Resurgence

An Aquatic Epiphany

On June 4, 2002, I jumped into the Canadian headwaters of the Columbia River, and took the first strokes that would carry me to the Pacific Ocean. No one predicted success. I was not rich, I was not a scientist, and I was not a fast swimmer. The biggest obstacle I faced was that I was an average guy. When I overheard Canadians whispering things like "He'll die up North," I just smiled. They saw me for what I was: some guy from Oregon trying to swim the length of one of North America's largest and most inhospitable rivers.

I spent 165 days in the Columbia River. That first day I glided through the mineral water of Columbia Lake, the pristine source of the river. I stretched out my strokes, and tore across water the color of sky. For the first and last time, I made a point of deliberately swallowing some water.

The next day, I kicked past putting greens of the Fairmont Hot Springs Golf Course, and took my first herbicide bath. Four days later, I swam past my first municipal sewage outfall. But even sewage wasn't all that bad: I knew it when I smelled it. Silicone earplugs kept out all but the most determined bacteria. Vaccines closed the door on hepatitis. And activated charcoal tablets put the brakes on diarrhea. The dangers my Canadian friends had in mind -- whirlpools, grizzly bears, rapids and glacial meltwater -- were the least of my worries. What kept me up at night were the dangers I couldn't see.

There was no barrier that could protect my nervous system from the neurotoxic pesticides that washed into the river from the fruit orchards and dry wheat farms that decorate the Columbia River Valley. There was no technology that could get the PCBs out of my fat cells. And there was no protection from the nuclear waste that spiked the waters of the Columbia River's Hanford Reach. (The idea of my swimming past the Hanford Nuclear Reservation in a lead suit was funny, but a nonstarter nonetheless. I swam through the most radioactive piece of land in the Western hemisphere with nothing but a five-millimeter wetsuit between me and the strontium-90, technetium-99, uranium and plutonium that plied the same waters I did.)

All of this begs the question, why would I risk my life by swimming the Columbia River? The answer was that I loved the river, and I swam in search of a way to help her. And I swam with the knowledge that I was part of the problem. The copper and asbestos dust that shaved off from the brake pads of my SUV sifted into storm drains and fouled salmon-spawning streams. The lights I left on sustained a demand for ecosystem-unfriendly hydropower. And when I flushed my toilet at the height of Portland's rainy winter season, it poured straight into the Willamette and Columbia Rivers.

During the swim, I met over 13,000 residents of the Columbia Basin. Everyone I met testified to their affection for the Columbia River. Even folks whose job it was to vent the municipal sewage lagoons into the river spoke of weekends spent fishing, paddling, and water-skiing. This surprised me, and it got me thinking. So often, stakeholders of a waterway spend their time fighting each other. These fights lead to entrenchment, and eventually begin to affect people's identities. Without realizing it, folks begin to equate resolving the conflict with risking who they are. They end up clinging to outmoded self-concepts and avoiding solutions, while their shared love for the river becomes a casualty of war.

I knew it didn't have to be this way. And I couldn't help wondering, what if we all acknowledged our love for this river? What if we leveraged the fact that we share so much common ground? Would our shared affection for the river let us put aside our differences long enough to protect every unspoiled section of river? I hoped so, even though I imagined it might be the work of decades.

What could I do to help? Well, I knew I was part of the problem, so I started with some quick fixes. I rode my bike more. I chose a hydropower-free mix of wind and geothermal power from my electricity provider. I shut off the water while I brushed my teeth. The exciting thing was how easy it was to make those changes. The depressing thing was that it took a 1,243-mile swim in cold, dirty water to motivate me at all.

The final frontier for me turned out to be an economic one. For all of my burgeoning awareness, it was a long time before I let myself trace the connection between the money I spent and the river I was swimming. I ate lots of food on the swim. (I had to consume 10,000 calories a day.) For all that, I must admit that most of what I ate was junk. Six hours in the water led to all sorts of cravings. I answered these by powering through bags of Pepperidge Farm Cheddar Cheese Goldfish Crackers, or wolfing down Quarter Pounders with cheese from McDonald's. In search of the calories I needed in order to swim in 39-degree water through blizzards, I didn't hesitate. If I wanted a grilled cheese sandwich, I grabbed whichever cheddar cheese was on sale. I didn't waste a thought on the pesticides and antibiotics that I might get along the way.

