CORPORATIONS AND THEIR INFLUENCE
ON GOVERNMENT POLICY
GROWTH OF CORPORATIONS
In 1999, Exxon Mobil, General Motors, and Ford each had greater
revenues than all but 7 of the 191 nation states then in existence.
The top 6 corporations had more annual revenues than the budgets
of 64 nations, which, in turn, had over half the world’s population.
As mergers and acquisitions (M&As) proceed, the size of
corporations does too. This concentrates more monetary wealth,
and power, in the hands of fewer individuals. In 1999,
international and domestic M&As totaled 24,000 worth$2.3
trillion (U.S.). Canada’s deals even larger than those of the USA
based on the relative size of our economies. (See William
Stanbury, “New Competition Act and Competition Tribunal Act:
‘Not with a Bang but with a Whimper’”, Canadian Business Law
Journal 12 (1986-87)). Examples of Canadian M&As include
Air Canada’s takeover of Canadian Airlines, Indigo’s takeover
of Chapters, the purchase of Southam’s by Hollinger and the
subsequent purchase of Hollinger’s media interests by
CanWest Global Comms.
The personal effects of the increased concentration of power is the
ability of airlines such as Air Canada, or banks, or oil companies to
treat consumers like dirt. However Glasbeek suggests there are
more sinister and serious outcomes of the greater concentration.
There are horizontal mergers with former competitors and vertical
mergers with suppliers, and conglomerates that bring together
firms from different sectors of the economy e.g. financial
institutions with airlines.
1
The vast size and concentration make it more difficult for
governments to control the actions of the behemoths. They can
also dictate terms to workers and their unions, to suppliers and
buyers who have no choice but to deal with them.
Such power has raised the argument that large corporations should
be treated like government, with public checks on their power.
(See R.A. Dahl “Preface to Democratic Theory” 1966 Yale Univ.
Press; and “After the Revolution: Authority in a Good Society”
1970, Albany, State Univ. of N.Y. See also Stanley Deetz,
“Democracy in an Age of Corporate Colonization” 1992, Albany
State Univ. of N.Y.).
As S. Beck stated (“Corporate Power and Public Policy” in
Consumer Protection , Environmental Law, and Corporate
Power ed. Bernier and Lajoie, Vol 50) in a private enterprise
market system, most critical decisions about technology , what is
produced, how work is to be done, location of plants, investment
levels, quality of goods and services, creation of new products or
services are largely made by businessmen. Government’s role is
mainly to acquiesce to the needs of business as identified by
business. Maclean’ Magazine put it “If CEOs of the big
corporations have begun to talk like government leaders, it is not
entirely accidental: these days they run the show” (Aug. 2, 1999).
Society and governments have become dependent on the largesse
of corporations. Sporting events, charitable organizations, schools,
colleges and universities, newspapers, television stations and
governments themselves have become hooked on corporate cash
and sponsorship.
Asbestos: Oct. 2000, WTO upheld Europe’s ban on imports of
Canadian asbestos. Canada appealed – not to poison foreigners
but to support the Canadian (Quebec and Newfoundland &
Labrador) asbestos industry. The Quebec Federation of
2
Labour supported this, arguing that asbestos can be used
safely. The Asbestos Institute is funded by the industry and the
Canadian and Quebec and Newf provincial governments.
Canada persuaded South Korea to remove hazard labels on
asbestos, designed to warn workers. Canada also did a deal to
state British handling of mad cow disease was OK in exchange
for British delay in banning Canadian asbestos.
Governments marginalized. Culture of TINA.
Wallace Clement The Canadian Corporate Elite: An Analysis of
Economic Power, McLelland & Stewart, 1975, Toronto, recorded
an extensive system of interlocking directorships across the
corporate world as well as overlap of government and private
sector functionaries in volunteer quasi-public agencies. Various
lobby groups and think tanks propagate private enterprise policies
by governments.
Contributions to political coffers
Robert MacDermid explains how Ontario Common Sense
Revolution was funded by corporations in 1990s and former
Liberal (1968-73) insider Mel Hurtig of Alberta discussed
patronage and the distortion to democracy in The Betrayal of
Canada.
Manitoba and Quebec ban corporate funding. The NDP refuses to
accept it from large corporations. The main parties talk of electoral
reform but don’t bite the hands that feed them.
Large corporations have persuaded govts that corporate
concentration is not an evil but in fact a good as it helps
governments’viability. Less competition domestically would
help corporate competitiveness abroad.
