Naderizing the Giant Corporation
A close-up look at the people and ideas behind the push for corporate democracy.
On April 17 a group called Americans Concerned About Corporate Power (ACACP) celebrated a nationwide antibusiness saturnalia. Billed as Big Business Day, and presided over by the Reverend Dr. Nader, H.P.C. (High Priest of Consumerism), the happening was highlighted by speeches and rallies in 150 cities and towns calling for the "public accountability" of large corporations.
Across the country, mock trials of certain businesses were held for such heinous acts as making a profit or not being sufficiently subservient to big labor. In Washington, D.C., 11 business villains were elected to a Corporate Hall of Shame, and shadow boards of directors were organized to monitor their future activities. Demonstrators in California handed out Cornelius Vanderbilt "public be damned awards"; categories included worst pollutor and worst employer. According to one news account, "The bad boys of business include the Grumman Corp. for overseas payoffs, U.S. Steel for 'closing plants overnight without due notice' and Exxon—'just for being the largest energy company in the world.'" What stunning logic!
A few quotes from the promoters of Big Business Day will serve to illustrate the business-baiting that attended these consciousness-raising activities. Ralph Nader demanded that large corporations "raise their own horizons to bring into their councils of judgment value systems not dominated so completely by the almighty dollar." Solidarity, the official publication of the United Auto Workers, concurred: "We'll be demanding that there be an end to 'business as usual,' and that Big Business start to be held accountable to people's needs.…We've been under the thumb of Big Business too long. Now it's time to push it back, to make it toe the line."
The theme, constantly hammered home by speakers and publications, was that large corporations are despoiling the environment, ripping off consumers, exploiting workers, and corrupting the political process. John Kenneth Galbraith urged us to "take a day to see how it [big business] sets prices, persuades consumers, influences legislation, and otherwise plans our lives." In a column entitled "Fat Cats Feed on Economy's Woes," Jack Anderson castigated business executives for their greed: "The corporate giants still ring up bigger and bigger profits and increase their control over our society." A brochure put out by Americans Concerned About Corporate Power sounded the ominous warning: "Big Business has a plan for the 1980s: more monopoly, weak unions, lower safety standards, excess profits."
Ralph Nader claimed broad-based support for his antibusiness coalition. "This is not a fringe group," he informed the media; "the support is America"—a rather dubious assertion. ACACP "is America" only in Tom Hayden's daydreams. Of course, a lot of Americans are concerned about corporate power—without the capital letters. They put big business in the same camp with big government, would like to see less of both, and may even have the sneaky suspicion that the two are intimately related. But the thrust of Nader and his cohorts is not to let business go it alone without big government help. No, more government all around is their answer. Despite the impressive titles of affiliated organizations and the coy rhetoric of ACACP leaders, the philosophical roots of Big Business Day are clearly socialistic, as a political profile of Big Business Day promoters demonstrates.
IN THE SMOKY BACK ROOMS
William Winpisinger—president of the International Association of Machinists and Aerospace Workers. In a 1978 article, Newsweek described him as "an open and avowed 'democratic socialist' who firmly believes that the transportation, petroleum, steel, aerospace and even breakfast cereal industries should be nationalized." A strong supporter of Michael Harrington's Democratic Socialist Organizing Committee, Winpisinger voices economic theories that are, according to a labor movement friend, "straight out of Woody Allen." He firmly believes that "so long as we keep books the way we do [capitalism], the result is more extortion by the marketplace in the form of inflation." Winpisinger was even more lucid in an interview in Mother Jones: "The American people gotta stand up and be counted and forget this philosophical horseshit of free enterprise being a birthright."
Dr. Barry Commoner—biologist, author, cofounder of the Citizens Party. In his book The Closing Circle he argued that we have "a full blown crisis in the ecosystem" attributable to environmental rape, perpetrated by private enterprise in its never-ending lust for higher profits. "Our economic system…has become out-dated," argues the good doctor. His solutions include a socialized energy industry and public control of "society-shaping" corporate decisions.
Jeremy Rifkin—old new leftist, director of the People's Business Commission, formerly the People's Bicentennial Committee. Rifkin calls for economic democracy, to be achieved by "dismantling of the present economic structure and a redistribution of corporate ownership into the hands of workers." A person of few scruples, one of his worthy projects involved sending a letter to thousands of secretaries of business executives offering a $25,000 reward for evidence of corporate crime.