When I swam past the fruit orchards of central Washington during the pre-emergent pesticide spraying, I finally saw the massive disconnect between my food choices and my clean water message. As I swam past miles of orchards, I was paced by tractors pulling spray rigs that blasted walls of green-yellow pesticides with names like Sniper into the air just yards away. (The average Washington apple orchard receives 40 applications of pesticide during the growing season.) Swathed in protective suits and locked inside sealed cabs, the farmers appeared to know the dangers of exposure to these chemicals.

Unfortunately, I took a deep breath of air every third stroke. As the parallel dance of swimming and spraying stretched over a period of two weeks, I began to read the freakish warning labels on barrels of pesticide. But it wasn't until a lymph node in my jaw swelled to the size of a golf ball that I vowed never to eat a conventionally-grown apple again.

Suddenly, after what seemed like an impossible level of chemical exposure and denial, I was ready to make a change at the supermarket. Yes, organic fruit and cheese and milk and bread and juice and meat all cost more. But buying conventional versions of these same products now seemed insane. Why would I spend money on neurotoxic fruit? Why would I support the same chemical companies whose products had made me sick? I wouldn't. But spending the extra money really angered me. Not only that, but I had trouble convincing even close family members to make the change along with me. I struggled to convince my dad to purchase organic milk. In a fatherly tone, he explained, "Chris, some of us don't want to pay five bucks for a carton of milk."

From the beginning I felt frustrated. I remember thinking, "If it takes swimming a contaminated river to get me to buy organic orange juice, what is it going to take the average person?" I never found a great answer, but I started playing with food examples in my public presentations. When folks asked me what they could do for their own creeks and rivers, I said, "Shop for a clean river. Buy organic."

When they frowned at such a glib answer, I told them about the pesticides and about my swollen lymph node, and I pointed out that, in the aggregate, their total lifetime food purchases would likely dwarf their charitable contributions to environmental causes. "Look," I would say. "If you pay another dollar for organic butter, you get cross, sure. So why do it? Because you are not just buying butter, you are creating an economic incentive for farmers to stop using the cancer-causing chemicals. That means cleaner creeks, cleaner air, healthier citizens, better wages for laborers, and viable family farms. And lots of you are donating to those causes already."

I told them that if I lived to be 77, and bought $500 of organic food every month, that one broke swimmer would contribute $250,000 to the cause of clean water during that time. People would nod, but I wasn't always sure I had them.

As I read these words, I feel a little sad. Why did it take a life-threatening, year-long journey to awaken me to the power of personal economies? Why couldn't I have convinced myself through study? If I had spent less time in the river and more time at the library, could I have provoked a similar awakening? I fear not. For 33 years, the connection between the food I ate and the waters I swam was vague and impersonal. It took swimming a river to wake me up.

Extracted from an article in RootStock (Spring/Summer 2004). Reprinted with permission from Resurgence magazine.

Thanks to the farmers of Organic Valley who sponsored the swim.

Gross National Happiness

The tiny Himalayan kingdom of Bhutan is an unlikely place for the birth of an international trend. Yet Bhutan is emerging as a global leader in the promotion of "Gross National Happiness," a concept it first embraced three decades ago and which is now being fleshed out by a wide range of professionals and agencies across the world.

The term Gross National Happiness (GNH) was coined by Bhutan's King Jigme Singye Wangchuck, when he ascended the throne in 1972. It signalled his commitment to building an economy that would serve Bhutan's unique culture permeated by Buddhist spiritual values.

Today, the concept of GNH resonates with a wide range of initiatives, across the world, to define prosperity in more holistic terms and to measure actual wellbeing rather than consumption. By contrast the conventional concept of Gross National Product (GNP) measures only the sum total of material production and exchange in any country. Thus an international conference on Gross National Happiness, hosted by the Bhutan government in the capital city of Thimphu in 2004, attracted 82 eminent participants from 20 countries.

