Little remains of the numerous conflicts between these two camps owing to the collapse of Communism beginning about ten years ago. The victory of private enterprise, with its claim of being based in the cherished reality of human freedom, covered the victory with a moral and humanistic cast. “The End of History”, as Francis Fukuyama entitled his 1992 book, does appear to be here—and just in time for the 21st century.

Others would say that the history of human freedom has only started—and that there are alternatives to the behemoths of both largescale enterprises like corporations, the type of private enterprise at issue here, and government authority over society as dominant motifs. One such alternative was advertised on television throughout much of 1999. The ad promoted something called “Florida’s Natural” orange juice as a product of a “co-op of Florida growers whose only business is making juice. They own the land, they own the trees, they own the company.” This co-op message, plainly and clearly delivered, stuck out from the usual glut of slick and clever corporate self-promotion as immaculately as a white gown amongst dark business suits for those as accustomed as most Americans are to a steady (albeit forced) diet of corporate messages only.

Further checking revealed that the co-op, called CitrusWorld, Inc., based in Lake Wales, Florida, comprises 12 grower organisations owning close to 60,000 acres of citrus groves, with a 540-acre citrus fruit processing center capable of extracting juice from over 10 million pounds of oranges every 24 hours. The juice is sold in liquid and frozen forms as a broad variety of juice products. The co-op also has a processing plant in Fullerton, California, and has recently planted over 15,000 acres of new groves in South Florida.

Cooperatives in this country have existed since its founding. President Washington’s cabinet contained a
co-op advocate. Subjecting co-ops to damnation by faint praise as just another way to do business
(something implied by President Reagan, for example) misses the point, however. Co-ops are not just
another way to do business. They are the next step forward in human freedom and democracy. A step that
will take us beyond the American Revolution, the French Revolution, and all other efforts aimed at
lifting people out of the socially repressive aspects of monarchies and the Middle Ages.

 Who Own Americans?
In the typical corporation, whether employing a few dozen or a few hundred thousand people, control is
centralized at the top in the hands of a small number of relatively wealthy shareholders and high-level
executives. All others are, to use a Prout term, “subordinated” to their desires and decisions. The vast
majority of people working in these structures, including mid- and lower-level managers, are under their
control either directly or indirectly. To use the language of government, they lack the freedom to govern
themselves within the corporate structure. True freedom to decide is reserved for a few. This consolidation
of authority makes corporations “private” in spite of the fact that the buying and selling of shares on
the open market makes them seem to be “public” entities.

Thus, though ideologues of the modern system of thought called Liberalism like Francis Fukuyama, Milton Friedman (who wrote Capitalism and Freedom), and a multitude of others claim that we live in the freest of conditions, reality is something else when we look at how the private sector is set up along lines that could be called more fettering and authoritarian than free or democratic. It is more accurate to say that we lose our freedom—and democratic rights—when we go to work, and that private enterprise is a mechanism that institutionalizes this loss. On the door to every corporation should read the inscription, “Democracy not allowed. Leave your rights at the door.”

The New Synthesis
Co-ops resist the deprivation of freedom inherent in corporate enterprise. Rather than centralize decision-making, they decentralize it so that all members partake in key decisions, either directly or through a board of directors that they themselves elect. It is like the difference between being told by your parents what to do (even at age 50 or 60)
and being able to decide for yourself. Or between being told how to vote by party apparatchiks and weighing the virtues of various candidates and voting for yourself.

In dialectical terms, co-ops transcend the mediation and alienation inherent in both the large-scale private
enterprise of Capitalism and the centralized government control of the economy of Communism. The former
interpose a relatively small number of powerful corporate shareholders between employees (including most
managers) on the one hand and significant decision-making power and other legal benefits like rights to
profits on the other. The latter interposed the state, party apparatchiks and bureaucrats. Even trade unions,
said to be the most advanced form of labor organization in modern industrial societies, fail in this regard
They maintain the mediation between employer and employee rather than unify employer and employee in
worker/manager ownership, as co-ops do. The welfare state, the ambition of the modern Liberal Left, especially
on the federal level, also fails to overcome this mediation.

