Location Canada Canada

We must begin to curb the power of corporations

The revelations of the Paradise Papers, the earlier Panama Papers and numerous articles in the western mainstream and alternative media demonstrate just one dimension, tax evasion, of an increasingly obvious truth: global corporations have become the greatest threat to the planet. The deliberate starvation of government, climate change, grotesque inequality, Dickensian working conditions, environmental degradation, dwindling biodiversity, the slow (or not so slow) death of the oceans and the creation of the security state on corporations’ behalf threaten not only the natural world but our capacity to democratically govern ourselves while maintaining some semblance of civilization.

The advent of the corporate state was truly unleashed when Canada and the U.S. introduced the first “free trade” agreement in 1989. In the 28 years since, hundreds of such agreements have been signed, all of them designed to erase borders for corporations and radically reduce the operational space for democratic governance.

Governments are the only institutions that can seriously challenge the power and reach of transnational corporations: they made them and they could unmake them. Only governments can curb their predatory nature, constrain their contempt for their workers, communities and the environment, and genuinely punish them when they openly break the law as part of their fiduciary “duty” to their shareholders.

Of course, it’s difficult to imagine current governments in any role other than the unindicted co-conspirator which have played for decades. The implementation over 30 years of neoliberal policies by governments of virtually every stripe has liberated corporations, increasingly removing constraints designed to make them accountable to the broader society.

The tax avoidance/evasion tidal wave is just one example. Governments have not only allowed this obscene anti-social conspiracy; they have facilitated it. Much of it is actually legal; in other words, sanctioned by governments we elect. Yet that does not absolve corporations from their responsibility. A recent study by Canadians for Tax Fairness (disclosure: I am on their board) revealed that the 60 largest public companies in Canada have 1,021 subsidiaries in a string of tax havens. Four had none; Valeant Pharmaceuticals and Sun Life Financial have over 50 each. According to the study, “Canadian foreign direct investment (FDI) in tax havens grew from $2.1 billion in 1994 to $284 billion in 2016.”

By now most people know how these “profit-shifting” schemes work. Companies assign profits made elsewhere to tax haven subsidiaries in countries with low or no income taxes. They half-heartedly claim they actually do business in these countries, but the numbers say otherwise. The study shows subsidiaries in non-tax haven countries employ between 1,244 to 2,760 employees per billion in assets; for tax-haven users the ratio is one to 250. In 2014, Canadian corporations held almost $31 billion in assets in Bermuda; their subsidiaries employed a total of 35 employees.

While the Trudeau government has made some moves in the right direction to track flesh-and-blood tax cheaters, it has done virtually nothing to curb the immoral behaviour of so-called corporate citizens. This should hardly surprise us. Over the decades we have watched these ersatz “citizens” develop into the institutional equivalent of psychopaths. This is not a subjective assessment; it is written into their legal DNA by the laws governing corporations. They don’t have social responsibility like ordinary citizens — only the fiduciary duty to their shareholders. They are citizens who live forever; once a corporation has a charter it can’t be revoked.

Twenty years ago, of the 100 largest “economies” in the world, 51 were corporations. I am sure that number is higher now. It was recently revealed that the Royal Bank is now, officially, “too big to fail” — or more to the point, free to be reckless knowing the taxpayer will bail it out.

In attempting to imagine how we can save our civilizations and ecosystems from corporate predation it may be helpful to know that corporations haven’t always had such free reign. In 1809, the Supreme Court of Virginia ruled that if an applicant’s purpose in seeking a corporate charter “[i]s merely private or selfish; if it is detrimental to, or not promotive, of the public good, they have no adequate claim upon the legislature for the privileges.” Charters were routinely denied and in 1832, Pennsylvania revoked the charters of 10 banks for not serving the public good.

These strict limits on corporations — they could only engage in the single activity described in their charter — began to disappear in the late 1800s. The U.S. Civil War resulted in corporations becoming much more powerful. States competed with each other for corporate investment and their judges systematically eliminated restrictions on corporate charters. They gradually re-interpreted the U.S. constitution and changed the common law to make corporations citizens.

Canada of course, actually started off as a corporate state — the Hudson’s Bay Company — and corporations have always had a cozy relationship with governments here. But it wasn’t until the Charter of Rights and Freedoms that they were considered “natural persons” with the same human rights as you and I. The fight to get corporations to pay their fair share of taxes must continue. But we should set our sights a lot higher. A good start would be to find a compelling case to take to the Supreme Court and have corporations’ “natural persons” status removed. And then put back into corporate law the power to revoke the charters of corporations which violate the public good.

by Murray Dobbin

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