The evolving concept of GNH could well be the most significant advancement in economic theory over the last 150 years, according to Frank Dixon, a Harvard Business School graduate who is currently managing director of research at Innovest Strategic Value Advisors. Innovest is the largest international financial services firm catering to ethical investment funds.

"GNH is an endeavor to greatly enhance the sophistication of human systems by emulating the infinitely greater sophistication of nature," says Dixon.

Just what would it mean for economic structures to emulate nature? Dixon and others explain it as follows. At present individual companies and entire countries are compelled to keep growing indefinitely. The only parallel for this in the natural world is cancer cells, which by growing exponentially destroy the host body and themselves.

Today it is widely acknowledged that the human economy cannot keep growing at the cost of its habitat. Yet even after two decades of expanding environmental regulation we are still losing the race to save the planet. This is partly because production systems and consumption patterns are out of sync with the carrying capacity of the planet. The pressure for ever higher GNP is merely one manifestation of this.

The concept of GNH is seen as one of several ways in which these imbalances might be rectified. The international gathering at Thimphu reflected a consensus that Gross National Product would still need to be measured and given due importance but in ways that are actually conducive to GNH. So far there has been a tendency to treat GNH as merely the well-intentioned slogan of a small country ruled by an enlightened monarch. The obvious difficulties of defining or measuring happiness have also helped to keep the concept of GNH on the outer fringes of serious discourse.

However, as the conference in Thimphu showed, basic happiness can be measured since it pertains to quality of nutrition, housing, education, health care and community life. Thus, GNH may indeed be ready to come of age. The concept is essential for anyone working on development, says Mieko Nishimizu, an economist who was formerly the World Bank's vice president for the South Asia region and attended the Thimphu conference.

Three major factors seem to be responsible for the expanding credibility of GNH. One, there is wider awareness that GNP is a one-dimensional and thus misleading measure. Two, a wide range of indices have been devised which offer a more realistic assessment of even material prosperity. Three, there is growing pressure for an infusion of moral and cultural values into the core of economic policy.

The GNP was never intended to be a measure of actual well-being. It is the artefact of a time when it was assumed that if there are more goods in circulation, general welfare is ensured. As extensive documentation has shown, this is not always the case. Moreover, attention has also been drawn to dire side effects of the GNP-driven model of economic growth in many societies, including the U.S. with its multiple social crises and rising sales of antidepressants.

Such critiques are not new. Back in 1968 Robert Kennedy lamented that the GNP also grows because of the sales of rifles and knives and "television programs which glorify violence in order to sell toys to our children ... (it) does not allow for the health of our children, the quality of their education, or the joy of their play."

Since 1995, an Oakland-based think tank called Redefining Progress has been annually assessing the American economy with an alternative yardstick called the Genuine Progress Indicator (GPI), which presents a relatively grim picture of American society compared to the GDP (as GNP is called in the U.S.).

The GPI index gets closer to the reality of people's lives in the following ways. It includes the household and volunteer economy which is completely ignored by the GNP. It notes as a "loss" all money spent on either preventing crime or repairing damage caused by it. Similarly all money spent on water filters, air purification and other ways of coping with environmental degradation is counted as a loss. Likewise money that goes into circulation because of car crashes and divorces is noted as a loss. The GPI also takes into account the extent to which the whole population shares in increasing material abundance.

The GPI is just one among several endeavors to evolve new indicators that measure actual conditions of human wellbeing. Some of the pioneers in developing such indicators were present at the GNH conference in Thimphu, including Frank Bracho of Venezuela, who was ambassador to India in the early 1990s. Bracho pointed out that though countries as diverse as Costa Rica, Canada, Iceland, the Netherlands, Sri Lanka and Mongolia have established well-being indicators, the hegemony of the GNP measure remains in place.

