Notes

PREFACE

1. In 1998, “about 90 percent of the total value of stocks, bonds, trusts, and business equity were held by the top 10 percent of households,” according to Edward N. Wolff, professor of economics, New York University, in “What Has Happened to Stock Ownership in the United States?” unpublished paper, September 2000. Citing data Wolff compiled, Economic Policy Institute researchers note that the share of household wealth held by the richest 1 percent of individuals in 1976 was about 20 percent; in 1997, that 1 percent held an estimated 39.1 percent. Wealth was defined as net worth (household assets minus debt). See Lawrence Mishel, Jared Bernstein, and John Schmitt, The State of Working America: 1998–99 (Ithaca, N.Y.: Cornell University Press, 1999), 261–262, table nos. 5B, 5.5.

2. My father, James Kelly, founded Graphic Engraving Inc. in Columbia, Missouri, after World War II. My maternal grandfather, C. M. Anderson, founded Anderson Tool and Die from his basement in Chicago during the Depression. I am cofounder, with Miriam Kniaz, of Mavis Publications, Inc. in Minneapolis, publisher of Business Ethics [www.business-ethics.com].

INTRODUCTION

1. In 1999, sales of new common stock were $105.7 billion, according to Federal Reserve Bulletin figures compiled in Statistical Abstract of the United States, 2000 (Washington, D.C.: U.S. Census Bureau, 2000), 523. Also in 1999, the total value of all shares traded was $20.4 trillion; sales of new common stock represent less than 1 percent of all stock trading. This was typical of the 1990s.

2. Eldon S. Hendriksen, Capital Expenditures in the Steel Industry, 1900 to 1953, The Development of Contemporary Accounting Thought Series (New York: Arno Press, 1978), 143–177.

3. Karl R. Popper, The Open Society and Its Enemies, Vol. 1: The Spell of Plato (Princeton, N.J.: Princeton University Press, 1966 [originally published 1943]), 70.

4. Wolff, “Stock Ownership.”

5. Paul Hawken, interview with Sarah van Gelder, “The Next Reformation,” In Context, Summer 1995, 41, 17–22; cited by David C. Korten, The Post-Corporate World: Life After Capitalism (West Hartford, Conn.: Kumarian Press, and San Francisco: Berrett-Koehler, 1999), 65.

6. The value of all stocks listed on exchanges in 1948 was $81.9 billion; in 1998 it was $10.5 trillion, a 128-fold increase, according to the 1996 and 1999 annual reports of the Securities and Exchange Commission, p. 211 (1996 report), p. 195 (1999 report). The description of environmental decline is paraphrased from The State of the World 1998 report from the Worldwatch Institute, cited by Korten, Post-Corporate World, 67.

7. This fact was noted by David C. Korten in When Corporations Rule the World (San Francisco: Berrett-Koehler, and West Hartford, Conn.: Kumarian Press, 1995), 220. Korten cited 1991 GNP data versus corporate sales data, and found fifty of the one hundred largest economies were corporations; the number has since been updated to fifty-one.

8. Franklin D. Roosevelt, acceptance speech, Democratic National Convention, June 27, 1936; quoted by Ralph Estes, Tyranny of the Bottom Line: Why Corporations Make Good People Do Bad Things (San Francisco: Berrett-Koehler, 1996), 88.

9. Francis Fukuyama, The End of History and the Last Man (New York: Free Press, 1992), 15. In a chapter titled “The Weakness of Strong States,” RAND Corporation consultant Fukuyama observed, “The critical weakness that eventually toppled these strong states was in the last analysis a failure of legitimacy—that is, a crisis on the level of ideas.”

10. Michel Foucault, Discipline and Punish: The Birth of the Prison (New York: Vintage Books, 1975), 102–103. Foucault wrote, “A stupid despot may constrain his slaves with iron chains; but a true politician binds them even more strongly by the chain of their own ideas … this link is all the stronger in that we do not know of what it is made and we believe it to be our own work….on the soft fibers of the brain is founded the unshakable base of the soundest of Empires.”

CHAPTER 1

1. Theo Aronson, Crowns in Conflict: The Triumph and Tragedy of European Monarchy 1910–1918 (Manchester, N.H.: Salem House, 1986), 187.

2. David Cannadine, The Decline and Fall of the British Aristocracy (New York: Anchor Books/Doubleday, 1990), 8.

3. Cannadine, Decline and Fall, 2, 15.

4. Arthur O. Lovejoy, The Great Chain of Being: A Study of the History of an Idea, The William James Lectures Delivered at Harvard University, 1933 (Cambridge, Mass.: Harvard University Press, 1936), 7.

5. Edward W. Said, Culture and Imperialism (New York: Vintage Books, 1994 [originally published 1993]), 225.

6. Those making poverty-level wage or below were 30 percent of the workforce in 1995, up from 24 percent in 1979. Poverty-level wage is the “hourly wage a full-time, year-round worker must earn to sustain a family of four at the poverty threshold, which was $7.28 in 1995 (in 1994 dollars).” Lawrence Mishel, Jared Bernstein, and John Schmitt, The State of Working America: 1996–97 (Washington, D.C.: Economic Policy Institute, 1996), 147–148.

7. Center on Budget and Policy Priorities, Washington, D.C., cited in “Rising Tide, Falling Boats,” The Economist, Dec. 20, 1997, 28.

8. Robert F. Kennedy Jr., “Petrofied Forest: How American and Ecuadorian Oil Firms Slimed the Oriente Forest,” The Village Voice, Feb. 12, 1991, 17. Other oil companies are involved in Amazon drilling, although Texaco has been a leader. According to Kennedy, “Production pits dump an astounding 4.3 million gallons of toxic production wastes and treatment chemicals each day into the Amazon rivers, streams, and groundwater.” The practice of burying toxic drilling muds is industrywide.

9. Kennedy, “Petrofied Forest,” 18.

CHAPTER 2

1. A long discussion of the difference between gentlemen and commoners in early America is found in Gordon S. Wood, The Radicalism of the American Revolution (New York: Vintage Books, 1991), 24–42. The pretense that economic work is for pleasure is noted on p. 36;“the only Gentlemanlike Way of growing rich … ,” p. 38. The John Adams quote, from his Defence of the Constitution of the United States, written 1787–88, is cited by Wood in footnote 1, p. 374.

2. Wood, American Revolution, 33.

3. Whitaker’s Peerage, Baronetage, Knightage, and Companionage for the Year 1914 (London: Whitaker’s, 1913), 11.

4. C.B.A. Behrens, The Ancien Régime (London: Thames and Hudson, 1967), 107–108.

5. Reinhard Bendix, Kings or People: Power and the Mandate to Rule (Berkeley and Los Angeles: University of California Press, 1978), 336.

6. George Rudé, The French Revolution: Its Causes, Its History, and Its Legacy After 200 Years (New York: Grove Press, 1988), 2.

7. Bendix, Kings or People, 376.

8. Alexis de Tocqueville, The Old Regime and the French Revolution (New York: Anchor Books/Doubleday, 1983), 31.

9. de Tocqueville, Old Regime, 30.

10. A commemorative medal celebrating France’s revolutionary National Assembly of Aug. 4, 1789, shows the delegates assembled under the slogan, “Abandon de tous les privileges”—Abandon all privileges. Cited by Bendix, Kings or People, 376.

11. Staff, Social Sciences I (eds.), The People Shall Judge: Readings in the Formation of American Policy, Vol. 1, Part 1 (Chicago: University of Chicago Press, 1949), 235. John Adams was complaining about the new aristocracy arising from “banks and land-jobbing,” in a letter to Thomas Jefferson, December 19, 1813.

12. Clean Yield Newsletter (Greensboro, Vt.: Clean Yield Asset Management), Feb. 5, 1998, 3.

13. Private-sector real (inflation-adjusted) hourly wages from 1987 to 1997 dropped from $15.87 to $14.72, a decline of 7.2 percent, according to Bureau of Labor statistics, analyzed by Mishel, Bernstein, and Schmitt, Working America: 1998–99, 126.

14. The number for 1999 sales of new common stock is from Federal Reserve data in Statistical Abstract of the United States, 2000 (Washington, D.C.: U.S. Census Bureau, 2000), 523. The value of all public shares traded in 1999 is from figures supplied by the Securities Industry Association in Washington, D.C.

15. The value of all exchange-listed stock in 1998 ($10.5 trillion) is from 1999 Annual Report of the Securities and Exchange Commission, 195; 1999 value ($11.6 billion) is from SEC phone interview. The value of common stock issued by U.S. corporations ($83 billion in 1998) is from Federal Reserve data in Statistical Abstract 2000, 523. This second figure does not include private placements or preferred stock. A footnote explains that it represents gross proceeds and excludes secondary offerings and employee stock plans.

16. Federal Reserve Flow of Funds Accounts of the United States [www.federalreserve.gov].

17. The dividend figure is from the table “Corporate Profits and Their Distribution,” based on data from U.S. Department of Commerce, Survey of Current Business; cited in the Federal Reserve Bulletin, May 2001, A32.

18. Federal Reserve Flow of Funds Accounts of the United States, Annual Flows, Web site shows net new equity issues since 1946. The first year this figure was negative was 1963; the next negative years were 1965 and 1968. Since 1978, negative years have been more common than positive years. The last positive year was 1993. The negative $540 billion figure is obtained by adding up net new equity issues from 1981 to 2000.

