IN APRIL 2003, A GROUP ASSEMBLED outside the capitol in Richmond, Virginia, to celebrate the chartering of a new tobacco company: Licensed to Kill Incorporated. Cofounder
Robert Hinkley bluntly declared the company's purpose: to manufacture and market its
products in a way that "generates profits for investors while each year killing over 400,000 Americans and more than 4.5 million other people
Licensed to Kill (motto: "We're rich, you're dead!") was formed as a
stunt but with
the serious goal of demonstrating how states sanction and protect corporations, even those dedicated to making money at the expense of public health and the environment.
"We told the Commonwealth of Virginia that we were going to kill people," says Hinkley, a corporate attorney. "To their credit, they
didn't want to set this company up, but there was nothing they could do about it."
Obtaining a corporate charter in Virginia—and most other states—is
as easy as filling
out a short form and paying a modest fee. Only if it planned to break the law would a company not receive a charter. (Despite its name, Licensed to
Kill wasn't illegal: The tobacco company merely had the audacity to plainly state its products' effects.) But then again, applicants don't usually even have
to list the purpose of their business.
Once chartered, corporations are granted a long list of benefits under
state and federal
law, including the ability to exist forever (there's no expiration date for charters) and the right to influence elections and shape legislation through campaign contributions. Additionally,
and directors are shielded by limited liability. Meant to encourage investment in business ventures by ensuring that an individual's assets cannot be seized by creditors
if a company fails, limited liability also insulates stockholders and directors, in most cases, from personal responsibility for the company's potential debts or even
Many of these rights stem from a series of court decisions over the past 120 years that have,
established corporations as legal "persons"— often powerful ones with little accountability to society. Their widely accepted purpose is simple: to maximize return to shareholders.
(This does not, of course, apply to not-for-profit corporations like churches, schools, and charities.)
Thus it has been for at least a century. Professor Jesse Choper,
an expert on constitutional and corporate law at the University of California at Berkeley, points to a 1919 case in which auto-maker Henry Ford was sued by his shareholders for proposing to sell his cars at a below-market price. Ford
said he wanted to do it to create more jobs—thereby "spreading] the benefits of this industrial system to the greatest
possible number, to help them build up their lives and their homes"—but the Michigan Supreme Court ruled in favor of
the shareholders. Later cases in other states have broadened corporations' ability to contribute to public welfare but generally
followed the Michigan court's opinion that business should be conducted "primarily for the profit of the stockholders."
Obligations to workers, customers, the environment, or the communities in which a company operates
generally take a backseat, if they are considered at all. "Nothing in its legal
makeup limits what [the corporation] can do to others in pursuit of its selfish ends," writes Joel Bakan, a law professor
at the University of British Columbia and author of The Corporation: The Pathological Pursuit of Profit and Power.
Indeed, "it is compelled to cause harm when the benefits of doing so outweigh the costs."
Corporations' accumulation of unbridled power—and the way they often misuse it—has inspired
myriad efforts to restrain them: boycotts, protests, lawsuits, legislation, and shareholder actions to change company policies
from within. But after witnessing corporations riding roughshod over local communities' rights to regulate everything from
cell phone towers to trash dumping, activists like Hinkley are calling for a new approach. He and others realize that such
battles will be endless unless citizens challenge the corporate system itself. "We've created this entity; it's like
a monster," says Jim Price, a member of the Sierra Club's Corporate Accountability Committee. "We've given corporations more power than we reserve
THAT MIGHT SOUND HYPERBOLIC to some, but not to members of the communities that have tried to challenge corporate power.
In 1996, for example, the voters of Montana, worried about the influence of money in politics, passed a ban on corporate participation
in ballot-initiative campaigns. The federal courts struck down the ban, saying it went against the corporate "person's" constitutionally
protected free speech—a right the Supreme Court had affirmed for corporations in the 1970s.
In 1998, Omnipoint Communications (now part of T-Mobile) sought a permit to install a wireless tower in the steeple
of a historic church in Wellfleet, Massachusetts, a tiny Cape Cod town. After deliberating, Wellfleet's planning board said
no. Undeterred, Omnipoint sued the town for violating its rights under the Telecommunications Act. Faced with the prospect
of paying the company for damages (as well as its legal fees), the town relented.