This is why Bhutan's insistence on the primacy of GNH over GNP inspires people far beyond its borders. Bhutan's commitment to GNH has meant that moral and ethical values are placed at the core of its economic strategies for ensuring better food, housing and health for a population of just over 710,000 people. GNH has allowed Bhutan to both expand its network of roads and increase its forest cover. In most other developing countries the arrival of roads is inevitably followed by deforestation. This is not to suggest that all is well in the Kingdom of Bhutan or that it is able to fully live up to its GNH commitment. Yet its achievements are remarkable.

The wide range of people present at the conference was largely due to the engagement of Sander Tideman, from Holland, who was once a banker and is currently coordinator for the Spirit in Business network. Tideman says that though Bhutan's move toward GNH has been more of a guiding principle than an actual form of measure, its impact has been powerful. For example, the government has restricted tourism in order to prevent its eroding impacts on local cultural values. This has allowed temples in Bhutan to remain places of study, worship and spiritual practice rather than mere tourist attractions.

The declaration adopted by participants at the Thimphu conference said that the facilitation of GNH should be accompanied by "the development of indicators that address human physical and emotional well-being. They must be capable of use for self-evaluation, so that individuals and groups may gauge their progress in the attainment of happiness. In addition, indicators should facilitate full accountability, good governance, and socially constructive business practices, both in day-to-day life and in long-range policies and activities."

Finding Hope Up a Creek

For a man broken by war, John Beal found himself an unlikely place of refuge.

Told that he had less than four months to live, the disabled Vietnam veteran wandered down to the stream behind his house to contemplate his future. Hamm Creek was an open sewer, plugged up with garbage. Beal was still recovering from bullet wounds and haunted by flashbacks. Besides suffering from post-traumatic stress disorder, he had gone through three heart attacks, followed by a serious motorcycle accident.

"I went down to the stream behind my house and just cried, wondering how I'd care for my wife and four kids," says Beal. "Then the idea came to me: if you're going to check out, so to speak, try to leave this place better than when you found it. I looked at this wreck of a stream, filled with refrigerators, old tires, torn garbage bags, broken swings and stinking carpets and all I wanted to do was clean it up."

Maybe it was a way of processing his memories of the wreckage of war, he reflects. Or maybe it was survivor's guilt. Instead of despairing, he started pulling out the garbage. "When I yanked out this huge refrigerator, I thought it would surely kill me. Instead I felt better."

Since that day 23 years ago, Beal has directed all of his energies to restoring this polluted Seattle, Wash. stream. During the last 10 years he has moved on to restoring the entire watershed. Beal has recruited hundreds of crews to clean up and replant around the streams and has now established a network of volunteer groups living in the area, as well as drawing the support and interest of the local Duwamish tribe.

Through sheer persistence, Beal eventually raised enough public awareness and pressure to persuade the local utility to allow Hamm Creek, which had been channelized and paved into a culvert, to be daylighted and rerouted over its property. As a result, what was once a culvert dripping with waste is now a beautifully recontoured and replanted stream brimming with beaver, salmon, and other fish.

For Beal, the impulse to do environmental restoration is itself restorative: "It has empowered me and kept me alive." That same impulse has spurred the energies of thousands of volunteers. "I've seen remarkable things happen to people who connect with Mother Earth," he concludes, describing dozens of cases of people disabled physically or psychologically who benefit from the exercise and feeling of accomplishment.

"I remember watching a young man who had been in a wheelchair for eight years come out to help us weed and plant," he says. "After two years, he's almost able to walk." At first, the young man would fall out of his wheelchair, Beal recalls. But now, he says, he is able to clamber down the slope of the shore, willing himself through. "He was out there every single day. And lately he's saying, 'Now I've got a mission in life.'"

No matter how stressed, angry, depressed or troubled they are, whether it's a jail crew sent to clean up litter for the day, or a class of students, they seem to derive pleasure from the activity, says the riverkeeper.

The redemptive feelings Beal describes are echoed by thousands of visitors and volunteers who have come to his restored creeksite. They are also confirmed by an emerging movement loosely called "ecopsychology," the study of nature's therapeutic benefits.

In the last decade, hundreds of studies have begun documenting what many people know intuitively about the healing power of nature. "Nature is in some fundamental way important for the human psyche, and as such it is really central to public health," says Roger Ulrich, director of the Center for Health Systems and Design at Texas A&M University.