19. Floyd Norris, “With Bull Market Under Siege, Some Worry About Its Legacy,” The New York Times, Mar. 18, 2001, A1. A chart on that page notes that the stock market bottomed in 1982, when the Dow Jones industrial average hit 777. It climbed from there—through the crash of Oct. 19, 1987, when it retreated to about 2,000—and was above 10,000 in 2000.

20. Norris, “Bull Market Under Siege,” A1, A16.

21. Adolf A. Berle and Gardiner C. Means, The Modern Corporation and Private Property (New Brunswick, N.J., and London: Transaction Publishers, 1991 [originally published 1932]), jacket quote.

22. Berle and Means, Modern Corporation, xxxiv–xxxv.

23. The 1964 AT&T issuance of new stock was noted by Berle and Means in Modern Corporation, xxxiii. GM’s $2.2 billion stock offering in 1992 was at the time the largest in history. Then in January 1997 it bought back $2.5 billion of stock, as noted in Hoover’s Handbook of American Business 1998 (Austin, Tex.: Hoover’s Business Press), 654. Another $4 billion buyback was announced Feb. 9, 1998, as noted in Standard & Poor’s periodical Standard Corporation Descriptions, 8786. See also Agis Salpukas, “Conoco Raises $4.4 Billion in a Record Initial Offering,” The New York Times, Oct. 22, 1998, C1.

24. Berle, Modern Corporation, xxxiii, xxxv.

25. “Over the past decade, productivity has risen by at least 1.5% annually, a figure three times the 0.5% average annual gain in workers’ real compensation per hour.” Stephen S. Roach, “The Hollow Ring of the Productivity Revival,” Harvard Business Review, Nov.-Dec. 1996, 86. To see if this had changed in 1998, I phoned Roach on June 25, 1998, and in a personal interview got the quote used here: “But we still have fifteen years….”

26. From 1977 to 1997, the number of workers working fifty or more hours a week jumped from 24 percent to 37 percent, according to James T. Bond, vice president of the Families and Work Institute. Cited in James Lardner, “World-Class Workaholics,” U.S. News & World Report, Dec. 20, 1999, 42.

27. In 1989, the real (inflation-adjusted) hourly wage for median workers was $11.30; in the first half of 1998, it was $11.13, according to statistics from the Economic Policy Institute. Cited in LRA Economic Notes (Labor Research Association, 145 West 28 St., New York, N.Y. 10001; 212/714-1677), Sept. 1998, 5.

28. Mishel, Bernstein, and Schmitt, Working America: 1998–99, 5.

29. Andrew Bary, “The Unsinkable Dow Hits 7,000, But What Comes Next?”, The Trader column, Barron’s, Feb. 17, 1997, MW5.

CHAPTER 3

1. Teresa Michals, “‘That Sole and Despotic Dominion’: Slaves, Wives, and Game in Blackstone’s Commentaries,” Eighteenth Century Studies, Winter 1993–94, 27(2), 209, 201.

2. Michals, “‘Sole and Despotic Dominion,’” 202.

3. Michals, “‘Sole and Despotic Dominion,’” 199–201.

4. Wood, American Revolution, 50.

5. John Locke, Two Treatises of Government [originally published in London, 1698], in Cambridge Texts in the History of Political Thought (Cambridge: Cambridge University Press, 1988), 271.

6. Richard B. Morris, Studies in the History of American Law: With Special Reference to the Seventeenth and Eighteenth Centuries (New York: Columbia University Press, 1930), 170.

7. Michals, “‘Sole and Despotic Dominion,’” 202.

8. This varies. Some utilities pay 100 percent of after-tax income as dividends; other companies pay no dividends at all. In 1995, S&P 500 companies on average paid out 37.5 percent of after-tax profits to shareholders, which was historically low. In 1994 the ratio was 43 percent. Shirley Lazo, “Companies Hold Tight to Cash,” Barron’s, Jan. 8, 1996, 25.

9. In mid-March 2001 the price-earnings ratio of the Standard & Poor’s 500 was 24. By contrast, the Nasdaq p-e ratio was then at 154, down from 400 a year earlier. At the end of the S&P’s last bear market in 1987, the p-e ratio was 12. Stock prices were just seven times earnings in Dec. 1974, at the end of a two-year bear market. Bridget O’Brian and Susan Pulliam, “The Really Bad News About the Market: Stocks Are Still Pricey,” Wall Street Journal, Mar. 13, 2001.

10. The market value of the S&P 500 at year-end 1995 was $4.6 trillion; the combined book value of the companies totaled $1.2 trillion. “Intangibles” were worth $3.4 trillion. From CFO magazine, cited in “Musings,” Business Ethics, July-Aug. 1997, 5.

11. Bernard Wysocki, Jr., “Why an Acquisition? Often, It’s the People,” Wall Street Journal, Oct. 6, 1997, 1.

12. Wysocki, “Why an Acquisition?,” 1.

13. John S. Pratt and Peter Dosik, “Whose Idea Is It? Company Sues Ex-Employee,” National Law Journal, Oct. 20, 1997. The lawsuit DSC v. Evan Brown was still languishing in court on Aug. 28, 1998, when I had e-mail correspondence with Evan Brown, who said he was waiting for a response to a motion and noted that DSC was in the process of being bought out by Alcatel, France.

14. Morton J. Horwitz, The Transformation of American Law, 1780–1860 (New York and Oxford: Oxford University Press, 1992 [originally published 1977]), 55–58.

15. Stevan Alburty, “The Ad Agency to End All Ad Agencies,” Fast Company, Dec.-Jan. 1997, 6, 117–124. Also see “2000 Millennium-End Business Ethics Awards,” Business Ethics, Nov.-Dec. 1999, 8–9; and Andy Law, Creative Company: How St. Luke’s Became “the Ad Agency to End All Ad Agencies” (New York: Wiley, 1999). It’s interesting to note that Law and his rebels could have walked off with all the clients, without paying Omnicon anything. One suspects Omnicon realized this. That realization—plus Law’s determination to resolve things ethically—led to the eventual “earnout” arrangement. Law allowed the acquisition to go through with the entire company intact (the London branch represented 5 percent of Chiat/Day revenues). He then struck the deal with Omnicon to purchase the company for $1, plus a percentage of profits for seven years, with an option to buy it outright for $2 million (representing roughly one times London-branch revenue at the time). His rebellion pointed up the absurdity that outsiders could own a company composed of nothing but human relationships. Yet in agreeing to “buy” the company, the final legal arrangement kept that fiction intact. However, Omnicon got only a portion of profits for seven years. Without Law’s rebellion, they would have gotten all the profits forever.

CHAPTER 4

1. Brett D. Fromson, “Nice Work If You Can Get It,” Washington Post National Weekly Edition, Feb. 16, 1998, 31. The boards Jordan sat on included American Express, Bankers Trust of New York, Dow Jones & Co., J.C. Penney, Revlon, Union Carbide, and Xerox. The ten companies had a total market value of about $100 billion. For his services, Jordan earned $1.1 million in 1998.

2. Frederick Rose, “Goofing Off?”, Work Week column, Wall Street Journal, Nov. 25, 1997, 1.

3. Lawrence E. Mitchell, “A Theoretical and Practical Framework for Enforcing Corporate Constituency Statutes,” Texas Law Review, Feb. 1992, 601.

4. Phone interview with Richard Saliterman, July 7, 2000.

5. Berle and Means, Modern Corporation, xxxviii, li. The authors noted that by the end of 1929 two-thirds of the nation’s industrial wealth had been transferred from individual ownership to ownership by publicly held corporations, run by managers rather than founders. Thus, they maintained, ownership had for the first time been separated from control, which worked a revolution in the private property tradition. “The American corporation had ceased to be a private business device and had become an institution,” even a kind of “adjunct of the state itself.”

6. Mishel, Bernstein, and Schmitt, Working America: 1998–99, Figure 5D, 268. According to their analysis, using an index set to 100 at 1960, the U.S. stock market was around 80 in 1983.

7. For an excellent discussion of the governance revolution, see Marina Whitman (former vice president of public affairs, General Motors, and former member of the President’s Council of Economic Advisers), New World, New Rules: The Changing Role of the American Corporation (Cambridge, Mass.: Harvard Business School Press, 1999). The figure of about one-third of the Fortune 500 targeted for hostile takeovers in 1990 is from p. 9.

8. Laura Holson, “A Slightly Kinder and Gentler Era for Hostile Takeovers,” The New York Times, Nov. 12, 1999, C1.

9. Joann S. Lublin, “Corporate Chiefs Polish Their Relations with Directors,” Wall Street Journal, Oct. 15, 1993, B1.

10. The practice of ousting CEOs is still going on. In a few short months in late 1999 and early 2000, for example, CEOs were forced out at BankOne Corp., Coca-Cola, Aetna, and Mattel. Directors are so powerful today that they need not even resort to firing. At Coca-Cola, directors Warren Buffett and Herb Allen (who controlled about 8 percent of shares) were “nonconfrontational—even sympathetic” when they met privately in Dec. 1999 with CEO Doug Ivestor. They simply said they’d lost confidence in him. Within a week he had resigned. See Betsy Morris and Patricia Sellers, “What Really Happened at Coke,” Fortune, Jan. 10, 2000.

11. Michael Useem, Investor Capitalism: How Money Managers Are Changing the Face of Corporate America (New York: Basic Books, 1996), 10.

