HOMESTEAD: Fwd: Fw: Sir James Macken's Article re Corporations

[Shann Turnbull <sturnbull@mba1963.hbs.edu>]

Dear Larry & Homesteaders

The problem of corporations is well articulate below by an Australian Judge.

Regards

Shann


>From: "John Nydam" <PAKEBEPPE@bigpond.com>
>To: "Shann Turnbull" <sturnbull@mba1963.hbs.edu>
>Subject: Fw: Sir James Macken's Article re Corporations
>Date: Thu, 6 May 1999 12:41:27 +1000
>X-Mailer: Microsoft Outlook Express 4.72.2106.4
>
>Dear Shann,
>Following the article I promised you.
>Regards,
>John Nydam
>"Beware of Global Corporate Tyranny"
>
>
>
>"NO BODY TO BE KICKED AND NO SOUL TO BE DAMNED"
>by The Hon. James Macken. This is a reprint from
>Annals 1992 nr.7
>The Author James Macken for 14 years was a prominent judge
>of the Industrial Commission. He has lectured at Sydney's three
>major universities and was awarded a Doctorate of Laws by the
>University of Sydney (honoris causa) in 1992
>
>SOCIAL JUSTICE              AN OVERVIEW OF CORPORATE LIFE
>
>" NO BODY TO BE KICKED AND NO SOUL TO BE DAMNED"
>
>For many years law students have been taught that companies are akin to
>a better class of human being. The mistakes made by God in creating Man
>have all been corrected and improvements of great importance have been
>made. From their earliest days they have been likened to a human body;
>and a pretty and superior body at that.
>In "Bolton v Graham & Sons Limited" (1) it was said by Lord Denning:
>"A company may in many ways be likened to a human body. It has a brain
>and nerve centre which controls what it does. It also has hands which hold
>the tools and act in accordance with directions from the centre....
>(the) directors and managers represent the directing mind and will of the
>company and control what it does. The state of mind of these managers is
>the state of mind of the company and is treated by the law as such."
>The company remains completely independent of its directors and
>managers. It is not so much that the company does what the directors
>want as that the directors do what the company wants.
>In 1972 the House of Lords acknowledged that, while a company must act
>"through living persons" such a person is not "speaking or acting for
>the company. He is acting as the company and his mind which directs his
>acts is the mind of the company."(2)
>It is the universal lot of mankind to die. But man's own creation....a
>company.... is immortal. Science fiction writers revel in horror stories
>focussed on the creation of intelligent robots that come to dominate
>their creator. Why should we fear robots? At least they can be seen to
>be dealt with. They have no individuality and they are able to rust.
>In companies, however, we have created a monster with which we have
>endowed faculties with which we cannot deal.
>John Marshall said: (3)
>"A corporation is an artificial being, invisible, intangible and existing
>only in the contemplation of the law. Being the mere creature of the
>law, it possesses only those properties which the charter of its
>creation confers on it,either expressly, or as incidental to its very
>existence.  These are such as are supposed best calculated to effect
>the object for which it was created. Among the most important are
>immortality, and if  the expression be allowed, individuality; properties
>by
>which a perpetual succession of many persons are considered the
>same, and may act as a single individual."
> >From the very earliest days to English company law men have worried
>about the wisdom of creating a legal person separate and distinct
>from the incorporators who make it up. They did not fear so much that
>the genie may have been let out of the bottle (after all it was the age
>of South Sea Bubble); they were rather concerned with the principle
>of creating a potentially powerful but permanently amoral being.
>The comment that a corporation has 'no body to be kicked and no
>soul to be damned' (a saying long attributed to the poet Edward
>Thurlow) was said with regret. In fact the whole saying is: "Did you
>ever expect a corporation to have a conscience, when it has no body
>to be kicked and no soul to be damned?"
>In Suttons Hospital Case Edward Coke said: "They (corporations)
>cannot commit treason, nor be outlawed, nor excommunicated, for they
>have no souls".(4)
>Ever since the Joint Stock Companies Act 1856 (UK) consolidated
>the prior legislation and cemented into place the principle of limited
>liability, concern has been expressed throughout the western world
>that a monster may have been created that would be difficult to
>contain.
>Louis Brandeis expressed the view that 'the main objection to the
>very large corporation is that it makes possible--- in many cases
>make inevitable--- the exercise of industrial absolutism'. If he could
>have foreseen just how large modern corporations would become
>he would not have been so circumspect in his views.
>As long ago as 1910 Theodore Roosevelt was of the opinion that
>there was still time to bring the enormous power of corporations
>under control. He said in "The New Nationalism":
>"There can be no effective control of corporations while their
>political activity remains. To put an end to it will be neither a short
