Are corporations too powerful and presenting as a threat to global economies, civil societies, and the environment
Are Corporations Too Powerful and Presenting as a Threat to Global Economies, Civil Societies And The Environment?
Corporations have become very powerful and influential in the society. Presently, big multinational companies have acquired a lot of power that they use to influence the economic, social and environmental aspects of the society. However, there has been a growing concern that, as the transnational businesses becomes more powerful, this threatens the global economies, civil societies and the environment. The report has demonstrated the extent to which corporations have been using their power to cause harm to the global economies, civil societies and the environment under the watch of government agencies. It emerged from the analysis that these corporations are well-connected to the powerful political elites whom they bankroll that they use as protection against any move made against them by the civil societies and the public. However, the government needs to rain on the corporations to ensure that they do not use their powers to cause harm to the global economies, civil societies and the environment for the betterment of the future generation.
Companies play a critical role in the development of a country is it politically, socially and economically. Most countries that have developed have been able to achieve such developments largely because of the growth of businesses. However, Sciulli (2001, p. 7) notes that the global economies, civil societies and the environment have become under increased threats from corporations. The activities of some powerful corporations have adversely affected the global economies by triggering global financial crisis that the world have experienced in the past and are still exposed to even today (Grant 1998, p. 37). In many countries, the civil societies have become under increased target by unscrupulous powerful corporations whenever they are criticized by the civil societies. At the same time, the environment has also become under increased threat from unscrupulous businesses that pollute the environment, thus causing serious environmental degradation. Unfortunately, Campbell (2015) argues that these corporations are presenting a threat to the global economies, civil societies and the environment under the watch of governments and law enforcement agencies that are expected to provide protection. The aim of this paper is to explore the extent to which corporations have become too powerful and presenting as a threat to global economies, civil societies and the environment using case studies.
Corporations as Threat to Global Economies
The economies of most countries have experienced remarkable growth in the past few decades. Quite a number of countries that were once classified as poor countries have moved up the ladder and are currently ranked as middle-income, industrialized or developed economies. The growth of the economies has been fueled by corporations that have a huge influence on the global economies (Grant 1998, p. 37). The growth of these businesses results in the growth of local economies that in turn results in growth of the global economies.
Nevertheless, corporations have become a threat to global economies. World economies have been under increased threat of experiencing economic downturn because of the activities of corporations. The concept of corporate social responsibility requires that a company promotes not just the interest of its stakeholders by maximizing wealth, but also the economic, social and environmental wellbeing (Mohr et al. 2001, p. 45). Friedman states that the corporate social responsibility of a company is to maximize wealth for the shareholders to promoting even the economic, social and environmental sustainability (Friedman 1990, p. 14). Unfortunately, the actions of some corporations in the recent past show that companies are too powerful and present a threat to the global economies. Many corporations have engaged in corporate frauds in the recent past that have had adverse effects on the global economies. In 2000s, quite a number of American companies engaged in corporate scandals that aimed at defrauding the companies and their investors. Among the companies that engaged in corporate scandals included Adelphia, WorldCom and Enron just to name but a few. These scandals badly affected the United States economy and the economies of those countries that depended on the products and services provided by these companies whose operations seized as a result of the fraudulent acts. Evidences have also linked the Great Depression that occurred in the United States in the 1930s to the conflicts of interest and corporate fraud. Dunbar and Donald (2009) study found that many powerful companies engaged in corporate frauds and conflicts of interests that resulted in loss of billions of dollars, but triggering a credit crunch that later resulted in the Great Depression.
The recent global financial crisis of 2007/2008 was also triggered by the activities of powerful corporations. The 2007/2008 global financial crisis is traced to the activities of former giant companies, such as AIG and other companies. Prior to the global financial crisis, AIG was a giant global insurance provider with assets worth over $1 trillion. However, because of mismanagement, the companies defaulted on swaps, which placed the firm into liquidity problems. As a result, AIG lost over $99.2 billion, which had a serious impact on the insurance and financial market (Dunbar & Donald 2009). These coupled with other factors triggered the global financial crisis of 2007/2008 that affected the global economies with some countries still feeling its effect to date, such as Greece. Other corporations that have been blamed for the global financial crisis include Merrill Lynch, Citigroup Inc., and JPMorgan & Co. among others.