12. Whitman, New World, 9.

13. In 1997, 28.7 percent of American workers were employed in nonstandard (or contingent) jobs, a slight decline from 1995, when the share was 29.4 percent. “No Shortage of ‘Nonstandard’ Jobs,” Economic Policy Institute Briefing Paper, Dec. 2, 1999 [www.epinet.org]. Temporary work increased 75 percent from 1992 to 1997; see Andrew Hermann, “Temporary Insanity,” Boston Phoenix, 1999 [www.Alternet.org].

14. GE anecdote from Thomas F. O’Boyle, “Profit at Any Cost: A Look at How Ethics Suffered in GE’s Relentless Drive to ‘Get the Numbers,’” Business Ethics, Mar.-Apr. 1999, 15; excerpt from Thomas F. O’Boyle, At Any Cost: Jack Welch, General Electric, and the Pursuit of Profit (New York: Knopf, 1998), 73–75.

15. From 1960 to 1997, corporate income taxes as a percentage of government revenue dropped from 23 percent to 12 percent; this figure was cited in Frederick Strobel and Wallace Peterson, The Coming Class War and How to Avoid It (Armonk, N.Y.: M.E. Sharpe, 1999), 56.

16. In 1994, Minnesota spent $143 million on Aid to Families with Dependent Children and work-readiness programs but $1 billion on corporate welfare, according to the Report on Corporate Welfare, Feb. 1995 (Minnesota Alliance for Progressive Action, 1821 University Ave., Suite S-307, St. Paul, Minn. 55104, 651/641-4050).

17. Adolf A. Berle, The 20th Century Capitalist Revolution (New York: Harcourt Brace, 1954), 64–65.

18. The Revolution in its widest sense extended from 1640 to 1689, and encompassed an earlier unseating of a different king, as well as the Restoration of 1660. This extended Revolution “reasserted the authority of the ‘natural rulers’ of the country, the gentry and merchant oligarchies, both against … monarchical absolutism … and against a radical republic.” Christopher Hill, Some Intellectual Consequences of the English Revolution (Madison: University of Wisconsin Press, 1980), 3.

19. John Emerich Edward Dalberg-Acton, First Baron Acton, “Selected Writings of Lord Acton,” in J. Rufus Fears (ed.), Essays in the History of Liberty, Vol. 1 (Indianapolis: Liberty Fund, 1985), 48.

20. Financial Markets Center, Employee Stock Options Background Report, Apr. 2000 (Financial Markets Center, P.O. Box 334, Philmont, Va. 20131, www.fmcenter.org); David Binns, Employee Ownership in the New Economy (Foundation for Enterprise Development, 7911 Herschel Ave., Suite 402, La Jolla, Calif. 92037, www.fed.org).

21. Financial Markets Center, Employee Stock Options.

22. Mishel, Bernstein, and Schmitt, Working America: 1996–97, 278–279.

23. Mishel, Bernstein, and Schmitt, Working America: 1996–97, 278.

24. Employers cannot literally take away benefits already earned, but they can cut the rate at which future benefits are earned or take away those future benefits entirely, wrote Ellen E. Schultz in “Companies Find Host of Subtle Ways to Pare Retirement Payouts,” Wall Street Journal, July 27, 2000, A1. “At General Electric Co., almost 9 percent of 1999’s operating income can be traced to its $4 billion pension credit,” wrote Nanette Byrnes, “The Perils of Fat Pension Plans,” Business Week, Apr. 24, 2000, 91–92. Other companies where pensions contributed 7 to 8 percent of 1999 operating profit included SBC Communications, IBM, BellSouth, and Weyerhaeuser.

25. Bendix, Kings or People, 6–7.

26. Popper, The Open Society, 57.

27. Popper, The Open Society, 57–61.

28. Popper, The Open Society, 53, 47, 12, 295.

29. Popper, The Open Society, 86–87, 107.

30. Phone conversation on Oct. 9, 1997 with Ellen Braune, National Labor Committee (275 7th Ave., New York, N.Y. 10001, 212/242-0986). This group, led by Charles Kernaghan, has done a great deal to put overseas sweatshops on the national agenda.

31. Kent Greenfield, “The Place of Workers in Corporate Law,” Boston College Law Review, Mar. 1998, 1 (39 B.C.L. Rev. 283).

32. Report based on union elections from 1993 to 1995, by Cornell University researchers, in a study commissioned under NAFTA for the U.S. Labor Department. Aaron Bernstein, “NAFTA: A New Union-Busting Weapon,” Business Week, Jan. 27, 1997, 4.

33. Bendix, Kings or People, 7–8.

34. Dalberg-Acton, “Selected Writings of Lord Acton,” 12.

35. Don Herzog, Poisoning the Minds of the Lower Orders (Princeton, N.J.: Princeton University Press, 1998). Herzog writes, “We have long associated conservatism with the reaction against the French Revolution. The association isn’t arbitrary or mistaken” (p. x). For conservatism at its very beginning “was locked in combat with democracy” (p. ix). It sought to marshal arguments against the rising debate favoring democracy, for as the aristocracy saw it, “that debate was poisoning the minds of the lower orders.” (p. xi). In countering democratic theory, Edmund Burke, in Reflections on the Revolution in France, pointed to the great chain of being as the legitimate base of society, praising “the great primeval contract of eternal society, linking the lower with the higher natures, connecting the visible and invisible world, according to a fixed compact sanctioned by the inviolable oath which holds all physical and all moral natures each in their appointed place” (p. 34). These “lower orders” to be held in their place, Herzog wrote, included “women, blacks, Jews, and workers” (p. 245).

36. Whereas changes in voting rights for women and blacks were made at the federal level, changes in voting rights concerning property were made by the states. This may be one reason we know little of this struggle, for it was not one struggle but many. They occurred over a period of years, and were completed nationwide by the 1850s.

37. See entries for Dorr Rebellion and Thomas Dorr at www.Britannica.com. An excellent discussion of changes in suffrage requirements is also found in Joyce Appleby, Inheriting the Revolution: The First Generation of Americans (Cambridge, Mass., and London: Belknap Press of Harvard University Press, 2000), 28–30.

CHAPTER 5

1. “In fact, sophisticated lawyers these days don’t use the ‘ownership’ term,” said Margaret Blair in a phone interview on Oct. 31, 1996. “The corporation is a nexus of contracts. It’s not a thing that can be owned.”

2. R. H. Coase, “The Nature of the Firm,” Economica, 1937, 4, 386, reprinted in Coase, The Firm, the Market, and the Law, (Chicago: University of Chicago Press, 1988), 33–55; Coase’s insights were elaborated on by Frank H. Easterbrook and Daniel R. Fischel, The Economic Structure of Corporate Law (Cambridge, Mass., and London: Harvard University Press, 1991).

3. Berle and Means, Modern Corporation, ix, xx, li, xxxviii.

4. In recent years the nexus-of-contracts formulation has become “accepted wisdom, if not outright dogma,” wrote Margaret Blair in “Rethinking Assumptions Behind Corporate Governance,” Challenge, Nov.-Dec. 1995, 12.

5. Blair, “Rethinking Assumptions,” 13.

6. Margaret Blair, e-mail correspondence, July 13, 1999.

7. Easterbrook and Fischel, Economic Structure of Corporate Law, 15, quoted by Kent Greenfield, “From Rights to Regulation in Corporate Law” in Fiona Patfield (ed.), Perspectives on Company Law (London: Kluwer Law International, 1997), 15. Greenfield’s insightful critique of the contractarian view of the corporation is that it is based on the “historically misguided belief in the private nature of corporate law,” and he argues for a view of corporate governance based on theories of public regulation. He offers a valuable overview of an enduring issue in corporate governance theory: Is the corporate form created by the state (thus subject to regulation by the state)? Or is it a matter of private contracts among individuals (hence government should keep out)? He notes that contract language is used to oppose social responsibility requirements, because the public is not party to the contract, but calls this “unhelpful,” since explicit contracts are not involved (p. 15).

8. Fukuyama, End of History, 1992, 15.

9. Robert Anchor, The Enlightenment Tradition (Berkeley, Los Angeles, London: University of California Press, 1967), 11.

10. Voltaire, Candide (New York: Quality Paperback Book Club, 1991 [first published 1759]), 171.

11. Voltaire, Candide, 16.

12. Karl Polanyi, The Great Transformation: The Political and Economic Origins of Our Time (Boston: Beacon Press, 1960 [originally published 1944]), 93.

13. Quoted in Polanyi, Great Transformation, 129.

14. Eric Hobsbawm, The Age of Extremes: A History of the World, 1914–1991 (New York: Pantheon, 1994), 269–273.

15. Mishel, Bernstein, and Schmitt, Working America: 1996–97, 147. Those making poverty-level wage or below were 30 percent of the workforce in 1995. See again chapter 1, note 6.

16. According to a 2000 American Management Association survey, “nearly three-quarters of major U.S. firms now record and review some form of their employees’ communications—either telephone calls, e-mail, Internet connections, or computer files. That’s more than double the number of just two years ago.” Sarah Boehle, “They’re Watching You,” Training, Aug. 2000, 51.

17. David F. Linowes, “A Research Survey of Privacy in the Workplace,” 1996, unpublished paper based on survey (see www.oc.uiuc.edu/NB). Linowes, a professor at University of Illinois at Urbana-Champaign who chaired the U.S. Privacy Protection Commission during the 1970s, surveyed eighty-four Fortune 500 companies representing more than 3.2 million employees. He also found that 35 percent use medical records in making employment-related decisions.

