Citizens need government to regulate corporations

One of my favorite moments on the 2012 presidential campaign was the answer that Mitt Romney gave in response to a question about the Supreme Court’s Citizens United decision.

“Corporations are citizens, my friend,” was the governor’s cherry response.

I thought then and I still wonder, what is he talking about? Do corporations have families and raise children? Are they patriots, sometimes seeing those children march off to war to defend this great country? Heck no! Citizens of what country? Corporations are not Americans, although they are defined in American law and some may be owned primarily by Americans.

Rather the corporation is a tool, a means created in law to organize investment in all kinds of things. Like any tool, they can be used for good or ill. And this tool has produced wonderful results. Just imagine Bill Boeing starting up his company in Seattle, and now it’s the principal economic driver of our Pacific Northwest economy.

Publicly traded corporations like Boeing provide a means for each of us, if we are able, to make economic investments. These corporations are run by boards of directors who act as trustees for our investments. They have a fiduciary responsibility to manage those funds to our benefit, and report to us regularly on the results — the profits.

A corporation’s goal for its investors is to maximize profits and a major way to accomplish this is to minimize costs — to be efficient. Before there were environmental regulations prohibiting the activity, corporations regularly discharged waste into the air or water. A good way to visualize this process, which is still going on, is to think of an active smokestack or a storm water discharge pipe.

Air and water are termed common property resources, they belong to all of us “in common.”

Some like to call these resources our commonwealth. Anyway, when a corporation can dump its useless waste without cost, that waste becomes our common problem. Economists call this “externalizing” costs. Corporations prefer this approach; it helps them become more efficient.

In fact, a major assignment for “big” government is act as a check on corporations, including financial management standards and labor conditions. But it’s pollution and environmental risk that I’m most familiar with.

Here governmental oversight is critical. In their pursuit of wealth, corporations may place substantial risk on our commonwealth. Major disasters (BP’s Deepwater Horizon, for instance) are rare, but little damages to the environment are not. Without robust governmental regulation, corporations have no incentive to do things right – it adds to costs and thereby diminishes profits, and they usually fight against such regulations.

This dynamic has been playing out in recent years right here. The Department of Ecology, as part of the effort to clean up Puget Sound, has sought to adopt stricter water quality rules. The initial strict rule proposals met much corporate opposition, led by Boeing. And, at each step, the draft rules were weakened to create a better “balance” between what was best for the environment and what was best for corporations.

Under the federal Clean Water Act, each state adopts its own water quality rules, subject to oversight from the Environmental Protection Agency (EPA). Last October EPA announced that, while approving most of the state’s plan, EPA could not approve it for three major chemicals -PCBs, arsenic and mercury. These are industrial chemical byproducts that contaminate fish and shellfish and EPA found that Washington’s standards were not strict enough. Boeing was not pleased, but we should be.

Now you or I might do the right thing just because it is right – making our choice for moral or ethical reasons. Corporations do not, and likely cannot, do this. They are not citizens. Rather, they are investment vehicles with rules and expectations that require maximum return on investment. It is only because of strong government regulation that corporations act to protect the common good.

So, the next time you hear a politician cry, “less government, less regulation,” ask who he or she is speaking for. Is it you, or is it that corporation that may have invested some of its surplus funds in that politician’s career?

This story was originally published May 29, 2017 at 1:45 AM with the headline "Citizens need government to regulate corporations."