Ulrich has tested these theories on patients recovering from cardiac and abdominal surgery. He found that patients whose hospital rooms overlooked trees required less pain medication and recovered more quickly than those whose rooms overlooked brick walls.

John Beal, like the ecopsychologists, believes that the impulse toward environmental restoration is about the need for connection and purpose in a world increasingly dissociated from nature.

"It's the connection to something larger than yourself," says Beal. "When you are so overwhelmed by your depression, or anxiety or sense of illness, it takes away that worry; it calms that fear."

Gasoline Wars

War in Iraq was inevitable. That there would be war was decided by North American planners in the mid-1920s; that it would be in Iraq was decided much more recently. The architects of this war were not military planners but town planners. War is inevitable not because of so-called weapons of mass destruction, as claimed by the political right, nor because of Western imperialism, as claimed by the left. The cause of this war is car dependence.

The US has paved itself into a corner. Its physical and economic infrastructure is so highly car dependent that the US is pathologically addicted to oil. Without billions of barrels of precious black sludge pumped into the veins of its economy every year, the nation would experience painful and damaging withdrawal.

The first Model T Ford rolled off the assembly line in 1908 and was a miracle of mass production. In the first decade of that century, car registrations in the US increased from 8,000 to almost 500,000. Within the cities, buses replaced trams, and then cars replaced buses. In 1932, General Motors bought up America's tramways and then closed them down. But it was the urban planners who really got America hooked. Car ownership offered the possibility of escape from dirty, crowded cities to leafy garden suburbs, and the urban planners provided the escape routes.

Throughout the 1920s and 1930s, America 'road built' itself into a nation of home-owning suburbanities. Cities such as Los Angeles, Dallas and Phoenix were moulded by the private passenger car into vast urban sprawls which are so widely spread that it is almost impossible to service them economically with public transport.

As the cities sprawled, the motor manufacturing industry consolidated. Car-making is now the main industrial employer in the world, dominated by five major groups of which General Motors is the largest. The livelihood and landscape of North Americans were forged by car-makers.

Motor vehicles are responsible for about one-third of global oil use, but for nearly two-thirds of US oil use. In the rest of the world, heating and power generation account for most oil use. The increase in oil prices during the 1973 Arab oil embargo encouraged the substitution of other fuels in heating and power generation, but in the transport sector there is little scope for oil substitution in the short term.

Due to artificially low oil and gasoline prices that did not reflect the true social costs of production and use, there was little incentive to seek alternative energy sources. The Arab oil embargo temporarily stimulated greater fuel efficiency with the introduction of gasoline consumption standards, but the increasing popularity of gas-guzzling sports utility vehicles over the past decade has substantially reduced the average fuel efficiency of the US car fleet.

The US transportation sector is almost totally dependent on oil, and supplies are running out. It is estimated that the total amount of oil that can be pumped out of the earth is about 2,000 billion barrels and that world oil production will peak in the next 10 to 15 years. Since even modest reductions in oil production can result in major hikes in the cost of gasoline, the US administration is well aware of the importance of ensuring oil supplies. Every major oil price shock of the past 30 years was followed by a US recession and every major recession was preceded by an oil price shock.

In 1997, the Carnegie commission on preventing deadly conflict identified factors that put states at risk. They include rapid population changes that outstrip the capacity of the state to provide essential services, and the control of valuable natural resources by a single group. Both factors are key motivators in the war with Iraq, which has 112 billion barrels, the largest supply in the world outside Saudi Arabia. Even before the first shot was fired, there were discussions about how Iraq's oil reserves would be carved up. All five permanent members of the UN security council have international oil companies that had an interest in "regime change" in Baghdad.

Car dependence is a global public health issue of which gasoline wars are only one facet. Every day about 3,000 people die and 30,000 people are seriously injured on the world's roads in traffic crashes. More than 85 percent of the deaths are in low- and middle-income countries, with pedestrians, cyclists and bus passengers bearing most of the burden. Most of the victims will never own a car, and many are children.