3
Lobbying by corporate proponents ensured that domestic
competition law is weak and weakly enforced. Justification of
takeovers and mergers is that better managers will be brought
in to improve shareholders’ earnings. But DuBoff and Herman
found no evidence of improved efficiency and perhaps less
efficiency. KPMG found no net gain for shareholders.
Concentration on shareholders distorts the social and economic
issues. Frequently workers pay the price of M&As. Hewlett
Packard and Compaq merger 2001. 15,000 workers sacked to
create “efficiencies”. May 2001 Clairol workers sacked (4000)
after Procter & Gamble take over. General Electric’s purchase
of Honeywell produced resistance from the European Community
and the European Commission banned the sale as risking fall in
competition. The parties wooed investors by promising job cuts of
30,000 jobs at Honeywell and 11,000 at G.E. Such announcements
tend to improve share prices on stock markets.
JDS Uniphase paid too much for its acquisition which cost 17,000
jobs. Nortel paid too much for its acquisitions and 30,000 jobs
were lost.
General practice is for executives and managers not to oppose
takeovers or mergers. So when Qwest and U.S. West were
merged, CEO Sol Tujillo got $15 million US severance pay plus
$46 million in stock options plus $11 million to cover taxes on the
gift plus $24 million in shares in Qwest.
When AOL and Time Warner merged, 2000 workers were
threatened with layoff and many more were laid off. Stock options
of US $3 billion were given to 2 AOL and 5 Time Warner
executives.
Executives may not always play the game. When Vodaphone
bid for Mannesmann AG ($28 billion) , the Mannesmann CEO
4
and senior executives were offered $72 million. Vodaphone
denied a bribe though the Mannesmann CEO left with $43
million and the executives shared $20 million.
It is not clear whether efficiency improves. What is clear is that the
executives benefit and many workers do not.
Corporate monopoly power undermines the free market and
the principles of liberal democracy. They can do so by simply
threatening to withdraw from the jurisdiction the accumulated
wealth of the corporation. A culture of interdependence or
perhaps co-dependence is orchestrated by the corporations.
The privilege of the wealthy is offered as compatible with the
public interest in a liberal democracy. Is this a sustainable
argument?
The interdependence arguably undermines democracy, which
implies distribution rather than concentration of power. Glasbeek
notes the following factors.
1. The relationship between government and large corporations
explains the reluctance to use criminal law for corporate
deviance.
2. The preference to use the regulatory rather than criminal law
raises concern because of the role corporations typically have
in the drafting of regulations See Stanbury’s account of the
creation of the competition regulations.
3. Chemical industry (CCPA) fought prohibition of certain
profitable chemicals. Concerns in 1980s had arisen over
Bhopal, Agent Orange and other disasters. The industry
fought regulation through lobbying, industry membership on
blue ribbon panels. In 1999, Government acceded to
industry’s demand to return to self regulation. A similar story
5
is unfolding over the use of genetically modified food. See
the Canadian Biotechnology Advisory Committee.
4. Governments have limited resources for research.
Universities funded by GOVT but limited money. Value of
university is neutral research but increasing dependency on
corporate funding. Indeed Govt granting bodies encourage
research where funds can be obtained from corporate sector.
This skews the research toward products – pills etc.
5. They rely on corporate money. See Eyal Press and Jennifer
Washburn in The Atlantic Monthly, “Kept University” See
also Neil Tudiver, Universities for Sale (Lorimer, 1999,
Toronto) The Corporate Campus ed. James Turk.
Corporations dictate the terms and professors frequently have
stocks in the company. In matters of drugs, medicine it is
increasingly difficult to find academics who are not in
conflict of interest due to financial or employment
connections with corporations.
6. Dr. Nancy Olivieri, medical researcher at Hospital for Sick
Children and on Faculty at University of Toronto. She signed
confidentiality agreement with Apotex for testing and
development of a drug. Olivieri informed the patients of risks
she had found and was demoted by the Hospital and taken off
the study. The University of Toronto did not support Olivieri
in her dealings with Apotex. Coincidentally Apotex had
promised a large donation to the University. Olivieri’s
reputation was trashed by Apotex but she was vindicated by
two investigative reports.
7. See also David Healy fired from position at U of Toronto
before he even took up the position. His misdemeanor was to
publicly question the benefits and to warn of the dangers of
6
Prozac. The institute at U of T that he would have worked at
was funded by pharmaceutical companies’ money.
As universities serve a purpose in our liberal society to generate
diverse ideas and knowledge and to call into question the
actions and ideologies of the status quo, it does not serve this
role well to have universities funded by corporations and to
have their professors acting for the private good rather than the
public good.
7