Avoiding Corporate Liability

Once upon a time early in the 19th century, corporations came into existence by state legislatures approving charters, which were granted for a limited period of time and for limited purposes. These corporations — producing textiles and other products in New England — raised capital in part because their investors had limited liability. That meant they could not lose any more than their investment if things went wrong.

Since corporations were artificial legal entities and not human, these lawmakers feared that without some strong leashes, they could be creating Frankensteins.

Over the following two hundred years, these ever larger corporations and their attorneys have been driving relentlessly, dynamically to erect systems of privileges and immunities that give the corporations themselves limited liability.

Their first big move was to take the chartering authority from the state legislature and place it inside an executive agency where chartering became automatic, shorn of the conditions the lawmakers once imposed.

Once chartering became automatic, perpetual and open-ended, corporate lawyers moved to have the courts — not the legislatures — turn corporations into “persons” for purposes of constitutional rights.

Their big breakthrough came with the Santa Clara case in 1886 when the U.S. Supreme Court allowed its summary headnotes to declare that the railroad in the case was a “person” for purposes of the 14th amendment. Through elaborations in later Supreme Court decisions, that meant that companies like Aetna, General Electric, Exxon and Lockheed had most of the same constitutional rights as real people like you.

Soon it was off to the races and the promised land of no-fault corporate behavior. Early in the 20th century, companies erected “no-fault” workers compensation schemes limiting damages for the horrors of worker injuries and workplace diseases in those mines, factories, and foundries.

Then came the steady erosion of shareholder rights and power, notwithstanding the securities acts of 1933 and 1934 which emphasized disclosure and anti-fraud rules. As owners, the shareholders have had little control over the corporations they “own”. The split between ownership by the stockholders and control by the corporate bosses, and their rubber stamp boards of directors, is now wider than the Grand Canyon.

With the limitless “business judgment rule” and the permissive corporate chartering goliath ensconced in the state of Delaware, shareholders don’t even have a vote as to whether their hired bosses should dissolve their company into bankruptcy.

These investors cannot even determine the limits on the runaway pay packages by and for their supreme executives. Investors cannot even propose their names for election to the boards of directors in these Kremlin-style corporate board elections. Investors are told-if you don’t like what we your bosses are doing, you’re free to sell your shares. And, of course, that exit leaves the rascals more in charge.

Anytime the law is activated on behalf of the “little people”, corporate lobbyists move in to weaken or delete these instruments of accountability. For example, tort law giving wrongfully injured Americans their day in court against manufacturers of defective cars, hazardous chemicals or drugs and other products has been weakened by business-backed state and federal laws. More immunity for corporate wrongdoing.

When the early atomic power industry got underway in the nineteen fifties, insurance companies would not insure the potentially massive damages a breach of containment disaster might produce. No problem. The industry pushed Congress to pass the Price-Anderson Act in 1957, which greatly limited the utilities’ and manufacturers’ liability for the human devastation arising from a class nine meltdown.

How about the contracts you sign with credit card, auto dealer, insurance company, bank and other vendors? Over the years by using fine print contracts to avoid many obligations, sellers have disadvantaged consumers who have to sign on the dotted line. Corporate lawyers have turned contract law upside down. And if you don’t want to sign, you can’t go to a competitor company because the contracts are just as one-sided, taking away your rights page after page, including your right to go to court.

Well, suppose a corporation, like General Motors, is so mismanaged that it is losing sales, profits, creditworthiness and heading toward abject failure. No problem. There is always chapter 11 voluntary bankruptcy to terminate obligations to creditors, dealers, litigants, and other claimants with pennies on the dollar.

Here is how bankruptcy attorney Laurence H. Kallen described the process in his book,Corporate Welfare: “[In] chapter 11 the megacorporations almost all succeed famously. They dominate the committees and bully the judges. They stay ten steps ahead of any feeble attempts at supervision. They use the bankruptcy laws to force plans of reorganization down creditors’ throats. And then the executives of those corporations laugh all the way to the bank.”

Speaking of banks, wouldn’t you like to have the power to mutate yourself like six large insurance companies did last November to get billions of your tax dollars under the TARP rescue program?

Mired in their risky, reckless investments, including derivatives, these insurance companies qualified for the money simply by a paper restructuring of themselves as bank holding companies. Voilá! The U.S. Treasury declared they qualify as financial firms and will soon be receiving your money. The New York Times reports that “hundreds” of other such companies “are still in the pipeline for review.”

