The Home of True Profit

March 2013

How can the stock corporation be trim-tabbed so as to make it an instrument of altruism? To answer this question, one has to pass from a self-centered way of doing business to one that is aware and takes full account of the social, ecological, and financial environments in which it operates. This, after all, would reflect and require the human being himself to act less out of self-assertion, more in response to the needs of the world. It may even be that we need to understand and use the stock corporation as a work in progress by means of which we change the way we behave economically.   

The central aim has to be to place capital at the disposal of individual initiative and to do so, moreover, in a way that leaves it uncollateralized, neither secured by real assets nor conditioning the use it is put to. There are many arrangements that seek to neutralize capital or remove land from the market, but these are subsidiary aims that do not come to their full meaning until seen as ‘structural’ accompaniments to the capitalizing of individual initiative. In themselves, they do not address the central question: How to capitalize individual initiative? In this regard, the issue is not that land is in the market or that capital is owned, but that land and capital may thereby become tradable assets rather than circulating means of production.

What follows aims to show that the corporation can be given a new context, though whether it this happens or not depends on individuals resolving to take the necessary steps. It describes a possibility in the hope that individuals will give it wings by using it as the vehicle of their activities. This may not be the earth-shaking change that a growing number of people are arguing for. And yet it is not clear that those who criticize the corporation have identified a practicable way beyond our current circumstances. What is needed is a doable arrangement – one that may begin small but which can be both replicated and scaled up once its social/legal viability has been demonstrated. The assumption is, therefore, that a start has to be made with small-scale enterprises.

Remodelling the corporation

The model described here is based on a standard corporation affording its investors limited liability and constituted to provide for shareholders, a board of directors, and an annual general meeting. However, since the aim is to clothe initiative with capital, the idea is for the directors to be wholly responsible for their activity, to which end they are responsible for the budgets of their activities. Thus the locus of awareness of the activity is in the directors as entrepreneurs.

On the side of capital, the share structure ensures that the capital in the business is carried by those with a minority of power but full pecuniary rights. Those who invest know in advance, therefore, that they cannot control the corporation through their capital. This is an ‘up front’ way of addressing the frequent fact in the UK and elsewhere that voting shareholders often have no effective power unless they have the majority or in some other way the controlling shares. The issue is not disenfranchisement, however, but the conscious relinquishment or stilling of power.

The controlling shares are vested in an informally constituted association, a nascent non-distributing, public benefit entity dedicated to the aims, or ‘star’, of the project, effectively an association of ‘friends’. The idea is that the deliberations of the association are of an ideal nature and do not lead to decisions. Whether what is discussed is taken up by the directors of the corporation is left to them. The suggestion here is that responsible individual action rather than democratic procedure is the more real approach to a truly social economic life. 

It is a crucial part of the design, therefore, that shareholders should be free to join this friends association, so that their concerns, thoughts and questions can nevertheless be aired, but in a context where they are taken into account for the sake of the idea, not because it acts as a vehicle for power. The membership of this association therefore has the character of a colloquium. 

Following the star

The aim is to change the dynamic (rather than the structure) of the stock corporation so that stakeholders do not act through the power of their money or position, but still these powers in order that the ‘star’ of the corporation can express itself. If this can be recognized and owned by all – especially the directors and the shareholders – then this will be the agreed policy of the corporation. The role of the directors is to give it effect, that of the shareholders to capitalize it. But neither the directors nor the shareholders as such are the source of policy directly. Policy derives from listening to the intuition, mission, or purpose that belongs to the company; following its star.

The idea is to create a ‘still area’, a point of rest or suspension in the social organism, wherein that which motivates human beings is not experienced as egoism, but as their individuality placing itself in the service of the community. This experience is vital if we are to go beyond the rivalry between shareholders and managers that all too often characterizes the modern corporation.