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Peter
Steven:
Who do you see as the audience for Wealth By
Stealth?
Harry
Glasbeek:
My vision is to reach people who are affected on a
daily basis by corporate activities but don’t
have the information to understand the law. I have
deliberately written this book in a non-technical
fashion, while still being accurate.
I
argue that the legal architecture of the
corporation itself is faulty. Although the law is
not supposed to favour the rich over the poor,
corporate law itself instils those inequalities.
The law actually legitimates and sanctions this
situation.
PS:
You have written a number of books on the law. How
is Wealth By Stealth different?
HG:
This book straddles the fields of law and social
science and although it respects the two areas it
presents an overview. My other works have been much
more technical. The main text is written in a
generalized way for readers new to the subject. For
those most interested, the notes and sources at the
back allow you to pursue the more sophisticated
aspects. The idea is to acquaint people with
what’s going on and to provide a critique. I
provide many examples, often with outcomes that
will startle. They startle because these corporate
situations are not treated by the law in the way
that we would expect them to be.
PS:
When you talk about corporate crime most people
will assume you are referring to those bad
companies we’ve been hearing about, such as
Enron, WorldCom, and Westray mining.
HG:
My book covers criminal behaviour and situations
long before the latest outbreaks of stock market
and accountancy scandals. But more than that I seek
to differentiate specific examples from the general
operations of corporate law. The WebCom and Enron
scandals became significant because the companies
were cheating each other. This is what caught the
media attention rather than the daily misdeeds of
corporate actors. It was the legal structure itself
that enabled them to act politically, and mould the
world around them, in a profoundly anti-democratic
manner. The book does speak to the Enron /
Webcom-type scandals in as much as it explains why
it is that the discretionary power of managers in
large corporations is subject to abuse.
PS:
Nevertheless, why are so many corporations acting
badly right now?
HG:
Enormous power has been given to directors and
managers and there has been growing pressure on
them to drive up their share prices. Power has been
given to management teams to use the
shareholder’s money in ways that they see fit.
Large investors have set up mechanisms to insure
that managers have the same interests as they do,
in profiteering of a certain kind. Consequently,
managers take a short term interest, regardless of
the impact that this might have on social and
economic welfare both of the corporation and the
society at large.
These
scandals also come at a time when there is a clear
economic problem: we have a massive amount of
excess production on a world-wide scale, so many
corporations are not performing as well as the
value of their share prices might
indicate.
PS:
How can “ordinary” citizens possibly hope
to wade into the complex and murky world of
corporate law? Isn’t it a field for
specialists only?
HG:
That’s what a specialist would have you
believe. I believe that the basic principles can be
understood and that it doesn’t take too much
thought to see the contradictions. This may offend
all those corporate lawyers who deal with the
inside workings of the law, such as the Securities
Commissions, the tax laws, the partnership
agreements, etc.— but these are internal
questions that need not concern us.
It
is vital to understand that corporate decisions can
have enormous impact on our lives. Corporations
make quasi-legal decisions that affect housing,
development, and health, the kinds of products that
are made, the kinds of safety measures that are
taken. These decisions often have binding power.
They are dangerous to ignore. We can’t allow
the discussion to be foreclosed.
PS:
Can you give me an example of a quasi-legal
decision?
HG:
The Westray mining company’s decision both to
start up and then to close its Nova Scotia
operations had serious effects. Here’s
another. In the early 1970s the autoworkers’
unions argued for smaller, fuel-efficient cars,
arguments that were ignored by the manufacturers.
Later those same companies had to restructure to
catch up to the demand for smaller cars—this
cost jobs and wrecked communities. Thus, their
private decisions have the same force as government
decisions to close a town.
PS:
At the beginning of the book you state that Conrad
Black has an invisible friend. What do you mean by
that?
HG:
When people create a corporation, which is really
just an administrative matter, the law says that
that entity must be treated as a
“person.” Therefore when something goes
wrong, with debts or injuries, etc. it is the
“person” owning the property who is held
responsible. The investors or shareholders are thus
shielded from direct responsibility. The
corporation is invisible—as the saying goes
there is “no body to be kicked or soul to be
damned.” Conrad Black’s Hollinger
Corporation shields him from
responsibility.
PS:
But your book doesn’t look solely at big
business. Why do you refer to incorporated small
business as “the cancerous spine of the
economy?”
