Daily Blague

The collapse of United Air's pensions is also the consequence of inertia and entitlement: inertia as regards the idea of the corporation and entitlement on behalf of shareholders, whose rights have trumped those of retired workers in a case that ought to make a communist, at least for a day, out of any right-thinking human being. Well, I must admit that this debacle doesn't make a communist out of me for an instant. I do believe in private property. What I don't believe in is the way that private property is recognized. To be very brief, the workers' benefits were a kind of property that ought to have taken precedence over any shareholder's. If necessary, the airline ought to have been liquidated in order to guarantee those benefits. There is no earthly reason for United Air to continue to exist if it cannot honor its obligations to workers whose claims have accrued over time. Even if those workers are six-figured pilots.

How long, in my Jeremiah mode, how long, I wonder, will it take Americans in particular and people in general to realize that the modern corporation is a metastasized monstrosity? That it concentrates ever-increasing wealth and power in the hands of fewer and fewer self-selecting autocrats? That it bribes legislators to support its license to strip-mine the nations resources - human and otherwise? That, finally, it has become unaccountable? What does the Enron story tell us, if not that the modern corporation cannot be checked by any force other than its own doom?

Most people don't have a very good idea of what a modern corporation is. If you were to tell the man in the street that IBM and General Motors are "Delaware corporations," he would be puzzled and perhaps even doubtful. But in fact it is in the Chancery Court of the State of Delaware that the fine points of corporate law have been worked out for decades, and for the most part those adjustments have favored "management" against "shareholders" on matters of corporate governance. This means that the modern CEO resembles Louis XIV more than he does your Congressman, whatever the "rules" say about elections. And thanks to a steady stream of mergers and acquisitions that have benefited few besides victorious executives and their merchant bankers, there are many corporations with assets of a behavior-warping immensity.

There is a good idea at the heart of the modern corporation: limited liability. Here is what limited liability means: if you invest in a corporation (usually by buying shares), and the corporation incurs debts that it cannot meet, you, the investor, will lose nothing more than your investment. You will not lose, for example, your home, your car, and your bank account. That's what distinguishes the limited liability corporation from the general partnership. The obligations of general partners are unlimited. That's why general partnerships are uncommon these days, too. Obviously, few people will invest in anything that exposes them to unlimited liability. The industrial revolution would have been severely checked without a mid-nineteenth-century change in business laws.

But that's the only good idea in the corporate makeup. There's an insane lack of others. The business corporation is pathetically undifferentiated from its parent, the undying body of overseers charged with maintaining churches, hospitals, and universities in pre-industrial society. This is what allows for the confusion at the heart of every corporation today: the equation of improvement with growth, of quality with quantity. Improvement is no longer an independent corporate goal. It has never been protected by an intelligent idea of the corporation.

That's what we've got to come up with. Regulating existing corporations by law will never work, and it would be undesirable if it could be. Corporations must be reinvented so that, like all healthy entities, they regulate themselves.

Do I have some ideas? Yes. But I haven't been given this job and you haven't been spared it. If you're looking for a place to start, why not consider the reasonableness of allowing executives to run their companies according to the laws of a state in which they do no business whatsoever but that happen to favor executives. That state would be Delaware. Its formulas for corporate operation have done nothing to prevent the slide of once-mighty General Motors's bonds into "junk" rating.