18. “Ending Nabisco’s Bathroom Brawl,” Business Week, April 29, 1996, 50.

19. John Kenneth Galbraith, “Free Market Fraud,” The Progressive, Jan. 1999, 63(1).

20. As Ray Stringham wrote in Magna Carta: Fountainhead of Freedom (Rochester, N.Y.: Aqueduct Books, 1966), the rights secured in the Magna Carta were “obtained by and for barons” (p. 6). Of the charter’s sixty-three clauses, twenty-one concerned property rights (p. 29).

21. G.W.F. Hegel, Introduction to the Philosophy of History. Leo Rauch, trans. (Indianapolis and Cambridge: Hackett, 1988), 22, 56. Hegel died in 1831; this work was published posthumously from lecture notes and is far more accessible than his other writings.

CHAPTER 6

1. An excellent reference is Eric W. Orts, “Beyond Shareholders: Interpreting Corporate Constituency Statutes,” George Washington Law Review, Nov. 1992, 61(1), 14–135. “Most legal commentators greet them with a loud hiss,” Orts wrote (p. 48). “The ABA [American Bar Association]’s Committee on Corporate Laws, in the best-known and most trenchant attack, warns not only of ‘opportunities for misunderstanding’ and ‘potential for mischief,’ but of a threat of ‘radical’ change in corporate law” (p. 17).

2. Bendix, Kings or People, 7.

3. As Robert Lacey wrote in Aristocrats (London: Hutchinson & Co., 1983): “The king allowed his mightiest subjects to hold their lands in return for their support in times of war; they, in turn, sublet sections of their territories to lesser lords, and the lesser lords sublet further to create links of personal allegiance which stretched from the monarch to the humblest peasant tilling the soil” (p. 43).

4. Concise Dictionary of American History (New York: Scribner’s, 1962), 593–594, 987.

5. Concise Dictionary, 987.

6. James Morris, Heaven’s Command: An Imperial Progress (London: Folio Society, 1992 [originally published 1973]), 87. The East India Company was dechartered by the Crown before Gandhi began his campaign for independence, so Gandhi did not fight the old Company, but rather the Crown.

7. Fernand Braudel, The Wheels of Commerce: Civilization and Capitalism 15th–18th Century, Vol. 2 (Berkeley: University of California Press, 1992 [originally published 1979 under the title Les Jeux de l’échange]), 439–440.

8. Household-owned equity, including mutual funds, represents close to two-thirds of all stock (see www.conference-board.org). According to Greg Ip, “Are Fears of ‘Wealth Effect’ Exaggerated?,” Wall Street Journal, Mar. 23, 2001, A2, household holdings of stock and mutual funds in March 2000 were $12.2 trillion. Total equity at year-end 1999 was $18.9 trillion, according to Donovan Hervig, research analyst with the Conference Board Global Corporate Government Research Center in New York, in a Mar. 14, 2001 telephone interview. Edward Wolff reported that in 1998, the richest 10 percent accounted for 78 percent of the total value of stock held by households, directly or indirectly (“What Has Happened to Stock Ownership”). If the 10 percent wealthiest held an estimated 78 percent of $12.2 trillion, that’s a total stock ownership of $9.5 trillion—or just over 50 percent of all stock.

9. Richard Waters, “10,0001: A Stock Odyssey,” Financial Times (London), Mar. 17, 1999, 12.

10. For the twelve months ended September 30, 1998, average return on common equity for the nine hundred companies in Business Week’s “corporate scorecard” was 15.5 percent (Business Week, Nov. 23, 1998, 175).

11. In 1999, stock market capitalization reached a peak of nearly 160 percent of nominal GDP. The pre-1990s high was August 1929, at 81 percent; the low was around 1941, when capitalization was under 20 percent of GDP. In the 1970s and 1980s it was in the 40 to 80 percent range. Alan Abelson, “Thanks, Yanks,” Barron’s, Nov. 1, 1999, 5 (chart based on data from Bianco Research).

12. “Getting Companies Off the Dole,” Business Ethics, Mar.-Apr. 1999, 4.

13. “Why Is Theft of Public Resources Legal?” Business Ethics, Sept.-Oct. 1998, 5. This article on the 1872 mining law drew much of its research from the Mineral Policy Center (1612 K St. NW, Suite 808, Washington, D.C. 20006, 202/887-1872).

14. Reuven S. Avi-Yonah, “World-Class Tax Evasion,” The American Prospect, May 22, 2000, 28–29.

15. Lon L. Fuller, Legal Fictions (Stanford, Calif: Stanford University Press, 1967), cited by Richard Saliterman, “Some Perceptions Bearing on the Public Policy Dynamics of Corporation Law,” appendix to four-volume set Advising Minnesota Corporations and Other Business Organizations (Charlottesville, Va.: Lexis Law Publishing, 1995), 340.

16. Saliterman, “Some Perceptions,” 319. This appendix (see previous note) was also published in revised form as “Perceptions Bearing on the Public Policy Dynamics of Corporation Law,” Hamline Law Review, Winter 1996, 20(2) (quote used here is on p. 261).

17. Ernst H. Kantorowicz, The King’s Two Bodies: A Study in Medieval Political Theology (Princeton, N.J.: Princeton University Press, 1981 [originally published 1957]), 4–5, 131, 331.

18. Kantorowicz is quoting from Edmund Plowden, Commentaries or Reports (1816), concerning a legal case that provided the “first clear elaboration of that mystical talk with which English Crown jurists enveloped and trimmed their definitions of kingship and royal capacities.” The case, around the year 1550, concerned the validity of the lease of certain lands in the Duchy of Lancaster, which the Lancastrian kings owned not as property of the Crown, but as private property. Edward VI, predecessor to Queen Elizabeth, in whose reign the case was tried, had made the lease while not yet of age. Kantorowicz writes: “The judges, after thus having gained a foothold on, so to speak, firm celestial ground … pointed out that, if lands which the King has purchased before he was King, namely, ‘in the capacity of his Body natural,’ later were given away by him, such gift … had to be recognized as the King’s act” (King’s Two Bodies, 7).

19. Kantorowicz, King’s Two Bodies, 13.

20. Kantorowicz, King’s Two Bodies, 5.

21. D. Gordon, “The Role of the History of Economic Thought in Understanding Modern Economic Theory,” American Economic Review: Papers and Proceedings, 1965, 55, 123, 124. Cited by David E. Schrader in The Corporation as Anomaly (Cambridge: Cambridge University Press, 1993), 10. Shrader writes: “Most discussions of the U.S. economic system … appear to be premised on the view that corporations are simply artificial persons and that their behavior in the market is substantially the same as that of other persons. Given the dominant economic view that individuals invariably act as maximizers of their utility, this translates into a view of the business corporation as an individual acting in the market to maximize its utility” (p. 2). Schrader’s thesis is that the corporation represents an anomaly in economic theory that has yet to be fully recognized. He quotes Alfred Chandler as noting that the advent of “managerial capitalism” was a “phenomenon” that was “revolutionary.” But, he writes, “the mainstream of contemporary economic theory has carried on its theoretical endeavors as if this ‘economic phenomenon’ didn’t really constitute anything fundamentally new in the economic world” (p. 4).

22. Daniel Yergin and Joseph Stanislaw, The Commanding Heights: The Battle Between Government and the Marketplace That Is Remaking the Modern World (New York: Touchstone, Simon & Schuster, 1999 [originally published 1998]), 11.

23. In Managers vs. Owners: The Struggle for Corporate Control in American Democracy (New York, Oxford: Oxford University Press, 1995), authors Allen Kaufman, Lawrence Zacharias, and Marvin Karson wrote: “When the Court took up the constitutional validity of a tax on railroads in this case, it decided that corporate properties were subject to the equal protection provisions of the Fourteenth Amendment and that the states must therefore treat them just as they would the private property of ordinary ‘persons,’ including the associated owners of a business corporation. This decision … thus simply extended the logic of the corporate fiction or ‘artificial entity’ that had long prevailed. Moreover, by identifying the corporation with private property instead of with public grants and state interests, Santa Clara also came close to extinguishing whatever prior claims the public may have made on corporate charters and properties” (p. 19). In Santa Clara County v. Southern Pacific Railroad Co. 118 U.S. 394 (1886), the court extended to the corporation the due process and equal protection that the Constitution had originally intended for individual persons. The case is considered a judicial endorsement of the laissez-faire philosophy—viewing the corporation as a “natural entity” with natural rights, rather than as a creation of the state subject to control by the state, which was a view that prevailed earlier.

24. Fukuyama, End of History, xv.

CHAPTER 7

1. Edward S. Mason (ed.), The Corporation in Modern Society (New York: Atheneum, 1966), 10.

2. Thomas Paine, Common Sense: Addressed to the Inhabitants of America, Feb. 14, 1776, in Thomas Paine, Collected Writings (New York: Library of America, Literary Classics of the United States, 1995), 28.

3. Paine, Common Sense, 28.

4. “The Old Regime was dedicated to defending the institution of absolute monarchy and the privileges of a hereditary nobility. It depended upon tradition, custom, and convention for its sanctions,” wrote Anchor in The Enlightenment Tradition (p. xi). The Enlightenment, by contrast, was devoted to reason, and “hostile to tradition” (p. ix).

5. Immanuel Kant, Groundwork of the Metaphysics of Morals. H. J. Paton, trans. (New York: Harper & Row, 1956 [originally published at end of eighteenth century]), 95, 96.