HG:
The corporation, acting within the free market, is
supposed to create efficiency and allow thousands
of sovereign economic actors to pool their
resources. But with the small business no
efficiency arguments can be made. All of these
small entities are in fact insignificant
economically, in terms of the free market.
It’s only the handful of very large
corporations who can set prices, and distort the
market.
The
managers of small business are merely seeking to
avoid responsibility. As I show with many examples
this creates problems of a different kind. It makes
the small corporation a rather unappetizing vehicle
from a capitalist perspective. Indeed, some of the
true free marketeers would like to see the
corporation become unavailable to small business.
So the book argues that small business doesn’t
insure that we have a free market.
PS:
Is your analysis of corporate law in Canada also
applicable to the U.S. and Britain? Are there
popular writers outside Canada delving into the
same issues?
Because
the book is non-technical the analysis applies to
all Anglo-American common law jurisdictions—in
the U.S., Britain, and Canada. There are local
variations, of course. In the U.S. shareholding is
much more diffuse. And these shareholders often
have more say than in Britain or Australia. Yet, in
terms of the basic legal structure, the fundamental
points are the same.
Other
writers, such as Ralph Nader and David Korten in
the U.S. have written about the quasi-governmental
effects of the corporation. They have also talked
about their undue political influence, especially
in their ability to take away their wealth. As
Korten states, corporations are created for public
purposes so they should be publically accountable.
My book works in harmony with these ideas but
emphasizes something different. I argue that the
actual legal structure of the corporation, makes
certain outcomes inevitable, and I attempt to show
how deviance is closely related to the very
existence of the corporation.
PS:
Assuming that Western governments had the political
will, are they in fact in a position to restrain or
modify the worst aspects of corporate behaviour?
For example, do you think it’s possible that
legislation could begin to hold corporate directors
accountable to groups in society other than their
shareholders?
HG:
There are possibilities. In France corporations
can’t be sued but their directors can be, so
typically the management can be held accountable.
And in our system there have been some cases of
prosecuting corporate managers. Union Carbide
executives are finally being pursued for their
actions in Bhopal, India. We haven’t gone as
far as imposing responsibility on
shareholders—as yet! This would be a logical
outcome. Once upon a time corporations were not
seen as separate from their shareholders. Thus it
was possible to hold them accountable. So it’s
partly a question of politics, and a political will
that depends on an entirely different
ideology.
Governments
can be embarrassed, especially when a lot of people
get angry as they did over Bhopal. Some small, good
steps are now being taken or considered in Canada
and the US, although they don’t get to the
root of the matter. Many of the new regulations
tend to be mediating rather than
structural.
PS:
Does the trend toward globalization and the push to
standardize, as seen in such bodies as the World
Trade Organization, affect the practice of
corporate law in Canada?
HG:
Yes, in a number of senses. After the Second World
War, in Canada and elsewhere, welfare systems were
put in place and promises were made. Social
movements and social pressure extended access to
material goods and improved citizenship rights.
However, the counter-attack on these rights has
been underway for some time, partly under the guise
of privatization, which when extended gives us the
movement for globalization.
These
developments have accelerated the strength of
capital and created enormous pressure on
governments to support their own local capitalists.
We shouldn’t believe, however that the State
is withering away. In Canada, for example, Nortel,
among many other high-tech companies, has been
massively supported by the federal government.Until
recently it was our multinational par excellance.
Corporations don’t just set up anywhere, you
know. They need local governments to provide all
kinds of infrastructure, such as roads, educated
labour, and power supplies.
PS:
As your argument develops in the book you begin to
speak about “commercial speech” Can you
summarize?
HG:
As a society we believe in free speech. However,
the courts have now extended this right to
corporations as if they were individual citizens.
This gives corporations the right to sell, create
images, and advertise. Speech itself rather than
the speaker has now been deemed appropriate.
Because corporations are seen as persons before the
law they can also participate in politics.
Consequently this provides a context that has an
enormous impact on how governments think about
policy.
Commercial
speech in terms of corporate rights plays a role in
the larger trend whereby everything can be
commodified and where consumerism becomes life
itself. The corporation makes it all seem normal:
selfishness, avarice, disregard for others,
impersonal relations, the subjugation of the
majority to the whims and caprices of the few. To
be a consumer is what citizens are taught to
be.
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