In Virginia in 2001, a federal court threw out a state law that had attempted to restrict the dumping of trash from
other states in its own landfills. The court's reasoning? The law violated trash hauler Waste Management Corporation's constitutional
rights under the Commerce and Supremacy Clauses, which were designed to pre- • vent state and local governments from
obstructing the flow of goods.
And just last May, Wal-Mart, the world's largest retailer, thwarted the Flagstaff, Arizona, city council's efforts
to regulate land use and limit sprawl. Wal-Mart poured some $300,000 into an initiative campaign that convinced voters to
overturn a council-approved ordinance to restrict the size of big-box stores. The campaign attracted national attention
when a Wal-Mart-funded political action committee ran ads featuring a photo of a Nazi-era book burning that asked, "Should
we let government tell us what we can read? Of course not. ... So why should we allow local government to limit where
"THE AUTHORITY TO GOVERN in this country is theoretically in the hands of the people," notes activist and historian
Richard Grossman. But if that's the case, how can a company nullify a state law? Why does a corporation have the power to
overturn a local planning decision? To Grossman, it comes down to one basic question—who gets to make the rules?—and
one not-so-simple answer: People can only begin to regain control over their communities by confronting corporations'
"illegitimate claims to constitutional rights, powers, and authorities." An activist most of his life, Grossman has helped
pass laws, elect people, and stop many instances of corporate abuse. A former Peace Corps volunteer and director of Environmentalists
for Full Employment, he has also brought community groups together to fight environmental injustice. But despite the
individual victories he felt his side was losing the war. A successful fight to save one forest, say, was soon followed by
a hard slog to protect another. If you’re upset about toxics in the air
and water, for example, eventually you want to write a law," Grossman says. "But it's not' enough to just write an environmental
law, or a labor law, or a consumer law, because the fundamental law—the Constitution—is a stacked deck against
us." His search for a more comprehensive approach led him to help found the Program
on Corporations, Law, and Democracy, a small group of organizers, activists, and writers from around the country who are educating
the public about how corporations have become more powerful than the institutions that created them—and what people
can do to right the scales.
These beliefs have taken hold in rural Pennsylvania, where Grossman now works for the Community Environmental
Legal Defense Fund. In the late 1990s, large corporate hog farms were generating a mountain of manure that threatened to seep
into the area's ground-water and wells. Instead of protesting these specific conditions, citizens in some of the area's townships—many
conservative, lifelong Republicans—worked with Thomas Linzey, head of the defense fund, to pass local laws that banned corporate farms altogether. In two cases,
they declared that corporations don't have the same rights as people.
Agribusiness firms have fought back by pushing for a plan—unveiled last year by Governor Edward
Rendell (D)—to set up a board of political appointees with the power to overturn local ordinances. "The establishment
of this board is nothing less than the state being used by agribusiness and sludge corporations to eliminate those 'pesky'
Townships and rural communities who continue to believe in local, democratic control over issues affecting their
lives," a group of township supervisors wrote. A bill based on Rendell’s initiative was signed into law in July.
A similar battle is being waged on the other side of the country, where residents of the
Northern California city of Arcata were struggling with the economic impact of fast-food franchises. In 1998, the city
passed an ordinance that prohibited any more of these businesses from opening. "Local businesspeople were very much in favor
of it," says David Cobb, a Humboldt County activist and the Green Party's 2004 presidential candidate. "So much so that they
said, Why only do restaurants?" The city is considering a prohibition on all chain retailers, while the county weighs
a ban on non-local corporate involvement in elections. Last year Arcata voted (in a non-binding resolution) to oppose
corporate personhood altogether, declaring that "only persons who are human beings should be able to participate in the democratic
The conviction shared by these disparate communities—that democracy is impossible
unless corporations are subordinate to citizens—is nonpartisan and proliferating. And its biggest advertisement is the
corporations themselves: Every time big business comes into a community and effectively declares that its citizens don't
have the right to govern themselves, Grossman says, more people will understand what is at stake.
TOBACCO-INDUSTRY PROVOCATEUR Hinkley is less troubled by the rights of corporations than
by their lack of responsibilities. Legally designed to "valorize self-interest and invalidate moral concern," as author Bakan
writes, the amoral corporation behaves in ways that most people would find "abhorrent, even psychopathic, in a human being."