By 2020, road crashes will have moved from ninth to third place in the world ranking of the burden of disease and injury, and will be in second place in developing countries. That we accept this carnage as the collateral damage in a car-based transport system indicates the strength and pervasiveness of car dependency. Moreover, car travel has reduced our walking. One-quarter of all car journeys are less than two miles. A 3km walk uses up about half the energy in a small bar of chocolate. The same distance by car expends ten times as much energy but from the wrong source. We can make chocolate, but oil reserves are finite.

Car use, and the corresponding decline in physical activity, is an important cause of the obesity epidemic in the US and the UK, and physical inactivity increases the risks of heart disease, diabetes, osteoporosis and hypertension. Car-based shopping has turned many small towns into ghost towns and has severed the supportive social networks of community interaction.

Those who opposed war in Iraq must work together to prevent the conflicts that will follow if we fail to tackle car dependency. We must reclaim the streets, promote walking and cycling, strengthen public transport, oppose new road construction and pay the full social cost of car use. We must argue for land-use policies that reduce the need for car travel. We need 'urban villages' clustered around public transport nodes, not sprawling car-dependent conurbations. We can all play our part and we must act now.

Ian Roberts (ian.roberts@LSHTM.ac.uk) is professor of public health at the London School of Hygiene and Tropical Medicine.

Devastating the Earth

In 1960, I began my study of chimpanzees on the shores of Lake Tanganyika in what is now Tanzania. At that time chimpanzee habitat stretched for miles, fringing the lake from Burundi to Zambia in the south. From the hills of Gombe national park one could see the forest stretching away inland, interrupted only by a few villages with their fields of crops. Today, the scene is very different: Cultivated land crowds up to the boundaries of the park, the trees have gone, peasants are trying to grow crops on the steep rocky hillsides, causing terrible erosion, the soil is losing its fertility, the forest animals have gone, and the human population is struggling to survive.

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Redesigning Corporate Law

After twenty-three years advising large corporations on securities offerings, mergers and acquisitions, I left my position because I was disturbed by the game. I realized that the many social ills created by corporations stem directly from corporate law. It dawned on me that the law, in its current form, actually inhibits executives and corporations from being socially responsible. So in June 2000 I decided to devote the next phase of my life to making people aware of this problem. My goal is to build consensus to change the law so that it encourages good corporate citizenship rather than inhibiting it.

The provision in the law I am talking about is the one that says that the purpose of the corporation is simply to make money for shareholders.

Distilled to its essence, it says that the people who run corporations have a legal duty to shareholders, and that duty is to make money. Failing this duty can leave directors and officers open to being sued by shareholders.

This explains why corporations find social issues such as human rights irrelevant -- because they fall outside the corporation’s legal mandate. Secondly, these provisions explain why executives behave differently than they might as individual citizens, because the law says their only obligation in business is to make money.

This design has the unfortunate side effect of largely eliminating personal responsibility. Directors and officers know that their jobs, salaries, bonuses and stock options depend on delivering profits for shareholders. Companies believe that their duty to the public interest consists in complying with the law. Obeying the law is simply a cost. Since it interferes with making money, it must be minimized -- using devices like lobbying, legal hair-splitting and jurisdiction shopping. Directors and officers give little thought to the fact that these activities may damage the public interest.

Lower-level employees know that their livelihoods depend upon satisfying superiors’ demands to make money. They have no incentive to offer ideas that would advance the public interest unless they increase profits. Projects that would serve the public interest -- but at a financial cost to the corporation -- are considered naive.

Corporate law thus casts ethical and social concerns as irrelevant, or as stumbling blocks to the corporation’s fundamental mandate. That’s the effect the law has inside the corporation. Outside the corporation the effect is more devastating. It is the law that leads corporations to actively disregard harm to all interests other than those of shareholders. When toxic chemicals are spilled, forests destroyed, employees left in poverty, or communities devastated through plant shutdowns, corporations view these as unimportant side effects outside their area of concern. But when the company’s stock price dips, that’s a disaster. The reason is that, in our legal framework, a low stock price leaves a company vulnerable to takeover or means the CEO’s job could be at risk.

