”
Corporations can take many forms. These include for-profit businesses, governmental entities, and private non-profits. If it is a for-profit business, its ownership shares may be privately held or publicly traded.
A corporation can centralize and monopolize control of virtually unlimited assets in the hands of individual owners who control the voting shares. Or it can localize and distribute the powers of ownership among many thousands of stakeholders with a natural concern for the wellbeing of the community in which the corporation operates. The Mondragon Cooperative in the Basque region of Spain is a leading example of the latter.
To discuss and address such foundational options in a meaningful way, we must give them conceptually meaningful names.
The World Economic Forum brings together the world leaders of business, government, and civil society to dialogue on global issues. Klaus Schwab, its founder and executive chairman, calls attention to an essential distinction between Shareholder Capitalism devoted to maximizing corporate profits and Stakeholder Capitalism devoted to the wellbeing of all stakeholders in the communities in which the corporation does business.
Advancing a global economy on the community stakeholder model is for Schwab a defining life cause. His foundational distinction is readily applied to the corporations that make up a global economy, thus giving us names for two specific corporate types.
- Imperial Shareholder Corporations are structured to maximize profits under control of and for the personal benefit of hyper-wealthy owners. They support authoritarian rule.
- Community Stakeholder Corporations are structured to distribute and localize power to secure the wellbeing of communities in which the corporation does business. They support deep democracy.
Imperial Shareholder Corporations trace their history back to the tradition and structure of the English East India Company, a corporation created and managed to exercise monopoly power in service to an imperial agenda. Such corporations can give enormous power to those who control them.
The history of this currently dominant corporate form traces back to 1600, when Queen Elizabeth I granted a group of private investors a legal charter giving them an initial 15-year monopoly on all English trade with India and East and Southeast Asia. This original corporate charter created the English East India Company, which later became the British East India Company.
As it amassed human, financial, and military resources in service to the British Empire’s colonial expansion and exploitation, the British East India Company came to virtually rule India from the early 18th century until the British Crown dissolved it in 1858. For further detail, see this account of “How the East India Company Became the World’s Most Powerful Monopoly.”
At one point this company commanded a private army of 260,000 soldiers, twice the size of Britain’s standing army at the time. Beginning in the early 1620s, the British East India Company became active in the global slave trade, transporting slaves from Africa to provide conscripted labor for the company’s operations in Asia. It imported tea from China for sale in Britain financed by illegal opium exports to China. When China rebelled against the opium trade, the British government responded with war ships. Britain’s victory led to the British takeover of Hong Kong.
A few owners of contemporary Imperial Shareholder Corporations use their control to align their corporate assets in service to the wellbeing of the communities in which they do business. Yvon Chouinard, founder of Patagonia outdoor recreation clothing is a leading example. Unfortunately, these are exceptions. And maintaining a commitment to community service is difficult for an Imperial Shareholder Corporation. Owners inevitably become incapacitated and die. New owners may not share the previous owner’s social commitment.
A Community Stakeholder Corporation organized as a worker/community cooperative distributes ownership among many owners who live in the communities in which that corporation does business and who share a natural concern for the wellbeing of those communities. In the cooperative model, each owner owns one share and has one vote. That share can only be sold back to the cooperative for sale to another qualifying community member. This corporate ownership structure is equitable, democratic, aligns decision makers with community wellbeing, and is well secured against external takeover.
We have many examples of relatively small businesses converting to worker-owned cooperatives. I am not aware, however, of any example of the conversion of a major Imperial Shareholder Corporation into a Community Stakeholder Corporation. The need to change this becomes increasingly urgent. Just in the consumer goods economic sector, transfer of brand ownership in recent years has consolidated the ownership of more than 550 familiar brands in the hands of the controlling owners of just 12 companies.
The Community Stakeholder Corporation is an institution essential to the wellbeing of modern society. By contrast, Imperial Shareholder Corporations are an illegitimate institutional form from an imperial past we must now put behind us. It is time to break them up and convert them to worker/community ownership as part of a larger agenda of equitable wealth redistribution.
Bear in mind that human institutions are human creations. Their only legitimate purpose is to secure and enhance our human well-being. If an institution is not fulfilling this purpose, it is our public duty to transform or eliminate it.
We now witness growing calls to break up corporate conglomerates to restore some semblance of market competition. Not only must these corporations be broken up to restore market competition. We must also convert the individual companies to structures that assure ownership is shared and deeply connected to a commitment to the wellbeing of the communities in which they do business.
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Noteworthy …
After his Deep Transformation Network May 14 online conversation with Marjorie Kelly – “Decoding the Operating System of Global Capitalism” – Jeremy Lent wrote:
“This is the kind of conversation that, as Marjorie puts it, helps to break the trance of the hypnotic sleepwalking to disaster that our current system is taking us on.”
View the video…
(The Zoom link follows a few paragraphs of important introductory text.)
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The Best Chance We Have: Antimonopoly on the Rise
Check out Stacy Mitchell’s rousing keynote speech – “Democracy vs. Big Tech: We Can Win the Fight Against Monopoly Power” – for the 2024 Bioneers Conference.
“There is a remarkable movement afoot that is making real headway in reviving our anti-monopoly policies.
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I don’t know if this movement can outrun the forces of authoritarianism. But I think it’s the best chance we have.”
Watch and/or read Stacy’s speech
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America – Democracy or Plutocracy
by Frances Moore Lappé
May 9, 2024
“What happened to the middle class in the United States? The rich ate it.
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The pain of Reaganomics should have taught us one clear lesson. A market economy can only work for the common good within rules set democratically—free from private control—to ensure opportunity for all.”
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Mondragon Seminar and Tour
October 6-12, 2024
Dive in for a life-changing immersion experience with the world’s largest and most successful consortium of cooperatives in the Basque region of Spain.
“Mondragón has proven that another economic world is possible, and that worker ownership is a practical and ethical alternative to business as usual.”
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From the Book Shelf …
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When Corporations Rule the World (Third, 25th Anniversary Edition, 2015)
Conclusion – Institutional Power (Page 332)
“My goal in 1995, the year the original edition of When Corporations Rule the World launched, was to advance public understanding of the system of corporate rule…
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My focus was on the need to ‘strip corporations of their power and claim our right to organize as caring, sustainable communities able to make our own political, cultural, and economic choices.’
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It is not sufficient to tame the institutions of the global capitalist suicide economy. The cultural and institutional system must be replaced by the values and institutions of a wholly different system.
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Once we are clear on the essential distinction between the old and new institutional structures, we can focus our time and energy on strengthening the institutions of a living economy rather than on slowing the damage with marginal adjustments to the institutions of the suicide economy.”
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