Both unions and the welfare state also have to contend with the caprices of political democracy, which has no
principled commitment to improving prevalent economic conditions. Often-lost battles for better income, better
working conditions, a shorter work week, mandatory health insurance and the like will continue until this
mediation is overcome, as will, most likely, extreme economic disparity.

Psychological Deprivation
Cooperatives overcome the contradiction between the promise of freedom and its extensive denial in the
economy. They also advance humanity psychologically and socially. Insofar as they extend decisionmaking
and other benefits beyond a small circle of key share-owners and executives to working members as a matter
of right, based on recognition of human freedom and rationality, they are psychosociologically embodiments
of a more mature condition of humanity.

Corporate enterprise, to compare, is a system that prolongs childhood and adolescence for the majority
since it reserves substantial freedoms and rationality for a few key players. By consolidating
organizational power and subordinating others beneath them in employee status, these few potentates
also instill a psychological condition of subservience in those beneath them, a condition broken only
at the risk of being fired. In the sense of being autocratic-dictatorial, large-scale private
enterprise, like that in large corporations governing many people, resembles the Communism it reviles
and the monarchies it overthrew. Its whole structure contains an intrinsic, fundamental social
inequality, not simply differences in opportunities to accumulate wealth. This social inequality is not
remedied by either equal civil or political rights since it is an essential part of modern economic
dynamics and the civil rights system. In Freudian terms, employee status resembles the infantile oral
receptive stage of character development.

“By the oral-receptive character Freud means the person who expects to be fed, materially, emotionally and intellectually. He is the person with the ‘open mouth,’ basically passive and dependent, who expects that what he needs will be given to him, either because he or she deserves it for being so good, or so obedient, or because of a highly developed narcissism that makes a person feel he is so wonderful that he can claim to be taken care of by others” (Fromm).

Employees of course work for a living, but they are essentially passive recipients of the orders of executives and owners. As a result of their work and status they expect to be taken care of via paychecks and benefits and to be relieved of the responsibility for decision-making characteristic of the mature personality. Many people operate from the oral-receptive stage of existence; many others who are mature and capable however are forced into this state by anti-democratic, authoritarian economic structures.

This category of character applies even more to the consumer mode of existence, by which people select from among the products and services offered them by others. Consumption of course is to a large degree oral-receptive by nature, but it can be more pro-active if organized cooperatively. In consumer co-ops consumers decide for themselves which products should be sold in their stores and have active, direct relations with manufacturers rather than submit to the tender mercies of middlemen. Large-scale private enterprise utilizes both socio-economic roles—the employee and the consumer—to impose or reinforce the psychological condition of dependence. Psychologically more mature conditions—independence, pride, and greater self-repect—are systematically stunted.

The main structural difference between corporate and communist enterprise is that in the former a relatively
small number of business owners and managers, instead of the monolithic state and its agents, accumulate
economic decision-making powers and rights over the majority of society. In both cases, however, working
people are administered like cattle or machines, not full-fledged participants in company policy-setting
procedures. Compare Bill Gates giving orders down the ranks to tens of thousands of employees with yourself
discussing freely and deciding democratically in a cooperative you own jointly with other working members, and
you will begin to get the idea about what is at stake.

Cooperatives are not just another business option—they are another species of economy altogether because of the way they affect and embody freedom. To the extent that freedom is a part of our humanity, co-ops reflect our humanity far better than either large private enterprises controlled by a few key players or Communism. And since, according to some philosophers, deliberative freedom, and not blind obedience or deference, is an element of morality, co-ops can better embody morality, too. This makes them a moral imperative, not just a business or political choice of convenience. The moral, humanistic economy of choice is mainly cooperative.

The moral and humanistic superiority of cooperatives is currently no shield against private enterprise,
however. Dan McSpadden of the marketing department at CitrusWorld declined to answer questions about the
co-op in large part because of the possibility that corporate juice manufacturers would use the information
against the company. A very real possibility considering the competitive—or, in less polite terms,
carnivorous—ethic of the private sector.

How Americans Lost Economic Freedom
The stage for the subservient position of most Americans in the economic structure was set at the nation’s founding. Then the economy was largely agrarian. Self-employment was the norm.

According to historian Joyce Appleby, the ideological ambience of the young economy was strikingly characterized by “the association of America’s prosperity with free labor —the free and independent labor of farmer-owners and their families” (italics added). Family farms were the expected norm—not employeeship, which to Americans of that time may have appeared closer to plantation slavery or European serfdom than independence.