Gar Alperovitz—codirector of the Exploratory Project for Economic Alternatives (EPEA). Alperovitz has called for the public ownership of energy corporations and waxes eloquent about his "American socialist vision." In a 1977 article, coauthored with Jeff Faux, the other EPEA director, he asserted: "Given its dynamic of unrestricted growth, the modern corporation is, over the long run, incompatible with a planned conserving economy.…virtually every other Western industrialized nation has concluded that rational energy and conservation policies require public ownership."
Michael Harrington—economist, author, national chairman of the Democratic Socialist Organizing Committee (DSOC). His book The Other Americans is credited with inspiring the War on Poverty. The DSOC statement of principles calls for "the social ownership and democratic control of the means of production and distribution."
John Kenneth Galbraith—the Mantovani of pop economics, author of many tedious tracts chiding Americans for their affluence and lack of social conscience. After sniping at capitalism for years, Galbraith finally came out of the collectivist closet in 1973 with his book Economics and Public Policy, which called for "a new brand of socialism."
Wade Rathke—head of the Association of Community Organizations for Reform Now (ACORN). Its People's Platform gives eloquent expression to its desire to enslave the business community: "In our freedom, only the people shall rule. Corporations shall have their role: producing jobs, providing products, paying taxes. No more. No less. They shall obey our wishes, respond to our needs, serve our communities." You will note no mention is made of profits, which obviously have been banished from ACORN's "freedom."
The Big Business Day socialists weren't alone in their efforts to vilify corporations. They received considerable aid and comfort from Big Labor. At its February meeting, the AFL-CIO Executive Council, the high command of the labor bosses, endorsed Big Business Day: "We agree with the broad objectives of this effort to focus public attention on abuses of corporate power." Besides Winpisinger, union sponsors of the gala affair included Douglas Fraser, head of the United Auto Workers, and now sitting on Chrysler's board; William Wynn, president of the giant United Food and Commercial Workers Union; Jerry Wurf, international president of the American Federation of State, County, and Municipal Employees; Robert Harbrant, president, Food and Beverage Trades Department, AFL-CIO; and Cesar Chavez, president, United Farm Workers of America.
The seed money for Big Business Day came from the Stern Fund, a foundation that has supported numerous left-wing outfits, including the Institute for Policy Studies; Rifkin's People's Bicentennial Committee; and the Foundation for National Progress, mother of Mother Jones. And there's evidence that the anti-business festivities were also financed, at least in part, with tax dollars. An editorial in the Wall Street Journal (April 17, 1980) mentioned the fact that the New Jersey Public Interest Research Group (PIRG), that state's sponsor of the day, received $354,293 in CETA grants. One wonders how much federal money, funnelled to a variety of state and local public interest groups by their friends in government, fueled the tanks of Nader's antibusiness blitz.
The object of Big Business Day and the ongoing efforts of ACACP is the enactment of something called the Corporate Democracy Act. The act constitutes a series of Nuremberg Laws for businessmen. Just as the Nazi statutes foreshadowed the destruction of European Jewry, the Corporate Democracy Act is designed to soften up corporations, to pave the way for their eventual demise as private institutions. The genocide will be directed at America's 800 largest corporations, the criteria for inclusion being assets or gross sales of $250 million, or 5,000 employees.
Introduced by Rep. Benjamin Rosenthal (D, N.Y.) as HR 7010, the bill is cosponsored by 14 of the most egregious economic illiterates in the House of Representatives. According to the National Taxpayers Union, this gang of 14 is among the top 25 percent of the big spenders in the nation's capitol.
BRINGING IN AUNT AGATHA
Title I of the Corporate Democracy Act requires that a majority of the directors of each company be "independent." An independent director is defined as an individual who has not been an officer, director, or manager of the corporation during the previous five years. Also disqualified are lawyers who have accepted fees from the corporation, employees of a commercial bank serving the company, and the officers, directors, and employees of suppliers and customers of the corporation. That bugaboo of antitrust freaks, interlocking directorates, whereby a person serves on the board of more than one corporation, are also prohibited.