The performance of global economies depends largely on the taxes paid by individuals and corporations. However, big corporations have become a threat to the economies of most countries by failing to pay taxes. Khadem and Butt (2015) report indicates that out of 1539 largest companies in Australia, 38% failed to pay taxed for the 2013/2014 financial year. The report indicates these corporations had a combined turnover of $1.6 trillion and profits totaling $169.9 billion yet they only paid $39.9 billion only in taxes (Khadem & Butt 2015). This is a threat to the Australian economy whose development depends to a large extent on the taxes it collects from corporations. Unfortunately, analysis indicates that most of these big companies avoid paying taxes through transfer pricing to low tax countries, which allows them to pay only a small amount of tax so that they can remain with huge profits after taxation. This has become a trend that most big powerful corporations are using to destroy the global economy.
A classical case showing the extent to which large companies destroy the global economies has to with how the American technology giant Apple has been using transfer pricing method to avoid taxes. Apple is currently being accused of having avoided paying taxes amounting to £11 billion in Ireland (Farrel & McDonald 2016). These are taxes that Ireland could have used for the development of its economy and Apple has been using this tactic to avoid taxes in many parts of the world. However, tax avoidance is not isolated to just Apple, as other big companies, such as Samsung, Google, LG, General Motors, and Ford among other big corporations have also been using transfer pricing method to avoid paying taxed and this threatens the global economy that could collapse in the event that these companies continue avoid paying taxes.
Corporations as Threat to Civil Societies
The civil society plays an important role in the society. Civil society refers to a group of people that have come together to pursue a common objective. The first core function of a civil society is to push for good governance and democracy. All countries in the world, regardless of whether developed or underdeveloped face governance challenges. As such, the civil societies are usually formed to advocate for good governance, such as pushing the government to promote economic growth or to ensure equitable distribution of resources (Grant 1998, p. 42). The civil societies also play a critical role of championing respect for human rights. There are many countries where the civil society has contributed greatly to human rights change. In the United States, for example, the civil society, particularly the Civil Rights Movement contributed greatly to social change by forcing the government to respect the human rights of the Black people by making racism and discrimination illegal by passing the Civil Rights Act.
Environment is another important area where the civil societies have contributed greatly in bringing about change. The environment has become under increased threat due to degradation by humans and industries. Therefore, to protect and conserve the environment, there are quite a number of environmental movements that have been forced in different countries across the globe that advocate environmental conservation. The environmental movements have forced governments and industries to take action on environment as was the witnessed during The People’s Climate March that was organized in New York and was held throughout the globe, including Melbourne, Australia (Tiwana 2014).
Despite the important roles played by the civil societies, evidences show that the civil societies have become under increased threat not just from states, but also from non-state actors, such as powerful and influential businesses (Roach 2007, p. 19). These are businesses that have strong connection with powerful politicians. The threat to civil societies span all over the world including developed countries. In Indonesia, civil societies have become under increased attacks by politically well-connected businesses that use powerful politicians to gag the civil space. Tiwana (2014) report indicates that millions of Indonesians are chocked by fires that are lit by powerful and politically well-connected agricultural corporations. However, whenever the civil societies come in to voice their concerns, the agricultural companies use their connections with the powerful political elites to gag them so as to allow their palm oil plantations to flourish and generate high returns.
The civil societies are also under increased threat from corporations in the United States. The increased misuse of guns by Americans has resulted in increased dissenting voices from civil societies that have been advocating the introduction of tougher gun control laws. The American civil society activists have been demanding effective gun control laws but their efforts have always been thwarted by the congressmen. However, Tiwana (2015) report shows that congressmen have always blocked gun control laws that are being proposed by the civil societies because these congressmen are being bankrolled by the arm manufacturing and sales businesses to protect the interests of these businesses in the Congress.
