The Corporation — Government by Whom?

For many years, Stoney Bird worked as a corporate lawyer, nurturing corporate privilege and self-seeking against all comers in the garden of corporate law.

Part 14

This is the fourteenth in a continuing series of articles that began with the January, 2014 issue of Whatcom Watch. The series addresses the impediments to democracy and well-being in American society. The article will open some of the core questions of what a “corporation” is and describe its evolution into the beginnings of the Eurocentric colonial era. There will be an as yet undetermined number of subsequent articles about this fascinating and hegemonic institution.

After 1776, Americans “rescued the corporation, an all-but-moribund institution in late eighteenth-century England, and utilized its capacity to empower individuals whose resources were unequal to their imaginations. They attempted to recreate it as an agent of opportunity rather than a recipient of privilege, to limit its tendency to exacerbate inequalities of wealth, to devise checks on its potentially dangerous power, to harness it more firmly to the public good.”

— Pauline Maier, historian1

We’re outside because there is something wrong inside.

— Slogan of striking workers at St. Joseph’s Hospital2

Corporations can generate as many stories as any human context. The stories are about power and its abuses, deceit, betrayal and, occasionally, sex. Here’s one of those stories.

The largest employer in town is the hospital. The hospital used to be locally owned and managed, but is now part of a chain owned by the Catholic Church and operating all over the western United States. Decisions are made by a board sitting hundreds of miles away. About a quarter of the workers at the hospital are paid so poorly that they can’t afford treatment at the hospital if they or their families get sick. They form a union, but after 18 months have not been able to reach a reasonable contract with management, who of course are very well paid. Incidentally, the chain is a “not-for-profit” corporation, according to its website. The website does not reveal anything about how its executives are paid.

This story, of course, is about Bellingham and its very “own” St. Joseph’s. The workers engaged in the strike are “nursing assistants, lab technicians, dietary staff, unit secretaries, and hospital housekeeping” according to The Bellingham Herald.3 These workers comprise about 900 of the hospital’s 2,750 employees.4

The phenomenon of sky-rocketing executive pay and stagnant pay for everyone else has been a staple of our understanding for the last four decades.5 Like many contemporary corporations, PeaceHealth acts as a funnel, sucking available revenue into the top executives’ pay packages and holding down the pay of those lower in the corporate hierarchy. Also as in many of its contemporaries, corporate management occurs in some far distant place and is carried on by persons who have no connection with the community, its people or the ecosystems they affect. To them, we locals matter as much as a blip in a spreadsheet and can be erased just as easily.

What is not so well known is that it was not always so. The corporate ideal in the early days of the United States was that it would embody the republican virtues described in the quotation from Pauline Maier. What’s more, it was expected to adhere to the “law of distribution,” a concept of the country’s early days that required inherited wealth and influence to be subdivided so that it could flow into the stream of development. The ideal was that the corporation would be one more way to avoid the rule of a hereditary aristocracy. In the new republic — when we had a republic — a guiding principle was the equal authority and right of all to participate in government and to share in the nation’s wealth.6 For the moment we’ll pass over the fact that “all” in those days only included free, white, land-owning adult males, who constituted only about 6 percent of those living in the original 13 states. Along with blacks, Native Americans, white indentured servants, the wives of the said “all” were excluded from the franchise, and in fact were just another form of property.

“The corporation” had by then already been through many phases in its history. And it was to go through many more. This essay will attempt to shed some light on the long story of this key institution of our society.

A final thought before we launch into the corporate epic: in essence a corporation is simply a collection of individuals who have decided to pool their time, energy and money. The pooling of resources enables them to accomplish things that they could not accomplish individually, or paraphrasing Pauline Maier, to enable their resources to catch up with their imaginations. Another way to put this is that they achieve power.

One question on which I invite you to reflect as we go along is whether the corporate form of organization differs in essence from that of a gang — or a mob.

Scholars debate about the origins of the corporate form of organization. University of Michigan Law Professor Vikramaditya Khanna claims some of the essential features were present in the business organizations of ancient India, beginning roughly in the seventh century BCE.6 Others refer to the Romans.7 In the Middle Ages, the corporation had a kind of renaissance, not for business purposes, but for establishing institutions like towns, universities and monasteries.8 For the towns, the key thing they wished to protect was their “liberties,” meaning rights of self-governance and freedom from feudal obligations.

For all of these it meant that the corporation — called at the time “universitas” or “collegium” — had some of the core properties of what we now call “corporate personhood:” it could own property, make contracts and sue and be sued. It continued in existence beyond the membership or even lives of the individuals who were its founders. In the case of a monastery, for example, this creation of the law was what owned the monastery land and buildings and made contracts with the purchasers of the products that the monks produced. This entity was separate from the abbot and from the monks as individuals. The monks had in any event, in many cases, foresworn ownership of property.

Corporations then were viewed as carrying out public purposes, which were carefully defined and required to be adhered to. The public purpose justified their existence.

Eventually other by-products of corporate institutionalism came into view. By the time of Henry VIII, monasteries owned a quarter of the land in England, having accumulated it bit by bit over the centuries through living and testamentary donations. Apart from anything else, putting all that productive real estate in the hands of the church meant it was removed from the free play of entrepreneurship. It also made the church the richest institution in the country and a threat to the supremacy of the king. So Henry dispossessed the monasteries, parceling out the spoils to favored supporters, just as any Mafia don or (as we will see) corporate CEO might.