Having thus ruled out all of the logical choices, where do the sponsors of the act propose that corporations turn for directors? Why to the Ralph Nader interest lobby, of course. Since businessmen traditionally associated with a given company will no longer be able to serve on the board, the Naderites hope to see board seats filled by community representatives, consumerists, environmentalists, and all of the other ists who use that amorphous term "the public good" as the excuse for their power lust.
Also contained in Title I is a provision for a vote of the shareholders on any transaction involving a purchase, sale, lease, merger, or financing if such transaction involves an amount equal to five percent or more of the firm's assets. But this totally misjudges, not only the real world of business decision making, but also the reason why investors buy shares rather than some other investment.
Such shareholder referenda on any major corporate decision will tie up a company for months in mountains of red tape. One purpose of a board of directors is to permit a rapid reaction to changing business conditions, as well as knowledgeable decisions by a group of individuals with a great deal of expertise. Instead of that rapid response, the corporate administration will be bogged down with mailing and counting millions of ballots, disseminating pro and con arguments from all over the country, and a protracted debate. Instead of bankers, lawyers, and Harvard M.B.A.s with their experience in the business world, major corporate decisions will be made by 10,000 Aunt Agathas, little old ladies and retired sanitation workers, from Passaic to Palo Alto.
When an investor buys a corporation's stock, he's investing in the company's products, assets, reputation, and future performance. He's also investing in the creativity, leadership, and judgment of a unique group of men and women—the company's officers and directors. What will happen to the sale of securities when giant businesses are run by people who probably have a hard time making out a mortgage application?
Title II concerns corporate disclosure. As part of its annual report, a corporation will be required to divulge: the names and addresses of its 20 largest shareholders, the racial and sexual composition of its work force (broken down by job classifications), total occupational injuries and illnesses, and daily emissions and effluents at each manufacturing facility. And that's just the appetizer. There's also a boilerplate clause authorizing the Securities and Exchange Commission "to require further disclosure to enable stockholders to make judgments on a firm's social performance and impact on the human and natural environment."
Whose rights are violated by this invasion of privacy? The rights of the workers, who may not want to be categorized racially or ethnically, and of the large stockholders, who have a right to privacy in their business dealings. The obvious intent of this section is to force quota hiring and permit the harassment of those with major interests in corporations. If any other organizations were compelled to disclose such information about its members, the civil liberties folks would be up in arms. The ACLU, however, supports the Corporate Democracy Act.
THERE'S NO ESCAPE
Title III is aimed at "employment maintenance." It's actually an effort to build a legal Berlin Wall around high-tax, antibusiness states—to keep businessmen from fleeing to less-hostile climes. It requires an incredible two years' advance notice, in writing, to close a factory or other facility if 500 jobs will be lost. Notice must be given to the secretary of labor, affected employees, and community representatives. The secretary is required to conduct an investigation, hold hearings, and subpoena witnesses to determine whether the closing is "justified." There's no mention of what action the secretary of labor may take if the closing is unjustified, an item that will undoubtedly be left to bureaucratic discretion.
As further punishment, the erring corporation will be required to pay to discharged employees "weekly maintenance income" equal to 85 percent of their average salary, as well as full fringe benefits, for an entire year. The corporation must also pay to each affected unit of local government an amount equal to 85 percent of the tax revenue to be lost in the first year by the closing.
This concept was pushed by then governor of Massachusetts Michael Dukakis at the 1976 Democratic convention. It will principally benefit those eastern states that have destroyed their industrial base by pernicious fiscal policies. Weak companies will be hurt the most by these restraints. Companies in financial trouble often have to cut back their operations, or redirect their production activities, to remain solvent. Such burdensome regulations and obligations may very well drive these firms into bankruptcy.
With other companies, the employment maintenance provisions of HR 7010 will go a long way toward institutionalizing low productivity, by making it more expensive to close an ailing plant than to continue operations. And as a number of business organizations have pointed out, the two-year notice provision will effectively lock in the decision to close a facility. Normally such a move is always subject to change, to reflect changing economic conditions. The Corporate Democracy Act, by forcing notification of the intended closing to employees, customers, and creditors, will make a change in plans impossible. Employees will begin looking for new jobs and customers will find other suppliers. This section of the act could end up costing more jobs, even in the short run, than it saves.