>nor an easy task, but it can be done."
>The fact is that a  corporation is capable displaying many of the
>vices of human nature but is not capable of displaying any of man's
>virtues. Innes CJ remarked: "Companies, no doubt, are not
>conspicious for generosity.
>Corporations, however easily they assimilate the more
>predatory human qualities, do not as easily acquire the higher
>attributes; and gratitute is not a feeling which we generally
>associate with joint stock activity." (5)
>Regrettably, we in Australia seem to be lagging behind Europe
>and the UK in recognising these dangers and doing anything
>about them.
>In the United Kingdom a bipartisan approach to this problem was
>taken and was reflected in the White Paper on Company Law
>Reform of 1973. It provided in part:
>"In formulating these proposals the government are specifically
>recognising, in the context of company law, the generally
>accepted fact that ownership involves responsibilities as well as
>rights. This requires company directors, on behalf of the share
>holders, to discharge their social responsibilities as well as to
>protect their legitimate interests. The boards of companies and
>their managements thus have a manifest obligations towards all
>those with whom they have dealings-- and none more so than the
>employees of the company."
>Apart from not being in danger of hell-fire, and not being in danger
>of physical hurt, corporations have no sense of humour. Were
>this not so they might have read the White Paper and died
>laughing and the very real problems posed by their continuing
>existence would have been solved. Who has enough imagination
>to envisage the multinational conglomerates centred on Australia
>alone, and which have collapsed since 1989 'discharging their
>social responsibilities'.
>The extraordinary harm done to the economy as a whole  by
>their borrowing policies or the inevitable ultimate transfer of
>Australian assets to overseas owners, and other such general
>economic and social damage, is one thing but even greater
>harm comes to those more closely connected to the group of
>companies which make up such conglomerates.
>Lord Wilberforce once said: ".... a limited company is more
>than a mere judicial entity with a personality of its own....there
>is room in company law for recognition of the fact that behind
>it, or amongst it, there are individuals, with rights, expectations
>and obligations inter se which are not necessarily submerged
>in the company structure."(6)
>Whatever the judicial view of corporate obligations..... the
>Gadarene charge towards a global 'corporate system' was not
>slowed in the slightest. Unlike the 'feudal system' the 'corporate
>system' lacks any redeeming qualities whatsoever.  How on
>earth did all this happen?
>There is no doubt that originally the infant 'corporate system'
>provided a powerful engine of economic growth. It allowed the
>aggregation of the capital of groups of individuals and then
>limited their liability for losses. These twin pistons powered the
>19th century industrial revolution and laid the basis for the
>explosion of the world economy in the 20th century. It did not
>achieve this without some assistance from two world wars
>which together led to the technical advances without which
>the world would not have shrunk quite so quickly.
>I am not suggesting that the two world wars were 'good'... but
>rather that they will probably be shown to have done less harm
>to mankind than the 'corporate system' with which they are
>associated. It should come as no surprise that the giant
>corporations (Mitsubishi and Fokker jump to mind) lend their
>names to bombers in one generation and civilian use in the
>next.
>By the early 20th century many of the owners of the wealth
>concentrated through the corporations had gone down in social
>history as inhuman ogres. In Australia, J. & A. Brown were hated
>mine owners while in America, Pierpont Morgan, Rockefeller and
>others were the bane of the working class of that time.
>In England their equivalents were less criticised as they were
>protected by the armour of their baronetcies, dukedoms, earldoms
>and knighthoods.
>However much the greed and the wealth of the owners of the
>great corporations of those early years may have perceived the
>individuals they were, nevertheless, real people... real human
>beings with human emotions and with the universal human
>destiny... morality. They were the owners of the stock which made
>up the corporations; jointly with others, perhaps, but with others who
>were also human.  Even at this point (apart from some tutt-tutting
>about human nature) there can be no real complaint about the growth
>of corporations, nor of their value to the economic system, because
>the problems then were remediable.
>The real problem with the corporate system came about when the
>ownership of the corporations ceased to be human beings and
>came to be vested in other 'things': other corporations!
>While humans owned the stock of the corporations the human
>owners either became directors of the corporations or appointed
>people as directors who would do as the owners said.  Capital,
>management and labour were all in human hands--a system with