Whether it is equal justice under the law, equal protection under the law, equal access to the law, or the power to make laws, there is no contest between the corporate entity and the real human being.

What Supreme Court Justice Louis Brandeis feared in an opinion he wrote during the 1930s is happening. These megacorporations have become Frankensteins — moving to own our genes, the plant seeds of life and taking control of computerized artificial intelligence. Their final conquest is far along — the control of government which is then turned against its own people.

As Paul Harvey used to say: “Good day.”

Ralph Nader is a leading consumer advocate, the author of Unstoppable: The Emerging Left-Right Alliance to Dismantle the Corporate State (2014), among many other books, and a four-time candidate for US President. Read other articles by Ralph, or visit Ralph's website.

10 comments on this article so far ...

Comments RSS feed

  1. bozh said on June 3rd, 2009 at 11:55am #

    unfortunately, ralph leaves out other factors which contributed to corporations getting equal right as any US citizen.
    massive miseducation, socalled religion, entertainment, advertising, privately-owned media, constitution/governance, politicians are all factors/enablers of corporate behavior.

    if now corporation control the governance [jurisprudence, pols, education, means of informing public, army, cia, etc.] obtaining the control was gradual and over more than a century.

    so, it seems that many people and not just judges/pols conspired with ceos to establish a largely corporate rule in US.
    also omitted is the fact that in US we have an extreme asocial structure of society. And only in such [fascist?] structures can such iniquities occur. tnx bozhidar balkas vancouver

  2. Don Hawkins said on June 3rd, 2009 at 12:34pm #

    Once upon a time in the early twenty first century in the year 2009 the World was at a turning point and tipping point that put the human race all 6 billion plus of us at the crossroads. In the year 2009 the average person most knew we were in deep do do and also knew there governments were being controlled by megacorporations and the government had turned against it’s own people. It was there final conquest and I mean final. The ice Worldwide was starting to melt and melt fast. Temperatures were on the rise Worldwide and so was the illusion of knowledge of the megacorporations and so called leaders and another way of putting it was the rise of bullshit. In the year 2009 it was still working sort of. The megacorporations and the people who run them and so called leaders did they understand how much do do we were all in? Oh yes they sure did so why the illusion of knowledge the bullshit as the last time any of us checked we only have one planet to live on. Well an old movie sums it up. The good the bad and the ugly and in the year 2009 we need to add one more the evil. Greed was still good and bad was good and the good were bad. Tipsy turvy some people called it. In the year 2009 many knew the shit was about to hit the fan in more way’s than one. The problem itself was about to show itself even more and the good guy’s were about to show themselves even more. To fight ugly and evil in the year 2009 the good guy’s only had to use the truth and knowledge and that is what they were going to do. The average person 2 million to start were trying to get a little get together in front of the Capital one voice calm at peace with a few talks from the good guy’s and as the Sunsets in the Eastern sky sorry those so called leaders and megacorporations can fool with your mind in the Western sky two million to start singing “Tomorrow, Tomorrw it’s only a day away”, was one hell of a thing to see. Yes the you know what is about to hit the fan kind of easy to see. For some reason they forget about the problem itself that is moving a little faster than first thought. That final conquest might have to be put on hold for a long long time.

