Cesran International

Using the Device of a Treaty to Control Corporations?

In today’s modern democracies, corporations wield significant influence over our lives, as well as over our governments. In the wake of the global financial crisis, it is evident that corporate interests are not always aligned with the public interest. Furthermore, there are few incentives for companies to adhere to this objective.

BY DR. JEAN-PAUL GAGNON | APRIL 17, 2012

financial crisis

This issue was raised last November in Melbourne at the Democratising Governance symposium organised by the Centre for Citizenship and Globalisation housed by Deakin University. In his presentation, Dr Hans Lofgren brought up the issue of democratising transnational pharmaceutical corporations. That of course relates strongly to the arguments made by Robert Dahl for example over fifty years ago: controlling corporations and ‘giant’ companies (in the words of Hans Blokland) was a striking feature of the USA’s New Deal and lead the political landscape as a top issue before and well into the 2nd European War (circa 1930s to 40s). This led me to ask about not only the feasibility of such an endeavour, but also about democratising other corporations, such as banks.

To offer one striking example, the Reserve Bank of Australia recently defied market expectations by keeping interest rates on hold, leaving the cash rate unchanged at 4.25%. But there are concerns that the ‘Big Four’ banks will announce an interest rate move independent of the RBA’s decision – which most have done. ANZ announced its interest rate decision, and banking analyst Brett Le Mesurier even noted that a rate increase would be a possibility. While banks would justify lifting rates in order to prop up profits amid a slump in loan growth, a rate rise would undoubtedly hit mortgage holders the hardest. The only way for consumers to voice their disapproval is to switch lenders or tell their governments that the citizens will control corporations.
In this light, it is easy to see that corporations such as banks are central to “the people”. I think that several individuals, if not all those participating at the symposium, would agree that because of their influence on our livelihood, we should bring them under our control. Indeed, I will argue that it is us – the people – that must come to decide how much profit a bank for example can make on its services; how much a pharmaceutical corporation can charge for its medicines; how a corporation is to be punished for breaching our laws; and many other pressing questions. As touched upon above, this argument is by no means original: it has been voiced by many thinkers over time and space within Europe, North America, and as we go later into the 20th century, almost all other major regions. This, I think, is because what people are seeking is a maximization of the ‘good’ and the minimization of the ‘bad’ as part of a broad normative understanding of the Good Society.
In banking corporations, the most numerous workers are typically paid the least with shareholders, board members and other elitist stakeholders earning gigantic salaries. To many, this situation does not ‘seem fair’ – and I would agree. Although it would be hard to take this next point past the realm of personal choice, it would be good to consider. I reason that individuals, like athletes in certain sports, should have a salary cap. Corporations, I think, should too have a salary cap. And, of course, a series of referenda should be the tool used to agree on the level of the cap and what to do with the surplus of capital.
I’d like to offer two reasons for this. Firstly, as Professor John Keane argued at the symposium late last year, democracy needs an ethos – a driving character – for it to function. Without knowing the reason, why bother trying to figure out who the citizenry are; what powers we have and how we can use them; what we consider to be equality; how we think laws should be made and enforced; how we want to choose our leaders; and how we want to communicate? This ethos for most democracies is the need and want to keep power to account; to control our destinies and protect ourselves from the violence and damages that emanate from autocratic systems. I think a dramatic economic disparity (especially in societies where market trumps politics – again drawing from Blokland here) between aggregates in the citizenry is a form of autocracy: the haves typically control and the havenots typically abide. And this leads us to the second reason for bringing corporations to account: they can do us great harm. Think of the recent global financial crisis, of Greece’s and possibly Portugal’s damaged economies, or of mega-projects going bad, such as dams and bridges.

Published in Political Reflection Magazine (PR) Vol. 3  No. 2

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