Nevertheless, there was no prohibition or restriction on the exchange or accumulation of property. It is the
right of exchange and accumulation, otherwise known as the free market, that led to the accumulation of
productive property in fewer and fewer hands and the consequent demotion of free and economically independent
Americans to dependent hired-hand status. Most modern Americans have lost a freedom and independence that
earlier Americans once had. Rather than making people free, the “free” market, for most people, removes it.

Modern politics by both Left and Right is a continuation of what Prout terms the “subordination” inherent in employeeship.

The Left, after promoting the welfare state, government regulation and strong unions for several decades last century, has now widened and significantly shifted its focus to promote environmental protection, civil and cultural rights for racial and ethnic minorities, and gay agendas, using the free market as its economic engine.

The Right of course still promotes private enterprise and bitterly opposes any infringement on it. Entrepreneurial ventures and small family enterprises may receive support, but not in principle at the expense of corporations and shareholders. The freedoms the Right promises via the economy are radically curtailed when they concern
employees, which most Americans are. A large number of supporters of the Right are thus under an illusion about their own politics, and myopically assume only government can be the enemy of liberty. Neither Left nor Right promotes as a matter of principle the “insubordinate” kinds of economy embodied in small entrepreneurial
ventures, small family enterprises and cooperatives.

The current stage was set for the Left, or New Left, during the 1960s, when it made its fateful break from the communist-influenced economic thinking of the Old Left. The African-American civil rights movement came to serve as a paradigm for other social groups who in turn adopted the garb of the oppressed, including women, gays, and other racial and ethnic groups.

In opting for civil rights like desegregated schools and social venues as well as, later on, other rights against civil discrimination, the New Left effectively abandoned the Old Left’s goal of dictatorial control of the economy. As a result the condition of employeeship continues, though it would have anyway and in more extreme form under governmentcontrolled enterprise favored by communists had they come to power. In other words, the subordinated socioeconomic status of most Americans continues with the acquiescence of the main trends of the New Left. Unions, for all their value to working people, also perpetuate this subordination.

What Is to Be Done
Cooperatives like CitrusWorld stand as a repudiation by example to both the corporate private enterprise politics of the Right and the welfare state/minority civil rights focus of the New Left. Though no political, educational, social or religious leaders are taking up liberation economics via the cooperative cause at the moment, this is what is to be done if the majority of Americans, including minorities, are to taste true freedom, and greater dignity, in the economic sphere. According to Prout, to free the maximum number of working citizens from subordination the cooperative movement should include the manufacturing, service and finance sectors, not only agriculture. An
economic result of this step upward in dignity will be reduced economic inequity, another goal of Prout. Since co-ops greatly widen the population of owners, they will decentralize wealth into the hands of tens of millions more Americans—and not by taxation, which is unreliable for this purpose and is highly vulnerable to special interest
lobbying and the political centralization of power over society in the federal government.

CitrusWorld sells their fine-tasting orange juice and other products around the country and overseas under the brand names of Florida’s Natural (orange, grapefruit, apple, orange-pineapple and others), Bluebird, Texsun, Adams and Vintage, and are licensees of other brands. You can find their website at http//www.floridasnatural.com.

References
Appleby, Joyce. Capitalism and a New Social Order The Republican Vision of the 1790s, New York University
Press, New York, 1984, p. 42. Fromm, Erich. Greatness and Limitations of Freud’s Thought, Mentor,
New York, 1981, p. 53. Sarkar, Prabhat Ranjan. Proutist Economics Discourses on Economic Liberation.
Ananda Marga Pracaraka Samgha, Calcutta, 1992, pp.128-45.

After 23 years as a corporate securities attorney-advising large corporations on securities offerings and mergers and acquisitions – I left my position as partner at Skadden, Arps, Slate, Meagher & Flom because I was disturbed by the game. I realized that the many social ills created by corporations stem directly from corporate law. It dawned on me that the law, in its current form, actually inhibits executives and corporations from being socially responsible. So in June 2000 I quit my job and decided to devote the next phase of my life to making people aware of this problem. My goal is to build consensus to change the law so it encourages good corporate citizenship, rather than inhibiting it.