  3. Mulga Mumblebrain said on June 3rd, 2009 at 4:27pm #

    The market capitalist neo-feudal project, which went into feverish overdrive in the 1970s, has almost reached fulfillment. However there remains the problem of environmental sustainability. While the parasite elites in charge of the fossil fuel, automobile and related industries seem utterly oblivious to ecological collapse, there is much evidence that the global parasite class as a whole sees clearly the dangers at hand.
    The idea that economic development will lead to the poor world reaching the material standards of the West is a bad, bad, joke. One seriously questions the intelligence or honesty of those who propose it. For a start, the resources to achieve it do not exist, and the pollution thus unleashed would destroy all life-sustaining biospheres. Moreover virtually all added value realised in destructive industrial expansion is being appropriated by the insatiably avaricious elites, as global inequality, within and between societies, grows apace.
    Elite discussion of ecological crisis returns again and again to the question of ‘over-population’. The letters pages and blogs are being increasingly dominated by Rightists who blame the very existence of the poor, not rich world over-consumption, as the source of all environmental ill. Clearly Western publics are being propagandised in preparation for some startling development. While the planet is clearly over-populated, one must seriously doubt that the global elites have humane plans to remedy this situation in mind. The slow reduction in family size achieved by rich countries, the demographic change, requires global income equality, education of women, and vastly improved social welfare, all of which are anathema to the overclass who prefer inequality , limitless greed and conspicuous over-consumption. Even now it is becoming more plain by the day that the current financial crisis was deliberately contrived as a means to the end of the greatest pillaging of the public purse and common wealth in history, the proceeds being transferred in the trillions by Wall Street’s place man, Obama, and his coterie of banksters, most alumni of Goldman Sachs. As is, curiously enough, the multi-millionaire Leader of the Opposition in Australia, Malcolm Turnbull, who demonstrated his elite credentials as long ago as high school where he was, reportedly, both head prefect and school bully-in-chief at the same time.
    Humane methods of population reduction being ideologically and pathopsychologically unacceptable, more abrupt means seem more likely to be applied. Certainly massacres in lands like Iraq, Afghanistan, the Congo, Somalia, Lebanon, Gaza and Pakistan are psychologically gratifying, and fullfill certain Messianic religious delusions of the worst type of Jew and ‘Christian’, but the untermenschen just keep on breeding. Climate change will do the job, but the elite can not be certain of surviving, or enjoying the centuries or millenia of climate disruption. So I expect disease, that proved so efficacious in obliterating indigenous populations during the era of Western colonialism, to be chosen as the means to the end of massive population reduction, and I expect it soon.

  4. Tennessee-Chavizta said on June 3rd, 2009 at 4:34pm #

    The middle-classes of USA don’t want USA to get economically better. The middle-classes of USA conspire to support the bankruptcy of the United States by voting every 4 years for Democrats and Republicans.

    What we need is a workers-council state in USA. A government ruled by workers while at the same time on the economic side: the mega corporations of USA like Wal-Mart, Pepsi, Coca Cola, Mcdonalds, General Electric, etc. owned by workers, thru the system of “workers control of production” (Workers management/workers-ownership), or “Workers stock ownership” however you want to label it.

    Only under the proletarian dictatorship are real liberties for the exploited and real participation of the proletarians and peasants in governing the country possible. Under the dictatorship of the proletariat, democracy is proletarian democracy, the democracy of the exploited majority, based on the restriction of the rights of the exploiting minority and directed against this minority.

    The dictatorship of the proletariat cannot arise as the result of the peaceful development of bourgeois society and of bourgeois democracy; it can arise only as the result of the smashing of the bourgeois state machine, the bourgeois army, the bourgeois bureaucratic apparatus, the bourgeois police.

    Therefore, Lenin is right in saying:

    “The proletarian revolution is impossible without the forcible destruction of the bourgeois state machine and the substitution for it of a new one” (see Vol. XXIII, P. 342)

    Soviet power as the state form of the dictatorship of the proletariat. The victory of the dictatorship of the proletariat signifies the suppression of the bourgeoisie, the smashing of the bourgeois state machine and the substitution of proletarian democracy for bourgeois democracy

    Let other people you know learn about socialism! Spread the word… the more people who know the truth, the greater the force against the capitalist system! Resistance forever!

    …………………../´¯/)
    ………………..,/¯../
    ………………./…./
    …………./´¯/’…’/´¯¯`·¸
    ………./’/…/…./……./¨¯\
    ……..(‘(…´…´…. ¯~/’…’)
    ………\……………..’…../
    ……….”…\………. _.·´
    …………\…………..

    SO PLEASE, STICK UP YOUR MIDDLE FINGER TO US IMPERIALISM AND CAPITALIST OPPRESSION !!

  5. Deadbeat said on June 4th, 2009 at 3:20am #

    The middle-classes of USA don’t want USA to get economically better. The middle-classes of USA conspire to support the bankruptcy of the United States by voting every 4 years for Democrats and Republicans.

    Why does the Left insist on blaming the victims. The working class has been indoctrinated into seeing themselves as “middle” class. They vote for the Democrats and Republicans because based on the structures of U.S. politics they have no choice and that the Left has abandon real working class politics for decades.

