Recently Dave Winer wrote that America needs a corporate death penalty. Like Dave, I oppose capital punishment for humans, but agree that we need to be able to put corporations out of our misery.
Funny thing is that we already have a corporate death penalty, although it’s never used. In 1992, Richard Grossman and Frank T. Adams published a pamphlet—Taking Care of Business; Citizenship and the Charter of Incorporation—that goes a long way toward introducing the concept of revoking a corporation’s charter, resulting in sudden and sure corporate death.
Understand that corporations are chartered by, and exist at the sole discretion of, the citizenry. The state grants businesses a package of privileges—not rights—to engage in commerce. One of these privileges is limited liability. In exchange, believe it or not, corporations are under the control of the citizens.
What makes the corporate charter so special is that it is revocable. In theory (and in law) this revocability is intended to ensure corporate accountability to society.
When a corporation so royally screws up—Dave uses the example of the Exxon Valdez—to cause continual and irreparable harm, as citizens we’re supposed to be able to revoke the corporation’s charter, effectively killing it. If this were to happen in the case of Exxon, for example, the corporation’s enterprises and other assets would be sold and the workers would find positions with the new owners or, better yet, become the owners. The Exxon executives and directors, having violated the public trust, would be summarily dismissed. No golden parachutes, and a pretty nasty line item on their résumés revealing that they managed so poorly as to wind up in a charter revocation.
No mere corporate deterrent, charter revocation empowers the citizenry by creating exceptionally tight feedback loops.
Corporations were originally conceived as being a cooperative venture between the government and business interests and the corporations sole purpose was to benefit society as a whole. In 1866 the U.S. Supreme Court ruled in Santa Clara County v. Southern Pacific Railroad that corporations were “natural persons,” under the Constitution and afforded all rights of a citizen.
This was a mistake. Who better to target for rectification of the mistake than Microsoft?
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