6. On a ten-year annualized basis through third quarter 2000, the socially screened Domini Index beat the S&P 500, with 21.3 percent returns compared to 19.4 percent for the S&P. Kevin O’Keefe, “When the Going Gets Tough: How SRI Mutual Funds Fared in a Tough 2000 Market,” Business Ethics, Jan.-Feb. 2001, 22.

7. Bernard Bailyn, The Ideological Origins of the American Revolution (Cambridge, Mass., and London: Belknap Press of Harvard University Press, 1967), 55, 56.

8. Bailyn, Ideological Origins, 56

9. “Patricia Ireland: The Progressive Interview,” The Progressive, Aug. 1999, 36.

10. Geoffrey Brewer, “A Supportive Environment,” interview with Royal Farros, CEO of iPrint.com, an online printing service, The New York Times, Sept. 13, 2000, C1, C8.

11. Marleen O’Connor observes: “Employees themselves should not be viewed as assets; rather, it is necessary to rethink firms’ investment disclosure of human capital practices. The most important reason for not talking about employees as assets does not involve accounting, but morality. Specifically, the firm does not own its workers. Rather, employees should be thought of and used as a resource.” She points to the European firm Skandia, for example, which sees human capital more as debt than asset; it sees itself as borrowing human capital from employees to leverage it into financial returns. In a related vein, Tom DeMarco, in The New York Times (“Human Capital Unmasked,” Apr. 14, 1996), wrote, “If corporations booked their investments in workers as capital assets, as I believe they should, AT&T would not have been able to eliminate [forty thousand knowledge workers’ jobs] without writing down $4 billion to $8 billion of assets. Then the market response would be different. Instead of applauding the company’s executives, we’d be looking to give them the boot.” Cited by O’Connor in “Rethinking Corporate Financial Disclosure of Human Resource Value for the Knowledge-Based Economy,” University of Pennsylvania Journal of Labor and Employment Law, Fall 1998, V, 530, 527 (footnote 13).

12. O’Connor, “Rethinking Corporate Financial Disclosure,” 541.

13. David C. Korten, “A New Focus: Corporate Cost Internalization,” Business Ethics, July-Aug. 1997, 16.

14. “The Sunshine Standards for Corporate Reporting,” special report from Business Ethics, Dec. 1996.

15. Hazel Henderson, “Overview of the Calvert-Henderson Quality of Life Indicators,” paper presented to the National Conference on Sustainable Development Indicators, Mar. 27, 2001, Ottawa, Canada [www.hazelhenderson.com].

16. Henderson, “Overview of Calvert-Henderson,” 6–13. See also Clifford Cobb, Ted Halstead, and Jonathan Rowe, “If the GDP Is Up, Why Is America Down?” Atlantic Monthly, Oct. 1995, 59–76. For more on the work of economist Herman Daly and professor of philosophy and theology John Cobb Jr., see their work For the Common Good: Redirecting the Economy Toward Community, the Environment, and a Sustainable Future (Boston: Beacon Press, 1989).

17. Henderson, “Overview of Calvert-Henderson,” 4–6.

18. O’Connor, “Rethinking Corporate Disclosure,” 528–529.

19. Cited by Ralph Estes in “Sunshine Standards.”

20. “Leading Investors Urge CEOs to Adopt New Reporting Guidelines,” press release, Nov. 13, 2000, Fenton Communications, for the Global Reporting Initiative [www.globalreporting.org].

21. “Launching a Worldwide Revolution … in Accounting (?!),” Business Ethics, millennium-end double issue (Sept.-Oct., Nov.-Dec.) 1999, 18. See also the GRI Web site (address in previous note).

22. “Launching a Worldwide Revolution,” 18.

23. “Making Social Disclosure as Routine as Financial Disclosure,” Business Ethics, Sept.-Oct. and Nov.-Dec. 1999, 6. Cynthia Williams’s quotes are drawn from remarks at the October 1999 SRI in the Rockies conference and from her Apr. 1999 Harvard Law Review article, “The SEC and Corporate Social Transparency.”

24. “Making Social Disclosure Routine,” 6. For a complete list of data that Williams suggests be disclosed, see “The SEC and Corporate Social Transparency” (see previous note).

25. Amy Domini’s remarks were made at the October 1999 SRI in the Rockies conference, quoted in “Making Social Disclosure Routine,” 6.

26. Ralph Estes, “The Corporate Social Accounting Movement of the 1970s: Enormous Success—and Tragic Failure,” Dec. 1999 (Stakeholder Alliance, c/o Center for Advancement of Public Policy, 1735 S St. NW, Washington, D.C. 2009). Ernst & Ernst (later Ernst & Young) tabulated social disclosure by large companies. In 1978, it reported that 89 percent of the Fortune 500, 94 percent of Fortune 50 commercial banks, and 88 percent of life insurance companies were reporting on social performance. By the early 1980s those numbers had dropped “to virtually zero,” Estes wrote. When social accountability drew back, “there was no voice of the people to disagree, to present the case for continued reporting, to confirm the need, to engage these leaders in dialogue—to bring constructive pressure to bear.”

27. John Adams in a letter to Thomas Jefferson, 1815, quoted in Bailyn, Ideological Origins, 1.

CHAPTER 8

1. These are the opening lines from Paine, Common Sense, 5.

2. Paine, Common Sense, 20.

3. Thomas Jefferson, in a letter to John Adams, Oct. 28, 1813, wrote: “For I agree with you that there is a natural aristocracy among men. The grounds of this are virtue and talents…. There is also an artificial aristocracy founded on wealth and birth, without either virtue or talents.” Thomas Jefferson, Writings (New York: Library of America, Literary Classics of the United States, 1984), 1305–1306.

4. Locke, Two Treatises, 170.

5. Cited by Richard Ashcraft, Revolutionary Politics and Locke’s Two Treatises of Government (Princeton, N.J.: Princeton University Press, 1986), 266.

6. Adam Smith, The Wealth of Nations, Vol. 1 (New York: The Modern Library, 2000), 140.

7. Cited by Eric Hobsbawm in Uncommon People: Resistance, Rebellion, and Jazz (New York: The New Press, 1998), 4.

8. Jefferson, Writings, 494.

9. Abraham Lincoln, “Annual Message to Congress,” Dec. 3, 1861, in Roy P. Basler (ed.), The Collected Works of Abraham Lincoln: 1861–1862, Vol. 5 (New Brunswick, N.J.: Rutgers University Press, 1953); cited by Marleen O’Connor, “Organized Labor as Shareholder Activist: Building Coalitions to Promote Worker Capitalism,” University of Richmond Law Review, Dec. 1997, 1345.

10. Speaking of natural rights, Paine wrote that every man is a natural part of society. “Society grants him nothing. Every man is a proprietor in society, and draws on the capital as a matter of right.” Thomas Paine, The Rights of Man, in Paine, Collected Writings (New York: Library of America, Literary Classics of the United States, 1995), 465.

11. Paine, The Rights of Man, 465.

12. Living wage laws require companies receiving government contracts to pay decent wages and reasonable benefits. The first living wage campaign was won in Baltimore in 1994; other living wage laws have been adopted in Boston, Los Angeles, Milwaukee, New York, and Portland, Oregon. Robert Pollin and Stephanie Luce, The Living Wage: Building a Fair Economy (New York: The New Press, 1998).

13. Ashcraft, Revolutionary Politics, 268, 264, 273.

14. Cited by Ashcraft, Revolutionary Politics, 280.

15. Locke, Two Treatises, 329.

16. Ashcraft, Revolutionary Politics, 9, 281.

17. Smith, Wealth of Nations, 48.

18. Paul A. Samuelson, Economics: An Introductory Analysis, 3rd ed. (New York: McGraw-Hill, 1955), 602.

19. Cited in David E. Schrader, The Corporation as Anomaly (Cambridge, England, and New York: Cambridge University Press, 1993), 61.

20. John Bates Clark, Essentials of Economic Theory (New York: Macmillan, 1924 [originally published 1907]), 376–377; cited by Schrader in Corporation as Anomaly, 12.

21. From keynote address by Roberto Eisanman, Business for Social Responsibility conference, Nov. 11, 1998.

22. Jacquelyn Yates and Marjorie Kelly, “The Employee Ownership 100: The 100 Largest Majority-Employee-Owned Companies (and What Makes Them Great),” Business Ethics, Sept.-Oct. 2000, 10–13.

23. Yates and Kelly, “The Employee Ownership 100,” 10.

24. Yates and Kelly, “The Employee Ownership 100,” 10.

25. Yates and Kelly, “The Employee Ownership 100,” 10.

26. I am indebted to Leslie Christian, president of Progressive Investment Management in Portland, Oregon, for questioning the notion that if the “right” people own shares, it’s OK to have shareholders be top dogs. She raised this point in private correspondence March 14, 2001, in her review of a draft manuscript of this book.

27. Yates and Kelly, “The Employee Ownership 100,” 13.

28. John Logue and Marjorie Kelly, “It’s Time to Renew Our National Enthusiasm for Employee Ownership,” Business Ethics, Sept.-Oct. 2000, 16–17.

29. The concept of sliding-scale tax benefits for employee ownership was suggested by Deborah Groban Olson, attorney with Jackier, Gould, Bean, Upfal & Eizelman, P.C., Grosse Pointe Park, Michigan [www.esoplaw.com].