The provision in the law I am talking about is the one that says the purpose of the corporation is simply to make money for shareholders. Every jurisdiction where corporations operate has its own law of corporate governance. But remarkably, the corporate design contained in hundreds of corporate laws throughout the world is nearly identical. That design creates a governing body to manage the corporation-usually a board of directors-and dictates the duties of those directors. In short, the law creates corporate purpose. That purpose is to operate in the interests of shareholders. In Maine, where I live, this duty of directors is in Section 716 of the business corporation act, which reads:

…the directors and officers of a corporation shall exercise their powers and discharge their duties with a view to the interests of the corporation and of the shareholders….

Although the wording of this provision differs from jurisdiction to jurisdiction, its legal effect does not. This provision is the motive behind all corporate actions everywhere in the world. Distilled to its essence, it says that the people who run corporations have a legal duty to shareholders, and that duty is to make money. Failing this duty can leave directors and officers open to being sued by shareholders.

Section 716 dedicates the corporation to the pursuit of its own self-interest (and equates corporate self-interest with shareholder self-interest). No mention is made of responsibility to the public interest. Section 716 and its counterparts explain two things. First, they explain why corporations find social issues like human rights irrelevant–because they fall outside the corporation’s legal mandate. Second, these provisions explain why executives behave differently than they might as individual citizens, because the law says their only obligation in business is to make money.

This design has the unfortunate side effect of largely eliminating personal responsibility. Because corporate law generally regulates corporations but not executives, it leads executives to become inattentive to justice. They demand their subordinates “make the numbers,” and pay little attention to how they do so. Directors and officers know their jobs, salaries, bonuses, and stock options depend on delivering profits for shareholders.

Companies believe their duty to the public interest consists of complying with the law. Obeying the law is simply a cost. Since it interferes with making money, it must be minimized-using devices like lobbying, legal hairsplitting, and jurisdiction shopping. Directors and officers give little thought to the fact that these activities may damage the public interest.

Lower-level employees know their livelihoods depend upon satisfying superiors’ demands to make money. They have no incentive to offer ideas that would advance the public interest unless they increase profits. Projects that would serve the public interest–but at a financial cost to the corporation–are considered naive.

Corporate law thus casts ethical and social concerns as irrelevant, or as stumbling blocks to the corporation’s fundamental mandate. That’s the effect the law has inside the corporation. Outside the corporation the effect is more devastating. It is the law that leads corporations to actively disregard harm to all interests other than those of shareholders. When toxic chemicals are spilled, forests destroyed, employees left in poverty, or communities devastated through plant shutdowns, corporations view these as unimportant side effects outside their area of concern. But when the company’s stock price dips, that’s a disaster. The reason is that, in our legal framework, a low stock price leaves a company vulnerable to takeover or means the CEO’s job could be at risk.
In the end, the natural result is that corporate bottom line goes up, and the state of the public good goes down. This is called privatizing the gain and externalizing the cost.

This system design helps explain why the war against corporate abuse is being lost, despite decades of effort by thousands of organizations. Until now, tactics used to confront corporations have focused on where and how much companies should be allowed to damage the public interest, rather than eliminating the reason they do it. When public interest groups protest a new power plant, mercury poisoning, or a new big box store, the groups don’t examine the corporations’ motives. They only seek to limit where damage is created (not in our back yard) and how much damage is created (a little less, please).
But the where-and-how-much approach is reactive, not proactive. Even when corporations are defeated in particular battles, they go on the next day, in other ways and other places, to pursue their own private interests at the expense of the public.

I believe the battle against corporate abuse should be conducted in a more holistic way. We must inquire why corporations behave as they do, and look for a way to change these underlying motives. Once we have arrived at a viable systemic solution, we should then dictate the terms of engagement to corporations, not let them dictate terms to us.
We must remember that corporations were invented to serve mankind. Mankind was not invented to serve corporations. Corporations in many ways have the rights of citizens, and those rights should be balanced by obligations to the public.

Many activists cast the fundamental issue as one of “corporate greed,” but that’s off the mark. Corporations are incapable of a human emotion like greed. They are artificial beings created by law. The real question is why corporations behave as if they are greedy. The answer is the design of corporate law.
We can change that design. We can make corporations more responsible to the public good by amending the law that says the pursuit of profit takes precedence over the public interest. I believe this can best be achieved by changing corporate law to make directors personally responsible for harms done.