>imperfections but not necessarily vicious, nor philosophically
>insupportable.
>A qualitative change for the worse took place when the corporations
>became a method of property tenure and a means of organising
>personal, and later national and international, economic life.  The
>owners of large parcels of stock in companies came to vest the
>ownership of the shares in corporations for personal, family or
>taxation reasons and, whatever the motive, from that point on the
>original corporation (a created thing in itself) came to be owned by
>other 'things'! Human ownership came to be further and further
>removed from corporate control as vast institutions such as
>mutual funds, banks and investment companies, trust funds,
>insurance companies came more and more to be the owners of
>corporations. Human ownership has now ceased for all practical
>purposes.
>The retail industry in Sydney illustrates the point well. Thirty
>years ago the major retail outlets in Sydney were dominated by the
>families which bore their names. The Jones family owned David
>Jones, the Foys owned Mark Foys, the Graces owned Grace
>Bros and so on for the Waltons, Buckinghams, Horderns and
>Farmers, and many others of earlier years.
>Although even in those days the family shareholdings were
>probably not even 50% in some cases, the 'family stamp' was
>on those businesses and there was a real relationship between
>ownership of the business and the management and the staff
>of the business. Now all that has gone and in a short period
>institutions of one kind or another own the shares in those
>companies.
>It is not that personal share holdings are diminishing to the
>point that they no longer have any influence over the direction
>of the company.... personal share holdings of corporations are
>virtually non-existent. It is estimated that in the USA (a land
>which prides itself on its great risk-taking entrepreneurs) there
>will be no personally owned stock by the year 2003. Since
>1984 38% of all humanly held stock in the USA has been sold
>to Mutual Funds, Banks and other similar institutions. The
>greatest beneficiary of this transfer of ownership has been
>government pension funds whose total value in 1988 was
>$1.5 trillion. (7)
>Why does all this matter? I put three propositions which do
>not exhaust the possible objections but any one of which
>would alone justify an attempt to change the present position.
>In the first place,the power of the modern corporations is too
>great to be allowed to continue to exist, let alone continue to
>grow. There are now many large multinational  corporations
>with accounts which are larger than the national accounts of
>some nations. (It would not surprise if they had larger debts
>than some nations as well). They have a capacity to act
>internationally so as to destroy the economies of whole
>nations, let alone the economies of regions and cities within
>nations. So powerful are the great multinational corporations
>that they only have to threaten to close a plant in a country to
>force the national government to give them a present of a few
>million dollars to stay in the country. (Kodak Australia provides
>a recent and topical example). Because this enormous power
>is frequently linked to control of the media in many countries
>the power of wealth and economic capacity can be hidden
>from the understanding of humans. The reality of the existence
>and exercise of this power is relatively easily hidden from
>governments and the people, including most of those whose
>livelihoods depend on the corporation. Directors of wholly -
>owned subsidiaries know virtually nothing of the business and
>the power of the parent company.
>During the 1913 strike in Dublin George Russell wrote to the
>employers putting the union viewpoint as being that  ' those
>who have economic power have civil power also'. The modern
>corporation has enormous civil power... in many cases more
>so than governments which are inhibited by electoral limitations.
>This political and social power does not only derive from its
>great wealth but from the fact that modern corporations spread
>their influence far beyond the commercial world into every
>aspect of society. Universities, football teams, sporting events,
>art and cultural displays.....endless others all fall under the
>corporate net in time. Great international sporting events such
>as the Americas Cup become corporate contests rather than
>truly national events. These ventures are all connected with the
>exercise of power and the acquisition of saleable assets and
>tax deductible advertising ventures.
>It needs finally to be said of corporate power that it is self
>concentrating. However far back one likes to go behind the
>corporate veil; as one follows the corporate debt from pocket
>to pocket, in the end the ultimate corporate owner is a bank
>(itself owned by other corporations).  The difference with the
>bank, however, is that in the last analysis the bank will be
>supported by governments.
>How ironic that in the end the great bulwarks of capitalism
>must inevitable become the property of the state.
>The second reason that the present level of corporate
>ownership and control of our society must be overturned,