30. Logue and Kelly, “It’s Time to Renew,” 17.

31. Deborah Groban Olson, e-mail correspondence, April 4, 2001.

32. Deborah Groban Olson and Alan F. Zundel, “A Half-Dozen Bold New Ideas for Spreading Capital Ownership,” Business Ethics, Sept.-Oct. 2000, 18–19. The Capital Ownership Group is a nonprofit network of professionals, activists, academics, and leaders of business, labor, and government who are working to broaden ownership [http://cog.kent.edu]. See also Shann Turnbull, “Should Ownership Last Forever?” Journal of Socio-Economics, 1998, 27(3), 341–363 [http://papers.ssrn.com/paper.taf?abstract_id=137382].

33. Olson and Zundel, “A Half-Dozen Bold New Ideas,” 18–19.

34. Olson and Zundel, “A Half-Dozen Bold New Ideas,” 18–19.

35. L. Ling-Chi Wang, “For This Ex-Hong Kong Resident, a Story of Humiliation Ends Today,” Minneapolis Star-Tribune, June 30, 1997, A9. The British possession of Hong Kong was ended peaceably—and without payment—after 158 years.

36. Locke, Two Treatises, 409–411.

37. Locke, Two Treatises, 411.

38. The People of the State of California v. American Trading Transportation Co. Inc. 64 6339 (Super. Ct., Orange Co., Calif.), a 1997 lawsuit, concerned a 1990 oil spill near Huntington Beach, Calif., by the tanker American Trader, owned by Attransco Inc. It was brought by the state of California, the cities of Huntington Beach and Newport Beach, and Orange County. The plaintiffs were able to calculate a specific value for the lost recreational use by looking at attendance data and correlating it with weather patterns on the dates the beaches were closed. The Clark Ford River basin case was Montana v. ARCO. “Causes of Action: 10 New Bases for Suits,” National Law Journal, July 20, 1998, A13–A17.

39. Olson and Zundel, “A Half-Dozen Bold New Ideas,” 18–19. For the figure on 2000 income from the Permanent Fund, see Sam Howe Verhovek, “Alaskans Know Which Side Bread Is Oiled On,” The New York Times, Mar. 18, 2001, A1; each man, woman, and child in Alaska in fall 2000 received a check for $1,963.86.

40. Peter Barnes, “The Pollution Dividend,” The American Prospect, May-June 1999.

41. Olson and Zundel, “A Half-Dozen Bold New Ideas,” 18–19.

42. Olson, e-mail correspondence, April 4, 2001.

43. Verhovek, “Alaskans Know,” A1.

CHAPTER 9

1. “‘Corporate social responsibility,’ in the eyes of U.S. law, is an oxymoron. A corporation has fiduciary responsibilities only to shareholders,” according to Greenfield, “From Rights to Regulation,” 2.

2. The comment about Shore Bank was made by a bank representative at the Making a Profit While Making a Difference conference in New York, June 14, 1999. The juice maker quoted was the founder of Odwalla.

3. D. Gordon Smith, “The Shareholder Primacy Norm,” Journal of Corporation Law, Winter 1998, 285, 295.

4. Cited by Richard L. Grossman, “Claiming Our Sovereignty: Establishing Control Over the Corporation” (n.d.), 1; unpublished paper distributed by Program on Corporations, Law and Democracy (www.poclad.org).

5. Richard L. Grossman and Frank T. Adams, Taking Care of Business: Citizenship and the Charter of Incorporation [pamphlet] (South Yarmouth, Mass.: Charter Ink./Program on Corporations, Law and Democracy, 1993), 13.

6. Grossman, “Claiming Our Sovereignty,” 2.

7. Horatio Gates to Thomas Jefferson, Feb. 2, 1781; cited by Gordon S. Wood, The Creation of the American Republic 1776–1787 (New York and London: W.W. Norton, 1969), 55.

8. Smith, “Shareholder Primacy Norm,” 285, 295.

9. Estes, Tyranny of the Bottom Line, 28.

10. The Trustees of Dartmouth College v. Woodward 4 Wheaton 518 (1819), in Henry Steele Commager (ed.), Documents of American History (New York: Appleton-Century-Crofts, 1958), 220. See also the discussion in Ralph Nader and Mark Green (eds.), Corporate Power in America (New York: Grossman Publishers, 1973), 69.

11. Lochner v. New York 198 U.S. 45 (1905), cited in Greenfield, “From Rights to Regulation,” 11. This article offers a valuable and readable overview of the history of two opposing legal views of the corporation, as subject to public regulation, or as private and thus beyond the reach of regulation.

12. Robert Lekachman (State University of New York–Stony Brook), introduction to Paul A. Samuelson, Economics: An Introductory Course, 8th ed. (New York: McGraw-Hill, 1970), xi.

13. Berle, 20th Century Capitalist Revolution, 60.

14. Earl Latham, “The Body Politic of the Corporation,” in Edward S. Mason (ed.), The Corporation in Modern Society (New York: Atheneum, 1966), 220.

15. Georges Duby (ed.), A History of Private Life, Vol. II, Revelations of the Medieval World (Cambridge, Mass., and London: The Belknap Press of Harvard University Press, 1988), 9.

16. Matthew Josephson, The Robber Barons: The Great American Capitalists, 1861–1901 (New York: Harcourt Brace, 1934), vii–viii.

17. Josephson, The Robber Barons, 372, 374.

18. Josephson, The Robber Barons, 362, 372.

19. Josephson, The Robber Barons, 448, 367.

20. “Business and Government: Business, Faced with an Overwhelming Political Fact, Should Favor a More Socialized State,” unsigned editorial, Fortune, June 1938, 52.

21. Cited by Herzog, Poisoning the Minds, 34.

22. Paine, The Rights of Man, 438.

23. Paine, The Rights of Man, 438.

24. The Constitution of the United States, in Commager, Documents of American History, 146–147.

25. In Munn v. Illinois 94 U.S. 124 (1877)—cited by William Letwin, “Economic Due Process in the American Constitution and the Rule of Law,” in Robert L. Cunningham (ed.), Liberty and the Rule of Law (College Station and London: Texas A&M University Press, 1979), 3—Justice Waite spoke to the matter of “due process,” writing that “the very essence of government” is its power to make laws “requiring each citizen to so conduct himself, and so use his own property as not unnecessarily to injure another.”

26. Munn v. Illinois, cited by Letwin, “Economic Due Process,” 39.

27. West Coast Hotel v. Parrish 300 U.S. 379 (1937), cited by Letwin, “Economic Due Process,” 64–65.

28. Carl J. Mayer, “Personalizing the Impersonal: Corporations and the Bill of Rights,” The Hastings Law Journal, Mar. 1990, 41(3), 589. Mayer wrote that with West Coast Hotel v. Parrish, “the doctrine of substantive due process was abandoned by the New Deal Supreme Court.” Letwin (“Economic Due Process,” 67) made the same observation: “Many have said that the Supreme Court in 1937 did away with substantive due process.”

29. Letwin, “Economic Due Process,” 30, 49.

30. Supreme Court Justice Owen Roberts, in the five-to-four decision on Nebbia v. New York 291 U.S. 523 (1934), sustained a New York law that created a board to set minimum and maximum retail prices for milk. William E. Leuchtenberg, Franklin Roosevelt and the New Deal, 1932–1940 (New York: Harper & Row, 1963), 144.

31. “When the CEO Ignored Racial Issues, the Lawyers Came Calling at Coke,” Business Ethics, Jan.-Feb. 2001, 7.

32. “(Un)Fair Lending,” Business Ethics, July-Aug. 1999, 8.

33. Paul Krugman, “Mergers Most Foul,” The New York Times, Jan. 14, 2001, WK-17.

34. Smith, “Shareholder Primacy Norm,” 289.

35. Marleen O’Connor, “Restructuring the Corporation’s Nexus of Contracts: Recognizing a Fiduciary Duty to Protect Displaced Workers,” North Carolina Law Review, June 1991, 69, 1247.

36. The count of thirty-two was made by Terry O’Neill, “Employees’ Duty of Loyalty and the Corporate Constituency Debate,” Connecticut Law Review, Spring 1993, 682.

37. Orts, “Beyond Shareholders,” 16. Also see Larry E. Ribstein, “Takeover Defenses and the Corporate Contract,” Georgetown Law Journal, Oct. 1989, 78.

38. James J. Hanks, Jr., “Non-Stockholder Constituency Statutes: An Idea Whose Time Should Never Have Come,” Insights, Dec. 1989, 20, 22. James J. Hanks, Jr., “Playing with Fire: Nonshareholder Constituency Statutes in the 1990s,” Stetson Law Review, 1991, 21, 97. Cited by Orts, “Beyond Shareholders,” 17.

39. Orts, “Beyond Shareholders,” 33.

40. Karen Donovan, “Titans Clash in Takeover Battle in Pa.: Judge Approves First Use of Toughest Anti-Takeover Law,” National Law Journal, Jan. 20, 1997, A1.

41. Lawrence Mitchell, “Cooperation and Constraint in the Modern Corporation: An Inquiry into the Causes of Corporate Immorality,” Texas Law Review, Feb. 1995, 73(3), 533.