Let me give you a sense of how director responsibility works in the current system. Under federal securities laws, directors are held personally liable for false and misleading statements made in prospectuses used to sell securities. If a corporate prospectus contains a material falsehood and investors suffer damage as a result, investors can sue each director personally to recover the damage. Believe me, this provision grabs the attention of company directors. They spend hours reviewing drafts of a prospectus to ensure it complies with the law. Similarly, everyone who works on the prospectus knows that directors’ personal wealth is at stake, so they too take great care with accuracy.

That’s an example of how corporate behavior changes when directors are held personally responsible. Everyone in the corporation improves their game to meet the challenge. The law has what we call an in terrorem effect. Since the potential penalties are so severe, directors err on the side of caution. While this has not eliminated securities fraud, it has over the years reduced it to an infinitesimal percentage of the total capital raised.

I propose that corporate law be changed in a similar manner–to make individuals responsible for seeing that the pursuit of profit does not damage the public interest.
To pave the way for such a change, we must challenge the myth that making profits and protecting the public interest are mutually exclusive goals. The same was once said about profits and product quality, before Japanese manufacturers taught us otherwise. If we force companies to respect the public interest while they make money, business people will figure out how to do both.

The specific change I suggest is simple: add 26 words to corporate law and thus create what I call the “Code for Corporate Responsibility.” In Maine, this would mean amending section 716 to add the following clause. Directors and officers would still have a duty to make money for shareholders, … but not at the expense of the environment, human rights, the public safety, the communities in which the corporation operates or the dignity of its employees.

This simple amendment would effect a dramatic change in the underlying mechanism that drives corporate malfeasance. It would make individuals responsible for the damage companies cause to the public interest, and would be enforced much the same way as securities laws are now. Negligent failure to abide by the code would result in the corporation, its directors, and its officers being liable for the full amount of the damage they cause. In addition to civil liability, the attorney general would have the right to criminally prosecute intentional acts. Injunctive relief-which stops specific behaviors while the legal process proceeds-would also be available.

Compliance would be in the self-interest of both individuals and the company. No one wants to see personal assets subject to a lawsuit. Such a prospect would surely temper corporate managers’ willingness to make money at the expense of the public interest. Similarly, investors tend to shy away from companies with contingent liabilities, so companies that severely or repeatedly violate the Code for Corporate Responsibility might see their stock price fall or their access to capital dry up.

Many would say such a code could never be enacted. But they’re mistaken. I take heart from a 2000 Business Week/Harris Poll that asked Americans which of the following two propositions they support more strongly:

Corporations should have only one purpose–to make the most profit for their shareholders–and pursuit of that goal will be best for America in the long run.

–or–

Corporations should have more than one purpose. They also owe something to their workers and the communities in which they operate, and they should sometimes sacrifice some profit for the sake of making things better for their workers and communities.

An overwhelming 95 percent of Americans chose the second proposition. Clearly, this finding tells us that our fate is not sealed. When 95 percent of the public supports a proposition, enacting that proposition into law should not be impossible.

If business people resist the notion of legal change, we can remind them that corporations exist only because laws allow them to exist. Without these laws, owners would be fully responsible for debts incurred and damages caused by their businesses. Because the public creates the law, corporations owe their existence as much to the public as they do to shareholders. They should have obligations to both. It simply makes no sense that society’s most powerful citizens have no concern for the public good.

It also makes no sense to endlessly chase after individual instances of corporate wrongdoing, when that wrongdoing is a natural result of the system design. Corporations abuse the public interest because the law tells them their only legal duty is to maximize profits for shareholders. Until we change the law of corporate governance, the problem of corporate abuse can never fully be solved.

Robert Hinkley rchinkley@media2.hypernet.com , formerly a partner at the law firm of Skadden, Arps, Slate, Meagher & Flom , now lives in Brooklin, Maine and is working to promote the Code. A Minnesota grassroots group has formed to work on the code (see www.C4CR.org Other information on the Code can be found at www.CitizenWorks.org Reprinted with permission from Business Ethics www.business-ethics.com