On the whole, this section of the Corporate Democracy Act is yet another attempt to abrogate economic laws via the political process. A business enterprise is like a tree. Sometimes it's necessary to cut off a dying limb so that the rest of the organism can thrive. No one likes to see factories close and people lose their jobs. But which is worse, one factory closing or a corporation being forced out of business because Nader and friends won't allow it to economize? Sometimes an entire industry dies so that another, more vibrant, dynamic, industry can replace it. This happened in the 19th century when the petroleum industry made whale oil a museum curiosity. The history of enterprise is one of movement, change, and innovation. That's the genius of capitalism. In the free market, economy, quality, and improvement triumph, pushing old products and processes aside. And we are all—workers, investors, and consumers—better off in the long run.
Title IV concerns itself with the "rights of employees" and has the potential for doing the most damage. This section amends the National Labor Relations Act to prohibit employee termination because of the exercise of "constitutional, civil or legal rights." It also makes it unlawful to discriminate against (example: pass over for a raise) or fire an employee except for "just cause."
Again we confront the old Marxist doctrine that a worker has a "right" to a job. Who created the job? Whose capital sustains it? Who runs the enterprise that makes the job possible? Never mind. The worker has the job, therefore it's his, by some sort of squatter's rights.
What constitutes just cause: coming to work an hour late for an entire month? drinking on the job? giving the foreman a hot foot? Conceivably every decision to fire, or not to grant a raise, will become a National Labor Relations Board case, involving thousands of dollars in litigation. It will create tenure for every worker covered by the act, by making it far more profitable to keep little Sally, who types 25 words a minute, in the secretarial pool, than to dismiss her and fight the decision to the Supreme Court.
As for the prohibition against firing an employee who exercises his "constitutional, civil or legal rights," this is a confusion of political and economic rights. A person has a right to the public exercise of free speech; that doesn't give him the right to make a speech in my living room. It doesn't obligate anyone else to provide him with a forum.
But that's precisely what Title IV will do. Imagine, if you will, a worker who constantly attacks his employer in the most derogatory terms, devoting considerable time and effort to convincing the public that the company's product is inferior, defective, overpriced, etc., and management is made up of nasty brutes. The company will be statutorily prohibited from terminating the employment relationship. After all, the employee has a right to freedom of speech.
A more extreme example: Let's suppose an employee begins aggressively proselytizing for racism on the job. With HR 7010 in effect, the employee will be immune from the action that any sensible business would take. He's just exercising his constitutional rights.
WHO WANTS THE CDA?
The Corporate Democracy Act, by castrating management, institutionalizing low productivity, and giving employees a political right to their jobs, will paralyze major corporations. Which is exactly what its socialist proponents intend. When these new Naderized corporations fail, their nationalization will be "imperative."
What an exciting prospect! Perhaps the Postal Service, which can't deliver the mail on time, will build our cars and run the airlines. The public education establishment, which has failed at teaching Johnny to read, will direct the television networks and publish books and newspapers. Instead of agribusiness, the bureaucrats at the Department of Agriculture can feed the country. America will at last be free of the grasp of giant corporations. Free to stagnate.
The Corporate Democracy Act is merely one manifestation, dangerous though it may be, of general anti-business attitudes. The intellectual steam for Big Business Day needs to be examined.
Corporations are undemocratic: Decisions are made by the officers and boards of directors instead of the shareholders. Corporations are autocracies, ruled by a business elite.
This charge elicits an enormous yawn and a so-what reaction. What shareholder in his right mind wants to control the company in which he's invested? The overwhelming majority of investors are concerned solely with profits, in the form of an increase in dividends or equity. If that profit isn't forthcoming, they vote with their bucks—by selling the company's stock. What could be more democratic?
Unlike government, which we are all required to "invest" in, no one is forced to buy shares in a corporation. The investor obtains his stock with the full realization that he isn't buying proportional control of the company. As Robert Hessen states in his book In Defense of the Corporation, "I will argue that shareholders own it [the corporation], that the officers make the decisions without consulting the owners, and that this relationship is unobjectionable because it rests on the principles of choice, consent, and contractual authorization."
Corporations are ripping us off: a number of large firms (an oligopoly) dominate each product market, allowing the firms to charge inflated prices.