42. O’Neill, “Employees’ Duty of Loyalty,” 681.

43. Orts, “Beyond Shareholders,” 26–31.

44. Orts, “Beyond Shareholders,” 73–74. The codrafter of the Pennsylvania statute, SEC commissioner Steven Wallman, argues that the law leaves directors’ duties where they have always been—to the corporation as a whole rather than to any particular group. He maintains that the focus on shareholder interests, increasingly defined as short-term stock price, is a recent misguided tendency in the law. See Mark G. Robilotti, “Codetermination, Stakeholder Rights, and Hostile Takeovers: A Reevaluation of the Evidence from Abroad,” Harvard International Law Journal, Spring 1997, 543.

45. Report on the twentieth anniversary of the Community Reinvestment Act, published March 18, 1998, by the National Community Reinvestment Coalition (733 15th St. NW, Suite 540, Washington, D.C., 202/628-8866, [email protected]). “Responsible Banking’s 20th Anniversary,” Business Ethics, Mar.-Apr. 1998, 8.

46. The first time an Alien Tort Claims Act suit was allowed to proceed in the United States was in 1998, when then–U.S. District Judge Richard Paez ruled Unocal could be tried in the United States for alleged human rights abuses—including slavery and rape—committed by authorities in Myanmar (formerly Burma) acting on Unocal’s behalf. The case was Doe v. Unocal. Paez said foreign plaintiffs can be heard in U.S. courts if a company “knew or should have known” that its business partner was violating the law of nations on behalf of a joint venture. A second case allowed to proceed in U.S. courts was Bowoto. v. Chevron, which concerned Chevron’s role in the May 1998 killing of two people on an offshore oil rig by Nigerian troops flown there in Chevron helicopters. National Law Journal, Apr. 24, 2000; cited in “BizEthics Buzz,” May 2000, an online newsletter produced by Business Ethics.

47. “Who Says Corporations Have Eternal Life?” Business Ethics, Nov.-Dec. 2000, 5. A copy of the proposed bill was provided by Thomas Linzey (Community Environmental Legal Defense Fund, 2859 Scotland Rd., Chambersburg, Pa. 17201, 717/709-0457).

CHAPTER 10

1. D. K. Hurst, Crisis and Renewal (Boston: Harvard Business School Press, 1995), 168. Cited by Karl E. Weick, “Leadership as the Legitimation of Doubt,” in Warren Bennis, Gretchen Spreitzer, Thomas Cummings (eds.), The Future of Leadership (San Francisco: Jossey-Bass, 2001), 92–93.

2. Keri Hayes, “Made in the USA (Sort of …), Business Ethics, Mar.-Apr. 1998, 6.

3. Jim Steiker and Michael Golden, “Hot Fudge Partners: An Insider’s Story on How Social Investors Failed in Their Attempt to Buy Ben & Jerry’s,” Business Ethics, May-June 2000, 5.

4. Jack Quarter, “The Innovator’s Dilemma,” Business Ethics, Jan.-Feb. 2001, 4. Adapted from Jack Quarter, Beyond the Bottom Line: Socially Innovative Business Owners (Westport, Conn.: Quorum/Greenwood, 2000.

5. Abram Chayes, “The Modern Corporation and the Rule of Law,” in Edward S. Mason (ed.), The Corporation in Modern Society (New York: Atheneum, 1966), 38.

6. Berle and Means, Modern Corporation, 313.

7. R. Edward Freeman, Strategic Management: A Stakeholder Approach (Boston: Pitman, 1984); cited by Orts, “Beyond Shareholders,” 20.

8. Ronald K. Mitchell, Bradley R. Agle, Donna J. Wood, “Toward a Theory of Identification and Salience: Defining the Principle of Who and What Really Counts,” Academy of Management Review, Oct. 1997, 23(4), 853, 866, 879. This article offers a valuable overview of various stakeholder definitions in other management literature.

9. John R. Boatright, “Business Ethics and the Theory of the Firm,” American Business Law Journal, Dec. 1996, 34(2), 217–219. Also see Steven N. Brenner and Philip Cochran, “The Stakeholder Theory of the Firm: Implications for Business and Society Theory and Research,” paper presented at International Society for Business and Society conference, Sundance, Utah, March 22–24, 1991.

10. Comment by David Ellerman in “From Employee Ownership to Workplace Democracy via ‘Residual Claimancy,’” presentation given at the meeting of International Institute for Corporate Governance and Accountability, George Washington University Law School, Washington, D.C., June 2, 2001 (see www.Ellerman.org).

11. Ellerman, “From Employee Ownership to Workplace Democracy.”

12. This argument was made by Ellerman, “From Employee Ownership to Workplace Democracy,” and in his book Property and Contract in Economics: The Case for Economic Democracy (Oxford and Cambridge, Mass.: Blackwell, 1992). The book is out of print but available at www.Ellerman.org.

13. Ellerman, “From Employee Ownership to Workplace Democracy.”

14. Ellerman, Property and Contract, 1–2.

15. David Ellerman, “The Libertarian Case for Slavery,” in Intellectual Trespassing as a Way of Life: Essays in Philosophy, Economics, and Mathematics (Lanham, Md.: Rowman & Littlefield, 1995), 81. If we allow sale of labor by the hour, why not allow sale of labor for life—as in slavery? If we disallow one, shouldn’t we logically disallow the other? In this article, Ellerman makes this point, arguing, tongue-in-cheek, that voluntary slavery should be permitted. As he wrote, “Any thoroughgoing and decisive critique of voluntary slavery … would carry over to the employment contract.”

16. Douglas McGregor, The Human Side of Enterprise (New York: McGraw-Hill, 1960), 47–56.

17. Robert A. Dahl, A Preface to Economic Democracy (Berkeley and Los Angeles: University of California Press, 1985), 57, 162, 111.

18. In a footnote on p. 91 of A Preface, Dahl writes that he has “profited greatly from a number of unpublished papers by David Ellerman.” The Dahl quote cited here is from p. 57.

19. Dahl, A Preface, 67.

20. Dahl, A Preface, 67.

21. Dahl, A Preface, 112–113.

22. Blair, “Rethinking Assumptions,” 12–17. Also, Margaret M. Blair, “Corporate ‘Ownership,’” The Brookings Review, Winter 1995, 16–19.

23. Margaret M. Blair and Lynn A. Stout, “A Team Production Theory of Corporate Law,” Virginia Law Review, Mar. 1999, 85(2), 249, 250, 253.

24. Blair and Stout, “A Team Production Theory,” 249, 250, 253.

25. Research on having employees on the board is inconclusive. “It doesn’t show companies do amazingly well or do poorly,” Edward Carberry said in a phone interview, Jan. 13, 1997. “Companies that do it think it’s a good idea. But a lot of times employee owners don’t care about board representation; they want to be involved at the job level.” He does not know of any companies that have a “bicameral legislature.”

26. Dalberg-Acton, “Selected Writings of Lord Acton,” 84.

27. Quoted by John D. Donahue, “The Disunited States,” The Atlantic, May 1997, 18.

28. Paine, Common Sense, 43.

CHAPTER 11

1. Braudel, Wheels of Commerce, 21.

2. Miles Rapoport, “How Money Reform Connects to Issues Reform,” The American Prospect, Sept. 25–Oct. 9, 2000, 24.

3. Buckley v. Valeo 424 U.S. 1 (1976; see http://laws.findlaw.com/us/424/1.html). For commentary see Cass Sunstein, “Chipping Away at Buckley,” The American Prospect, Sept. 25–Oct. 9, 2000, 23–24.

4. Cass Sunstein, “Rescuing Money From Politics: Round Two,” The American Prospect, Sept. 25–Oct. 9, 2000, 25. “Buckley v. Valeo is poorly understood. The Court did not strike down campaign finance reform as a whole. Instead, the Court suggested three different points. First, Congress could not limit direct expenditures on campaigns, by candidates for themselves (consider the case of Ross Perot)…. Second, the Court said that Congress could limit contributions to campaigns, to reduce the risk and reality of corruption. Third, the Court indicated that public financing is entirely legitimate so long as it is voluntary and does not forbid private expenditures.”

5. Ellen S. Miller, “The Clean Money Solution,” The American Prospect, Sept. 25–Oct. 9, 2000, 22. The article was part of a collection of pieces, “Rescuing Politics from Money: A Symposium,” which offers a valuable overview of campaign finance reform.

6. Miller, “Clean Money Solution,” 22.

7. First National Bank of Boston v. Bellotti, cited by Mayer, “Personalizing the Impersonal,” 615–616. Mayer wrote, “Prohibitions against corporate expenditures on election of candidates … date back to the Progressive era.” In a footnote, he says that the Tillman Act, repealed in 1909, provided that corporations could not directly fund candidates for federal office. “Since then, Congress and the state legislatures have repeatedly limited or prohibited corporate contributions or expenditures.” But in striking down Bellotti, the Court in effect declared that spending money was “an important property right to be guarded.”

8. INFACT, 1997 People’s Annual Report, reported in “Company Watch: Says Who?” Business Ethics, Jan.-Feb. 1998, 8.

9. Appleby, Inheriting the Revolution, 27–28.

10. Appleby, Inheriting the Revolution, 32–33.

11. Santa Clara County v. Southern Pacific Railroad, cited in Joseph B. James, The Framing of the Fourteenth Amendment (Urbana: University of Illinois Press, 1965), 194.

12. Grossman and Adams, Taking Care of Business, 20.

13. Mayer, “Personalizing the Impersonal,” 589.

14. Mayer, “Personalizing the Impersonal,” 578. Writing in 1990, Mayer noted various corporate uses of the Bill of Rights, adding, “Twenty years ago, the corporation had not deployed any of these Bill of Rights provisions successfully.”