Current environmental regulations, Hinkley says, do little more than tell companies how much damage they can legally
do. A law that limits the amount of mercury and other toxic emissions, for instance,
essentially allows a certain level of pollution. As entities dedicated to the pursuit of profit, corporations naturally regard
these rules as impediments to making money and try to circumvent them any way they can.
To change that dynamic, Hinkley wants to add a coda to the laws that govern corporate charters that says,
yes, corporate directors should be focused on profit but not at the expense of "the environment, human rights, the public
health and safety, the welfare of communities . . . [or] the dignity of employees." The essence of capitalism—the
profit motive—would remain intact. But corporations would have to serve interests beyond the bottom line. Just as potential
profits are already limited by specific laws against, for example, child labor and false advertising, harm to the environment
and communities would no longer be an acceptable part of competition.
Under Hinkley's proposed changes to state business laws, pollution would be flatly prohibited—after
companies were given 15 years to develop and implement the technology they need to meet that requirement. Any violations
after that deadline would be illegal, making large corporations and their directors subject to criminal or civil charges
for their misdeeds.
State legislators in California, Maine, and Minnesota have already introduced bills based on, or
similar to, Hinkley's ideas. "My goal is to make social responsibility and social responsiveness and social benefit integral
to the nature of corporations," says California state senator Richard Alarcon (D). But the going is slow. The Maine bill,
sponsored by Representative John Eder (G), was quickly voted down in committee. The Minnesota version, championed by Senator
Sandra Pappas (D), received a hearing and was tabled for further review. Alarcon's bill received a hearing in early 2004.
But the California Chamber of Commerce and other business groups dubbed it a "job killer," and it did not make it out of committee.
In a letter to Alarcon, the Chamber said that the bill would act as the "ultimate disincentive" for people
to serve on corporate boards and that a flood of litigation could result. Its language, the Chamber argued, "could render
the corporation and its directors liable for the economic and environmental consequences of any number of legitimate
business decisions, such as closing a facility within a community or engaging in a regulated activity that has some adverse
environmental consequences." Hinkley believes the 15-year transition period
would allow companies and their directors to avoid unfair liability by retooling their operations so they won't damage the
public interest in the first place. He's watched corporations respond in this way to the demands of corporate securities
law, his specialty as an attorney. "Companies basically err on the side of caution" when disclosing financial information
to potential investors, Hinkley says. "It's not so they'll win a lawsuit, but so they'll never face one."
What he says his proposal would do is change the rules of the game: Build in an obligation
to be socially responsible and let companies compete, and profit, on that basis. Even with new rules, few companies would
abandon the profitable U.S. market altogether, and their operations conducted and products sold here would be subject to these
restrictions, regardless of where the companies were based. Many might find it more cost-effective to just follow the same rules everywhere.
The European Union is already moving businesses in this direction, passing strict environmental regulations
that require manufacturers selling their products in Europe to conduct extensive tests on common chemicals and limit
dangerous materials in electronic products. (See "Old Europe's New Ideas," January/February 2004.) If adopted widely in the United States, Hinkley's proposal
might even become a model for other countries, just as California's clean-car regulations have paved the way for other states
to demand more environmentally friendly options.
Hinkley is convinced that once corporations accept that they can no longer damage the public interest in pursuit of
profit; they'll innovate and evolve. "When businesses see this is what consumers want—and they'll see this if we
stand up and pass a law—they're going to say, OK, the profit motive is still what we're about. We're just going to have
to do things a little better." Not requiring them to change, he insists, is not an option.
It's too early to tell whether corporations can be reined in by Hinkley's attempts to broaden their responsibilities
or Grossman's challenge to their rights—or something else entirely. But these efforts are unquestionably helping
to forge a broad movement for reform. "More than two centuries of government 'of the people, by the people, and for the people'
in the United States came to an end at the beginning of the twenty-first century," businessman Robert Monks wrote last year
in a report for the London-based Centre for the Study of Financial Innovation. "Instead, what we have today is a new phenomenon,
one that I deplore: the corporate state."
Monks should know. He served on the board of Tyco International before scandals engulfed the company and its CEO. Now
a shareholder activist working to influence other corporations, he says reform is urgently needed. "We're like a frog in the
water that's boiling away. We're not cooked yet, but my God, when history looks back, people will say, Where were you? Didn't
you understand what was happening?"
chris warren is a
freelance writer based in Santa Monica, California.