The term oligopoly is a wonderful device for the antitrust folks. Since they can't prove that any industry is controlled by just one company, they level the charge of oligopoly—rule by the few. The Naderites have thus devised a numbers game they can't possibly lose. Whatever companies represent a majority of sales in a given market are labeled an oligopoly. Since there are always a certain number of firms which, taken together, have most of the business, the charge can always be proven. That these companies compete with each other, with smaller firms in the same industry, with large and small firms in industries making substitute products, is never discussed.
To give you an idea of how these greedy monsters are abusing us, last year all corporate profits represented 9 percent of national income. By contrast, the earnings of employees represented 73 percent of national income. By the way, 60 percent of these excessive profits are plowed back into the business, to expand production, improve products, and create new jobs. The remaining 40 percent is distributed to the 25 million fat cats (you can imagine how fat) who are corporate shareholders.
Corporations are corrupting the political process: business spends millions of dollars to elect its friends to Congress, and that combined with its lobbying effort gives big business enormous political power.
The political activities of corporations don't exist in a vacuum. In the 1978 congressional elections, the combined contributions of union political action committees (PACs), $10.3 million, exceeded the contributions of corporate PACs, which were $9.8 million. There were no corporate PACs among the top 10 campaign contributors. But union PACs accounted for 6 of the top 10, among them Mr. Fraser's UAW and Mr. Winpisinger's Machinists and Aerospace Workers. The most money contributed by a corporate PAC, International Paper Company, amounted to $173,056. By contrast, the United Auto Workers spent over five times that amount: $964,465.
While there are corporate panhandlers, such as the companies seeking higher tariffs to stifle foreign competition, most corporations try to buy protection through lobbying and campaign contributions. The objective is to prevent Congress from passing a new tax or another arbitrary regulation. There's nothing sinister about a political effort to protect individuals' property from predatory government or the right to do business free from meddlesome bureaucrats.
YE OLDE PUBLIC INTEREST
Corporations put profits before people: business isn't concerned about minority hiring and protecting the environment; it doesn't operate in the public interest.
The obvious question is, by whose standards? Most corporations fit my definition of operating in the public interest perfectly. They offer us a dazzling array of goods and services, while creating jobs and providing investment opportunities.
As a matter of fact, businesses contribute millions of dollars annually to charities. And between 1970 and 1977, private enterprise spent $51.6 billion to clean air and water of industrial wastes. But that's begging the question. The right of people to engage in industry or commerce isn't premised on the social utility of their actions. Rather, it flows directly from the right of individuals to take purposeful action to sustain their lives. A corporation, after all, is nothing more than a term applied to the relationship of a group of individuals—owners, managers, and workers. Each has a right to invest his resources or expend his time and effort for his betterment. No further justification is necessary.
In the final analysis, what is it that Ralph Nader wants? What is the motivation for 15 years of carping at corporate America—for public interest groups, consumer alliances, trust busting, congressional investigations, and journalistic exposés?
While aggressively pursuing means, Mr. Nader is understandably reluctant to discuss his ends. Unlike Jeremy Rifkin or Gar Alperowitz, he has an image to maintain. It's rare that he lets his hair down.
One of those rare occasions was a 1975 interview in Rolling Stone magazine. In his utopia, Nader declared, people will be free of big business. They will have escaped the cities to find solitude and contentment in a bucolic existence. "They can grow their own gardens, they can listen to the birds, they can feel the wind across their cheek [sic], they can watch the sun come up. And within a five or six block perimeter, they find they have their stores, their schools. They have their parks, they have their libraries…compared to a big city where all of these things are far away."
To call Nader a socialist is an oversimplification. He's really a feudalist at heart. His goal is to abolish the Industrial Revolution and drag humanity back to a simpler time. His ideal is a society modeled after the medieval village, where everyone lives in small communities, subsists off the land, and barters the handicrafts they have fashioned in their huts at night.
If America is ready to trade television, pocket calculators, synthetic fabrics, stereos, books by the millions, central air conditioning, and wonder drugs—all "forced upon us by big business"—for this meek new world, Ralph Nader is ready and eager to lead us to it.
Donald Feder is an attorney and the executive director of the Second Amendment Foundation. His free-lance writing has appeared in the Boston Globe, Seattle Times, REASON and FRONTLINES.