Curing the Ills of Globalization: What Role Should Large Companies Play?

Has globalization gone awry? Charles Derber, a sociology professor at Boston College, believes that it has. As proof, Derber points to the global economic downturn; the widening gap between rich and poor; and the scores of demonstrations, both in the US and abroad, criticizing globalization as an anti-labor and anti-environmental force. Derber elaborates on these arguments in his new book, People Before Profit.

The pressures of globalization, Derber argues, put large companies in a bind: US corporations are legally obligated—and bound by their corporate charters—to pay off their shareholders with a maximum return. How, then, can companies give a portion of profits to, say, assisting the third-world poor, without welshing on their primary obligation?

Derber argues that even enlightened figures such as Jesus or Buddha would struggle as CEOs, torn between helping their shareholders and helping bigger-picture causes: “Jesus or Buddha in the saintly CEO role would end up in court, sued by their own shareholders, if they lowered profits to help the poor of the world. And this is just one of many ways that global financial markets and firms are wired by their inner programming to put profit above people.”

So what can large companies do to solve the “doing well by doing good” problem? It’s a tough question, but Derber has several suggestions—some of which are in the book, and others of which emerged in a February 12 event on the Boston College campus and during an interview with The Voice.

For example: Large companies can partner with organizations whose missions are to make globalization a more democratic, pro-labor process. One such organization, Free the Children, based in Thornhill, Ontario, Canada, raises money to buy children out of bonded work so that the children can go to school. Another organization, United for a Fair Economy, based in Boston, is one of several grassroots groups dedicated to public education and political activism about inequality, both in the US and internationally. Then there are the hundreds of groups, such as Caritas and Oxfam International, which concern themselves with third-world poverty and development.

Derber also believes that large companies should join the grassroots movements—already underway in several states—to revise the rules of corporate charters, so that any incorporated entity taxed as a business would have fiduciary obligations to both private shareholders and the public good. Current charters define the corporation as “a sacred free contract among private parties that neither government nor citizens have any constitutional authority to question.” But a new type of charter, as suggested by Derber, would eliminate the right of corporations to sue governments in venues such as NAFTA or WTO tribunals; the new charters would also, ideally, forbid companies from making contributions to political campaigns.

Derber points out that, in Pennsylvania, activists have already called for state corporate charters to be limited to 30 years, with renewal only occurring after the corporation has demonstrated its service to the public good; companies would, ideally, have to submit annual labor and environmental audits to authorities, the same way they currently submit annual financial audits.

Another step large companies can take is to empower their workforces. Derber raises the question: Why should the shareholder be “the only stakeholder vested with the vote and the only constituency to whom the corporation owes fiduciary obligation?” More than 30 states in the US, he says, have already passed “stakeholder laws” that permit boards of directors to consider worker interests without violating their fiduciary obligation to shareholders. As an example of how companies can enfranchise workers without necessarily giving them stock ownership, Derber cites the German model of corporate governance, which requires that at least one-half of the board of directors be elected by the workers. In Germany, he writes, the workers are given the vote because “they are viewed as members of the corporate community who bear risk, as the investors do, and whose commitment is essential to success.”

Derber cites dozens of reasons as to why companies should act right now to make globalization more democratic, rather than waiting a year or so. He believes that public opinion regarding globalism is approaching a “tipping point”: Soon, consumers and stakeholders will punish corporations whose globalization efforts yield poor human rights records. Just as, in today’s world, companies would do almost anything to avoid a reputation as a racist or sexist organization, Derber believes the time is coming when companies “will be equally fearful of being considered anti-human-rights.”