15. Mayer, “Personalizing the Impersonal,” 578.

16. Richard L. Grossman, “Corporate Omnipresence—Even in Vermont,” Annals of Earth, 1999, 17(1), 1.

17. Mayer, “Personalizing the Impersonal,” 592.

18. Mayer, “Personalizing the Impersonal,” 626.

19. Mayer, “Personalizing the Impersonal,” 620, 633, 650.

20. Bayless Manning, Economic Policy and the Regulation of Corporate Securities, 1969; also “The Stockholders’ Appraisal Remedy: An Essay for Frank Coker,” Yale Law Journal, 1962, 72, 223, 245. Cited in Donald E. Schwartz (ed.), Commentaries on Corporate Structure and Governance: The ALI-ABA Symposiums, 1977–1978 (1979), which was in turn cited by Richard Saliterman, “Some Perceptions,” 342. (See earlier notes for full information on Saliterman work.)

21. Jane J. Mansbridge, Why We Lost the ERA (Chicago and London: University of Chicago Press, 1986), 19, 29.

22. Mayer, “Personalizing the Impersonal,” 660.

23. Mayer, “Personalizing the Impersonal,” 661.

24. Ralph Estes, correspondence with author, Dec. 10, 1999.

25. Michael Lerner, “The Social Responsibility Amendment to the U.S. Constitution,” Tikkun: A Bimonthly Jewish Critique of Politics, Culture & Society, July-Aug. 1997, 12(4), 33–42, 79. This cover section includes an outline of the amendment, an article on “The Content of Ethical Impact Reports,” and a collection of “SRA Responses” from people like Hazel Henderson, Richard Grossman, and Ward Morehouse.

26. Fourteenth Amendment to the Constitution of the United States, in Commager, Documents of American History, 147.

27. “Getting Companies Off the Dole,” 4.

28. “Getting Companies Off the Dole,” 4.

29. “Getting Companies Off the Dole,” 4.

30. The Constitution of the United States, Article I, Section 9, in Commager, Documents of American History, 142. The paragraph reads in full: “No Title of Nobility shall be granted by the United States: And no Person holding any Office of Profit or Trust under them, shall, without the Consent of the Congress, accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince or foreign State.”

31. Alexis de Tocqueville, Democracy in America, Vol. 1 (New York: Vintage Books, 1990 [originally published 1835]), 48.

32. Jefferson, “Observations on Démeunier’s Manuscript” [June 22, 1786], in Jefferson, Writings, 588.

CHAPTER 12

1. Letter from Jefferson to James Madison, Paris, Jan. 30, 1787, in Jefferson, Writings, 882.

2. John Fiske, The American Revolution, Vol. 1 (Boston and New York: Houghton Mifflin, 1891), 24, 23.

3. Fiske, American Revolution, 79.

4. Thomas Linzey has researched all fifty states and found that the power of charter revocation is legally present in all.

5. “Declaration of Independence,” in Jefferson, Writings, 19.

6. Edwin Merrick Dodd, American Business Corporations Until 1860 (Cambridge: Harvard University Press, 1934); Lawrence M. Friedman, A History of American Law (New York: Simon & Schuster, 1973); cited by Grossman and Adams, Taking Care of Business, 17.

7. Morton J. Horwitz, The Transformation of American Law, 1780–1860 (Cambridge, Mass.: Harvard University Press, 1977); cited by Grossman and Adams, Taking Care of Business, 8.

8. Illinois Business Corporation Act, Revised Statutes, chapter 32, part 1.01 et. seq.; New York Business Corporation Law 101 et. seq.; cited by Grossman and Adams, Taking Care of Business, 22–23.

9. The 127-page petition against Unocal is available at www.heed.net. Russell Mokhiber, “Death Penalty for Corporations Comes of Age,” Business Ethics, Nov.-Dec. 1998, 7.

10. Mokhiber, “Death Penalty,” 8.

11. In Adbusters, Aug.-Sept. 2000, the editors said they hope to launch a three-pronged strategy: a radio-TV campaign about Philip Morris’s long criminal history, a boycott of the company’s popular food brands like Kraft and Maxwell House, and the collection of cyberpetition signatures to be sent to New York Attorney General Eliot Spitzer demanding that he revoke the company’s charter. Reported in “Activist Notes,” Business Ethics, Nov.-Dec. 2000, 5.

12. “Who Says Corporations Have Eternal Life?” (interview with Thomas Linzey), Business Ethics, Nov.-Dec. 2000, 5.

13. “Who Says Corporations Have Eternal Life?” 5.

14. William Greider, Who Will Tell the People: The Betrayal of American Democracy (New York: Simon & Schuster, 1992), 354–355.

15. Greider, Who Will Tell the People, 354–355.

16. “When Brilliant Ideas Become Law: Punishing the Corporate Felon,” Business Ethics, Jan.-Feb. 2001, 6.

17. Paul Precht, “Robed Rebels,” Dollars and Sense, July-Aug. 1998, 6. Other information was from e-mail correspondence with Stephanie Greenwood, Sept. 28, 1998, and from a flyer put out by the Students for Humane and Responsible Economics entitled “Economics: What Do You See?” Greenwood said they received assistance from faculty adviser Phinneas Baxindall, who sits on the editorial board of Dollars and Sense, and from faculty member Juliet Schor. Other core members of the group in 1998 were Jane Martin, Mitch McEwen, and Adam Storeygard.

18. Bob Lincoln, “Return to Judgment III,” Walden Asset Management Newsletter, Spring 2001, 3. My thanks to Leslie Christian of Progressive Investment Management in Portland, Oregon, for pointing out this article.

19. “New Inroads in Public Finance: SRI Is Popping Up Everywhere in California,” Business Ethics, Mar.-Apr. 2000.

20. “New Inroads.”

21. David M. Oshinsky, “Freedom Riders,” The New York Times Book Review, Mar. 15, 1998, 9, a review of David Halberstam, The Children (New York: Random House, 1998).

22. Program on Corporations, Law and Democracy. Short Reading List (South Yarmouth, Mass.: Program on Corporations, Law and Democracy, 1998).

23. “Vote Yes on Measure F” brochure, Citizens Concerned About Corporations, P.O. Box 27, Arcata, Calif. 95518. See also Paul Cienfuegos, “Sprouting Wings: A New Movement Takes Flight,” Business Ethics, July-Aug. 2000. The article details more than a dozen initiatives to reign in corporate power. Cienfuegos leads workshops on “First Steps in Dismantling Corporate Rule,” and runs a bookstore with over two hundred titles on democracy and corporations [www.100fires.com].

24. “Activist Notes,” Business Ethics, Nov.-Dec. 2000, 5.

25. “A Dialogue About Capitalism: The AFL-CIO’s Bill Fletcher Speaks His Mind,” Dollars and Sense, Sept.-Oct. 1998, 26–27. See also Paul Buhle, Taking Care of Business: Samuel Gompers, George Meany, Lane Kirk-land, and the Tragedy of American Labor (New York: Monthly Review Press, 1999), reviewed by Jane Slaughter, “Big Labor’s Little Problem,” The Nation, Oct. 25, 1999, 36–39.

26. E-mail correspondence with Terry South, Feb. 1998.

27. Wood, Creation of the American Republic, 5.

28. Wood, Creation of the American Republic, 4–6.

29. Wood, Creation of the American Republic, vii.

30. Will Durant and Ariel Durant, Rousseau and Revolution (New York: Simon & Schuster, 1965), 579.

31. “The Declaration of Independence,” in Jefferson, Writings, 19.

CONCLUSION

1. “System Failure: Corporate America, We Have a Crisis: Seven Ways to Restore Investor Confidence,” Fortune, July 1, 2002, front cover.

2. Charles P. Kindleberger, Manias, Panics, and Crashes: A History of Financial Crises, 4th ed. (New York: Wiley, 2000 [originally published 1978]), 23.

3. Kindleberger, Manias, Panics, and Crashes, 35.

4. Total return on Enron stock was 40 percent in 1998, 57.7 percent in 1999, and 88.6 percent in 2000. In 2001, total return was negative 99 percent. “Morningstar Quicktake Report: Enron-ENRNQ” [http://www.morningstar.com].

5. Kurt Eichenwald, “Investors Lured to Enron Deals by Inside Data,” The New York Times, Jan. 25, 2002, A1.

6. Patrick McGeehan, “Enron’s Deals Were Marketed to Companies by Wall Street,” The New York Times, Feb. 14, 2002, C1.

7. Deborah Solomon and Susan Pulliam, “U.S., Pushing WorldCom Case, Indicts Ex-CFO and His Aide,” Wall Street Journal, Aug. 29, 2002, A1.

8. The July 9, 2002, speech by President George W. Bush to business leaders at a site near the New York Stock Exchange was quoted in David E. Sanger, “Bush, on Wall St., Offers Tough Stance,” The New York Times, July 10, 2002, A1.

9. Ruy Teixeira, “Is the Big-Business Era Over?” American Prospect, Aug. 26, 2002, 12–13.

10. “Bubble Capitalism,” The Nation, Aug. 19–26, 2002, 5.

11. For more on the Code for Corporate Responsibility, see www.DivineRightofCapital.com. The author is attorney Robert Hinkley ([email protected]), and the leader of the citizens’ group is John Karvel ([email protected]).

12. John Logue, “It’s Time for Worker Directors on the Boards of U.S. Corporations,” draft paper forthcoming in Business Ethics, Nov.-Dec. 2002.