In the end, the natural result is that the corporate bottom line goes up, and the state of the public good goes down. This is called privatizing the gain and externalizing the cost.

This system design helps explain why the war against corporate abuse is being lost, despite decades of effort by thousands of organizations. Until now, tactics used to confront corporations have focussed on where and how much companies should be allowed to damage the public interest, rather than eliminating the reason they do it. When public interest groups protest a new power plant, mercury poisoning, or a new big store, the groups don’t examine the corporations’ motives. They only seek to limit where damage is created (not in our back yard) and how much damage is created (a little less please).

But the where-and-how-much approach is reactive, not proactive. Even when corporations are defeated in particular battles, they go on the next day, in other ways and other places, to pursue their own private interests at the expense of the public.

I believe that the battle against corporate abuse should be conducted in a more holistic way. We must enquire why corporations behave as they do, and look for a way to change these underlying motives. Once we have arrived at a viable systemic solution, we should then dictate the terms of engagement to corporations, not continue letting them dictate terms to us.

We must remember that corporations were invented to serve humankind. Humankind was not invented to serve corporations.

Many activists cast the fundamental issue as one of ‘corporate greed’, but that’s off the mark. Corporations are incapable of a human emotion like greed. They are artificial beings created by law. The real question is why corporations behave as if they are greedy. The answer lies in the design of corporate law.

Make directors personally responsible for public harm

We can change that design. We can make corporations more responsible to the public good by amending the law that says the pursuit of profit takes precedence over the public interest. I believe this can best be achieved by changing corporate law to make directors personally responsible for harms done.

Let me give you a sense of how director responsibility works in the current system. Under federal securities laws, directors are held personally liable for false and misleading statements made in prospectuses used to sell securities. If a corporate prospectus contains a material falsehood and investors suffer damage as a result, investors can sue each director personally to recover the damage. Believe me, this provision grabs the attention of company directors. They spend hours reviewing drafts of a prospectus to ensure it complies with the law. Similarly, everyone who works on the prospectus knows that directors’ personal wealth is at stake, so they too take great care with accuracy.

That’s an example of how corporate behaviour changes when directors are held personally responsible. Everyone in the corporation improves their game to meet the challenge. Since the potential penalties are so severe, directors err on the side of caution. While this has not eliminated securities fraud, it has over the years reduced it to an infinitesimal percentage of the total capital raised.

I propose that corporate law be changed in a similar manner — to make individuals responsible for seeing that the pursuit of profit does not damage the public interest.

To pave the way for such a change, we must challenge the myth that making profits and protecting the public interest are mutually exclusive goals. The same was once said about profits and product quality, before Japanese manufacturers taught us otherwise. If we force companies to respect the public interest while they make money, business people will figure out how to do both.

The specific change I suggest is simple: add twenty-six words to corporate law and thus create what I call the ‘Code for Corporate Citizenship’. Directors and officers would still have a duty to make money for shareholders,

… but not at the expense of the environment, human rights, the public safety, the communities in which the corporation operates or the dignity of its employees.

This simple amendment would make individuals responsible for the damage companies cause to the public interest, and would be enforced in much the same way as securities laws are now. Negligent failure to abide by the code would result in the corporation, its directors and its officers being liable for the full amount of the damage they cause. In addition to civil liability, the Attorney General would have the right to criminally prosecute intentional acts. Injunctive relief — which stops specific behaviours while the legal process proceeds — would also be available.

Compliance would be in the self-interest of both individuals and the company. No one wants to see personal assets subject to a lawsuit. Such a prospect would surely temper corporate managers’ willingness to make money at the expense of the public interest. Similarly, investors tend to shy away from companies with contingent liabilities, so companies that severely or repeatedly violate the Code for Corporate Citizenship might see their stock price fall or their access to capital dry up.

Change is possible

Many would say such a code could never be enacted. But they’re mistaken. I take heart from a 2000 Business Week/Harris poll that asked Americans which of the following two propositions they support more strongly:

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