Robert Hockett —
Introduction: From ‘Accounting For’ to ‘Accountable To’
In an earlier post I welcomed legislation recently proposed by Senator Elizabeth Warren. Her Accountable Capitalism Act, I suggested, not only bids fair in the long run to render incorporated business firms less sociopathic, but also affords in the short run a fine opportunity to recall what corporate privileges are for. The latter, I argued,
are both analytically and historically best understood as ‘publicly’ conferred advantages accorded ‘private’ entities for ‘public goods’ that they provide. This interpretation of the origin and function of the corporate form, I noted, is simply inescapable when we observe the practice of conditional corporate chartering, and the law of corporate action taken ultra vires, that predominated from the dawn of American incorporation well into the 20th century.
Unfortunately, I also noted, once the 19th century conditions of capital scarcity and unreliable public revenue that had recommended incorporation as a necessary mode of ‘outsourcing’ public functions to private entities in the first place had receded, corporate history took a darker turn. Subnational state governments that once had chartered firms conditionally to discharge public functions now began to bribe them, with a view to gleaning franchise revenue. Charters now grew unconditional and firms were treated as accountable to no one but their largest shareholders. Firms grew ever larger in this new environment, and states grew weaker and ‘divide-and-conquerable’ where holding privileged ‘private’ firms to ‘public’ account was concerned. A ‘race to the bottom’ began.
What, then, I asked, is requisite to restoration of some version of the status quo ante – the world in which the truly extraordinary privileges of perpetual existence and asset-insulation (particularly limited liability, an illuminating synonym for which would be ‘limited accountability’) were conditional upon provision of some public benefit? The answer, I suggested, would involve a number of essential measures, all of which would capitalize upon the fact that it’s our federal government now that stands to mega-firms as our state governments once stood to smaller firms. I therefore promised in a sequel post to lay those out, and then to indicate how Senator Warren’s legislation would begin to take those necessary steps.
Well then, here we go.