A major turn in the wheel of corporate development occurred with the creation of the great European trading monopolies around the beginning of the seventeenth century. These included the British and Dutch East India Companies, as well as similar companies that were set up for trade with Russia, Turkey and other specific regions.9 The voyages of European discovery took place in the 1400s and 1500s, creating long distance trade that was first conducted with each voyage being a separate enterprise. The problem for the merchant adventurers was that competing ships might come into the home port more or less simultaneously, causing a glut on the market and financial losses on all sides. With a royal charter granting a monopoly in the trade, corporate management controlled all the voyages and could space them out and preserve profits. These charters did not, of course, prevent competition with similar companies chartered in other countries.

Governing was a part of what these companies were designed to do as much as trade. Their charters gave them general powers to legislate, to tax, to set up and administer a court system, to raise armed forces and negotiate treaties. Corporate innovators eventually came up with the idea of the joint-stock company. Shares, which were tradable, would be issued to the original investors, giving birth to the idea of the stock market.

By far the most “successful” of these companies was the Dutch East India Company, which in 1619 burned the capital of Indonesia to the ground with a force of 18 ships and established its capital of Batavia on the site. A year later, they arrested a number of competing British merchants, convicted them of treason and beheaded them.

After that, the Dutch company held a monopoly on almost all of the spice trade with Europe and also conducted much of the trade among different parts of Asia. Over the next two centuries, Dutch ships carried five times as much cargo in these trades as their nearest competitor, the British East India Company.

The 13 American colonies were established in the same way and with same general conception of what their powers should be. In 1620, for example, James I issued a “patent” to certain “Knights, Gentlemen, and Merchants” for the establishment of “New England,” a joint-stock company.10 The patent named a heady mix of lords, admirals, and the king’s “cousins” to run the new enterprise. To carry out their governing duties, these worthies were to meet not in the new world but in Plymouth, County Devon, England. The territory in question was enormous. It ran from the 40th parallel (roughly through present-day Philadelphia) to the 48th (through the Gaspé Peninsula north of present-day Maine) and from “sea to sea.”

In its corporate capacity, the new entity was granted all the land within those boundaries and had the right to own land elsewhere. It could sue and be sued. Its powers would survive changes in the identity of the original grantees. Since it was a joint-stock company, the owners of the shares could trade in them. It could legislate, appoint government officials, raise armies, impose martial law, keep out those it chose not to admit and, most especially, was directed to expel those “suspected to affect the Superstition of the Church of Rome.”

As for the people who were already living in “New England”, King James’ patent describes them as “savages and brutish people.” Most, the patent says, had been struck down by a “wonderful” plague, not to speak of many “horrible slaughters and murders.” The territory for “many leagues” being in a condition of “destruction, devastation and depopulation,” and “deserted as it were by its natural inhabitants,” the good James is resigned to his “Kingly duty” and must “second and follow God’s sacred will” by seizing the plum laid before him “with boldness.” His duty arises not least because of the need of “reducing and Conversion of such Savages as remain wandering in Desolacion 11[sic] and Distress, to Civil Societie [sic] and Christian Religion.” By taking advantage of their distress, inflicting an alien religious tradition and seizing their land, he claims to be doing them a favor!

The New England company didn’t last very long. Its name stuck, but in 1635 it surrendered its rights in favor of the Massachusetts Bay Company, which had received its own charter — with similar powers and rights — in 1628. Nevertheless, the New England charter was a model for the colonial corporations that did persist, both in its internal institutional arrangements and in its assumptions about race and religion as excuses for the exercise of violence.11

Next Month: slave trade

References

n Berman, Harold J., “Law and Revolution: The Formation of the Western Legal Tradition,” Harvard University Press, 1983.

n Khanna, Vikramaditya S., “The Economic History of the Corporate Form in Ancient India,” draft 2005, Yale Law Journal.

n Maier, Pauline, “The Revolutionary Origins of the American Corporation,” William and Mary Quarterly, 3d Series, Vol. 1, No. 1, January, 1993.

n Piketty, Thomas, “Capital in the Twenty-First Century,” Harvard University Press, 2014.

n Relyea, Kie, PeaceHealth workers go on strike over wages and benefits, The Bellingham Herald, May 12, 1015, www.bellinghamherald.com/2015/05/12/4290725/peacehealth-workers-to-strike.html, viewed May 14, 2015.

Endnotes

1. Maier, see References, p. 83.

2. Observed at a rally held May 13, 2015.

3. Relyea, May 12, 2015, see References.

4. For number of workers on strike, Relyea, May 12, 2015, see References. For number of employees at Peace Health, Johnson Team Real Estate, Top Employers in Bellingham and Whatcom County, www.johnsonteamrealestate.com/Top_Employers, viewed May 14, 2015.

5. See, e.g., Piketty in References.

6. Khanna, in References.

7. See, e.g. Berman, in References, p. 215.

8. This was part of a general move to revive and systematize Roman law in what Harvard law professor Harold Berman has called the “Papal Revolution” beginning roughly in 1075 CE. The “revolution” was not sudden or for the most part violent, but it did produce radical changes in a few decades. The Church for the first time claimed — and obtained — the right to govern itself independent of the secular power, to appoint popes and bishops (instead of having them appointed by local or imperial secular authorities), and to have their own system of laws, together with the courts and jurists to administer them. See Berman, in References.

9. See Wikipedia article on the Dutch East India Company, en.wikipedia.org/wiki/Dutch_East_India_Company, viewed May 27, 2015.

10. For this and other corporate/colonial charters go to avalon.law.yale.edu viewed May 28, 2015.

11. A future essay in this series will show how the notorious papal Doctrine of Discovery purported to justify these ideas on corporate powers. A brief description of the Doctrine appears in the essay entitled “The Constitution: Property, Commerce, Empire and Corporations Over People, Communities and Nature,” that appeared in the May, 2014 issue of Whatcom Watch. See http://www.whatcomwatch.org/php/WW_open.php?id=1714.