    Please read the find critiques and analysis published here on DV by Left Luggage. Before the Left starts blaming the working class they need to take a good look at the Left own failures and deceptive practices. Before the Left can blame voters they need to get organized and build real solidarity among the ranks of the working class. That did not happen in 2008.

    The Left weakened itself in 2004 and was totally unprepared for 2008. Under those circumstance it makes practical sense for voters to vote lesser evil. Nader vs. McKinney only weakened the Left. The “more choices more voices” is not an idea that will strengthen the Left and win workers over to its ranks

    Blaming the voters when the Left’s hands are unclean will not convince them over either.

  6. Josie Michel-Brüning said on June 4th, 2009 at 7:13am #

    When I am reading all this I fear again the rats have much more chances to survive on this planet than human beings!
    They have no ancestors, famous for their philosophy and progressive ideas or cultural enrichments, but they don’t waste their time with blaming others. In the opposite, if one of the rats had eaten poison by mistake it will warn its fellow rats before dying.
    What about the joy of living? Couldn’t joy and love be better means for transmitting ideas and for winning friends?

  7. Josie Michel-Brüning said on June 4th, 2009 at 7:43am #

    Just for avoiding misunderstanding: I do appreciate this article by Ralph Nader.
    I just complain that left people seem to be unable for uniting with and appreciating each other, as if they were members of sects.

  8. Deadbeat said on June 4th, 2009 at 12:41pm #

    >>I just complain that left people seem to be unable for uniting with and appreciating each other, as if they were members of sects.<<

    It not about “appreciation” is it about real politics. Real politics means that there are people with agendas that are constructed to maintain division. They exist on the Left and they need to be rooted out. Some of the real politics may be due to good intention but poor strategy and others may be more deceitful. Over the past several decades the Left has moved away or outright avoided promoting real working class politics and efforts that would unite the working class. This abandonment has created a vacuum that has been filled by others who has manipulated and diverted attention away from critical issues.

    For many on the Left they have followed the meanderings of Noam Chomsky and others like him who has made the central issue “U.S. Imperialism”. This concept is nebulous to the working class. It really doesn’t speak directly to their everyday issues. Also Chomskyism lays the blame, especially on U.S. foreign policy, on the need for oil and other natural resource and fails to examine the rise of “racism” meaning Zionism, as a problem within the U.S.
    His trajectory has help moved the Left away from Marxist analysis which is crucial in understanding and confronting the issue of working class concerns.

    This vacuum, especially on the economic front, is being filled by misdirected analysis. In fact it was so bad on the Left in 2008 that some members even supported Ron Paul’s run. Now Ron Paul has become the best apologist FOR Capitalism (and the “f[r]ee market) during this crisis. I find it ironic that those who criticizes the voters omit this aspect.

    If the Left remain divided it is due to the lack of cohesion around an ideology that best expresses working class interest and solidarity.

  9. bozh said on June 4th, 2009 at 3:37pm #

    i was 25 before i cld say NO to my mom and 77 before i cld say NO to my wife.

    maybe US cld say NO to israel before it is 6 0r 700 yrs old. Certainly, at one point in time, US has to say NO!

    yes, amers might say no, but time is running out as global warming might prevent US from growing up. And ‘jews’ wld be left without its pet dog; gasping for moshiach’s help and cool air!
    at that time, people in ME wld slowly fry in dry heat of 60C.

    so, all in all, things look very good. Still, ‘jews’ are very smart; they all may declare once again that they are really lenin/stalin/trotsky loving russians and cld then leave the wretched oven for siberia and be back in mother russia. tnx bozhidar balkas vancouver

  10. bozh said on June 4th, 2009 at 3:54pm #

    i haven’t read obama’s speech in cairo. I think he said s’mthing about “new begining with muslim world”.
    but, folks, i’m not dwelling at all onthe begining but on the same old ending.

    everything changes; thus, several hundred beginings with muslim world are all different; including the latest one.\
    and thus the ending will be different. But, folks, change is the only ceratainty!

    however, the ending may not come before biden’s second term or george clooney’s third term. We are once again well entertained. When i said we, i don’t mean people with ‘tainted’ skin and other unproductive lazy, good for nothing bones!
    once again i ask ‘gods’ to unite and save for us novaya zemya [new land] along with siberia, n. and s. pole, iceland, greenland. tnx