>is that it necessarily involves a small and shrinking group of
>men, with absolute power over the political and economic
>life of society and only able logically to act out of motives
>of power and greed.
>These are often described as 'entrepreneurs' but recent
>events in the corporate world would suggest that the use of
>that description could be libellous.  These plutocrats can
>only think and act as the corporation's interest would
>require.  It follows that sentiments such as compassion,
>mercy, justice, fairness, honesty, loyalty are rarely ever
>permissable among such 'top executives'.  This is equally
>true whether the management supremo is employed by a
>large private corporation or a government department or
>privatised sector of the public service or wherever.
>The reason for this is that, however worthy such
>individuals may be in their private lives, when they are at
>work they have to act in the best interests of the
>corporation and the corporation can have no conscience;
>nor can there be any profit in such emotions as
>compassion.  The senior executive who lets his guard
>down and tries to do something for an employee out of
>sympathy with some personal tragedy will soon have
>his own to worry about.
>The managerial hot-shots themselves are to be pitied
>rather than condemned for they are equally prisoners of
>the corporate state even if they are better paid than most
>of the rest of us.  They must give themselves (and their
>wives and families) totally to the corporation.  It must
>become their first love and only life.  They must place it
>before the well-being of children and nation.  If the
>company says "pack up and move overseas"...that they
>must do; whatever the ties to country and family.
>W.J. Kenyon Jones, Chairman of Ronson in the UK said
>in "Management Today" (February, 1967):
>The business executive "must set aside any nationalistic
>attitudes and appreciate that in the last resort his loyalty
>must be to the shareholders of the parent company, and
>he must protect their interests even if it might appear
>that it is not in the national interest of the country in
>which he is operating.  Apparent conflicts may occur
>in such matters as the transfer of funds at a period of
>national crisis, a transfer of production from one
>subsidiary to another, or a transfer of export business."
>Once such an attitude would have been recognised as
>the worst form of treachery.  Now, however, this
>corporate philosophy has moved out of the realm of
>commerce and moved to take control of the levers of
>political power directly.  It was only to be expected
>that as soon as the fairest state in the commonwealth
>came to be known as 'N.S.W. Inc' senior executives of
>banks and business houses and private corporations
>came to form a Special Executive Service and be
>appointed to highly paid jobs running essential
>departments of government.
>It should finally be said, in an appeal to resist the
>torpedoing of human values in the "corporate state",
>that to accept the corporate state, the domination of
>managerial plutocrats presiding over a consumer and
>materialist society, is to accept a servitude more
>terrible than mankind has experienced in the past
>because this time we are the slaves of 'things' rather
>than merely cruel men.
>The corporate system has it own double-speak to
>cloak the reality of its intentions.  Thus, it constantly
>refers to its preference for freedom of control between
>its employees and itself and its desire to 'free-up' the
>labour market.  It implies that the company and the
>worker are on equal bargaining terms and should be
>allowed to make their own deals.  Anything less
>equal would be hard to imagine.  Countless legal
>authorities stand against the validity of contracts
>made in the climate of such inequality.
>After Goebels success in selling Nazism to the
>German people we should not perhaps be surprised
>at the success of the corporate state in quietly
>taking over the thinking of a whole nation.  'Whom
>the gods would destroy they first make mad'.
>The Income Tax Act 1952 (UK) provides:
>a body corporate "shall not be deemed to cease to
>be resident in the United Kingdom by reason only
>that it ceases to exist".
>The two original reasons for incorporations of
>companies no longer exist.  I fear that if we allow
>the 'corporate system' to continue in any guise we
>will lose the few rights we have left.
>                    ______________
>In "Australia's Awakening" William Lane wisely
>noted:
>"There comes a time when tolerance of wrong
>becomes itself a wrong; and only those have
>rights who dare maintain them".
>References
>1. H.L. Bolton & Co v T.J. Grahame & Sons Ltd
>     (1954) I QB 154 @ 172-3.
>2. Tesco Supermarkets Ltd v Nattrass (1972)
>     A.C. 153 @ 170.
>3. Dartmouth College v Woodward. 4.
>     Wheaton. 518. (1819).
>4. Suttons Hospital Case (1612) 10 Rep.
>     32b.
>5. Commissioner for Inland Revenue  v
>     Lunnon 1924 Ad. 94 @ 96.
>6. Re: Westbourne Galleries (1973) A.C.
>     360 @ 379.
>7. Jay O. Light. Professor of Business
>     Administration at Harvard Business
>     School (Harvard Business Review,
>     Sept/Oct 1989).

Shann Turnbull  Ph.D.
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