In a recent article we wrote: “America today is very different from the country that fought the Revolutionary War and framed the Constitution. Then, it was a nation of farmers; today, it’s a nation of corporations.”
Though we are today a nation of corporations, there is remarkably little discussion about corporate actions and the impact of those actions on our lives, even though it’s clear that what our corporations, especially our major corporations, choose to do affects in major ways wages, jobs, healthcare and the overall economy.
There is even less discussion on what we want from our corporations. Is it, for example, enough that their sole goals are to maximize the return to their shareholders?
This article suggests something citizens can do to spur these needed discussions and to make visible what corporations are actually doing and the effects of their actions. Here we are not calling on the government to mandate this transparency, rather we are calling on ordinary citizens and citizen organizations to act to make the actions of corporations more visible, more transparent.
Labeling the Corporation
We are used to the idea that many of the products we buy are labeled. For example, many processed foods are obliged to disclose their ingredients, and they are labeled so that we do not have to guess at what we are eating. Consumers are often encouraged to “read the label”, so they will know what they are buying.
Similarly, let us now insist on labeling and making visible what corporations are doing. Corporations affect us and our country through their decisions on outsourcing and on wages and pensions, and by what their goals are. Do they consider in their actions the effects on customers, their own employees, the communities in which they operate, and on the country that sustains them with its laws? Or do they only consider shareholder value?
Do they pioneer with new and valuable products, and if they do, how do they decide where those products are made? Or, in the realm of services, do they exploit the ignorance of their customers to either give them loans they cannot repay or investment advice more tailored to corporate profits than to the welfare of the customers.
Let’s label corporations with labels that tell us what they are actually doing.
How to Label the Corporation
We are not talking here about physical labels attached to products that corporations make, but about electronic labels attached to the corporations themselves.
But where would these labels come from? How would they be made? What would they look like? What would they do?
An example of corporate labeling already exists. It was created by a cooperative effort between the Zicklin Center for Business Ethics Research at The Wharton School of the University of Pennsylvania and the Center for Political Accountability (CPA). While this is a label that only describes the political spending activities of corporations, the methodology can be applied equally well to other corporate actions.
Together the two organizations developed a set of twenty-nine criteria by which the corporate approach to managing, overseeing and disclosing political expenditures could be judged. The criteria covered disclosure of the range of a company’s political spending — contributions to candidates, Party committees and ballot initiatives as well as payments to trade associations and other tax exempt entities organized for political purposes — and its policies and practices for associated decision making and oversight.
They then scored the top 100 U.S. corporations on all twenty-nine criteria, and for each company the weighted scores for the individual criteria were combined into a single rating, specifically, the CPA-Zicklin Index of Corporate Political Accountability and Disclosure.
Before the Index was made public each company was informed of its rating and had the opportunity to dialog with CPA about them. This also gave the company the opportunity to make changes in the policies and practices they were publicly posting on their website. Only after that was the rating made public. The result is that you can see today this well thought out rating of the top 100 U.S. companies on the CPA website and also, for those who want it, a detailed description of how it was determined.
We believe that something very much like this can be done for other corporate activities.
The essential step is to work out criteria about which you want information, then see what information can be obtained for each company. It was important to the CPA-Zicklin effort, that a corporation not providing information to the public on a specific criterion would result in a score of zero on that criterion and thus a lower rating when the result is made public.
We suggest that civic organizations with a particular interest, label corporations on that interest., whether that is the environment, how they treat their employees, the quality of their goods, or the degree of outsourcing. They should then develop their criteria, and gather information; not always only from the corporations.. They should then produce a publicly available rating that is easy to link to.
Modern technology makes all this possible and more. People with a particular interest in a particular company could organize a Facebook page. There could also be Smartphone apps, similar to those that already exist for comparison shopping. Pointing the camera of a Smartphone at a product would immediately reveal the company that makes it and the rating given to that company by a selected website on a selected issue.
Any and all of these actions will contribute to making visible, transparent and discussible what our corporations are doing.
We are a nation of corporations, but our press and our conventional politics do not in any systematic way make visible the effect of corporate actions on the country. Let us as citizens make up for that significant omission.
He is the author, with Professor William Baumol, of the book Global Trade and Conflicting National Interests. For more about Professor Gomory, click here.