Corporations

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Discussion

A critique, by John Boik in: Creating Sustainable Societies:

'The critique here focuses on for-profit, publicly held corporations, rather than nonprofit or privately held ones.


Weakness 1: Profit is the prime motivator.

The prime motivator of the current corporate model is profit, or more generally, narrow self-interest. Managers receive strong incentives to maximize corporate profits and shareholder wealth. As noted in previous chapters, human behavior can be influenced by a wider spectrum of motivators, some of which are more effective at encouraging pro-social behavior. Narrow selfinterest, when over-emphasized, can be corrosive.


Weakness 2: The corporate model leads to hyper-inequities in the concentration of income and wealth.

The current system allows wealth to become hyperconcentrated in a small minority of investors, executives, and corporations. Concentrated wealth harms an economy, raises moral issues, and sets up unfair political advantages.


Weakness 3: Corporations can become monopolies or “too big to fail.”

Despite regulations, corporations can grow large enough to act as monopolies. Monopolies stifle competition and help to hyperconcentrate wealth. Corporations can also grow large enough to become “too big to fail.” Moral hazards can be produced when a corporation knows it is too big to fail and will be bailed out by the federal government. For example, analysts cite the moral hazard produced by bailouts of large banks, making them more likely to exhibit risky behavior.


Weakness 4: Corporations lack transparency.

The current corporate system is marginally transparent. Publicly traded corporations are not obligated to reveal substantial aspects of their behavior. They do produce quarterly and annual reports, and file documents with the SEC and other regulators, but these represent a limited form of transparency. For example, corporations can hide information on political activities and beneficial ownership.[88, 89] Nearly one-third of shareholder resolutions in 2012 will ask companies for more disclosure about their campaign spending and lobbying.[90] Corporations are also not required to report some types of salary information, or information on social impacts."


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