Similarly, in the United Kingdom, the civil society have often come under attack by businesses that are opposed to their dissenting voices in regards to how they do businesses and make profits. Tiwana (2013) reports indicates that there has been growing frustrations from the public and the civil society concerning the increasing tax evasion by multinational businesses whose turnover reportedly exceeds most country’s GDP, while the average British citizen continues to languish in poverty and struggle to pay their taxes. To bring this to a stop, the civil society has been calling on the government and the legislators to crack down on the rogue transnational businesses that evade taxes. Unfortunately, Tiwana (2015) says that the efforts of the civil society in the UK have been fruitless as these unscrupulous transnational corporations are well connected to powerful politicians whom they use to block the civil society’s efforts.
The civil space in Cambodia is even worse as the rights activists have on many occasions been subjected to brutality for opposing the bad activities of big corporations. Tiwana (2014) reveals that, in Cambodia, land activists that have been opposing attempts by big companies to forcibly acquire land are often subjected to brutality by security forces sent by these influential corporations and are sometimes even locked behind bars for a long time. A survey conducted in Cambodia indicates that these big corporations looking for land for their businesses are well connected to the powerful political elites and government officials whom they use to frustrate the civil societies efforts so as to have their way (Campbell 2015). Likewise, in Honduras, civil society groups have been killed while some have been badly injured for opposing the activities of big corporations. According to Sciulli (2001, p. 12) Honduras has many peasant farmers group that for many years have been involved in land disputes with corporations. Unfortunately, any time the groups engage in dispute with the well-connected and powerful corporations over land issues, they are kidnapped, attacked and even murdered. Similar attacked on civil society have been reported in all parts of the world, including Canada, Australia, and India among others.
Corporations as Threat to the Environment
Environmental degradation has been a serious issue globally. Currently, the world is grappling with the problem of climate change, which threatens the lives of the current and future generation. Scientists argue that the world’s average temperatures have increased significantly over the last few decades due to pollution and the global warming effect. Presently, the world has started experiencing the effects of the climate change through increased droughts, flooding, rising sea levels, typhoons, wide fires and increased glacial movements among others (Griffin et al. 1997, P. 7). Unfortunately, big and politically well-connected corporations have become the biggest threat to the environment. Most big corporations around the world are driven by agreed and pursuit for high profits at the expense of the environment that they are supposed to protect. Corporate social responsibility principle holds that a company needs to go beyond pursuit for profit by promoting the economic, social and environmental wellbeing (Uddin et al. 2008, p. 199). Although Milton Friedman opposed the idea of CSR arguing that the sole responsibility of a company is profit maximization for the benefit of investors (Ferrero et al. 2014, p. 38), Freeman disagreed with Friedman arguing in its stakeholder theory that a company has a responsibility to ensure the wellbeing of its stakeholders by promoting economic, social and environmental sustainability (Freeman 1984, p. 41). Freeman’s stakeholder theory is advanced by the triple bottom line framework that holds that list three roles of a company, including economic, social and environmental responsibility (Estes 1996, p. 101).
Unfortunately, globally, corporations have become the biggest threat to the environment. Mohr et al. (2001, p. 45) notes that most big corporations are only concerned about amassing wealth and generating high profits at the expense of the environment and this has resulted in increased environmental pollution and degradation that threatens the sustainability of the environment. The extent to which corporations have become a threat to the environment was exposed recently in 2010 when British Petroleum caused one of the worst oil spills ever recorded. This follows the Deep Horizon oil spill at the Mexican Gulf that occurred in 2010 spilling off millions of gallons of oil into the sea waters. This resulted in serious pollution of the Gulf waters killing aquatic life, including fish, sea birds, and sea mammals among others (Henkel et al. 2012, p. 677). The spill also affected the plants as well as the lives of the people that dependent on the waters. Despite the spill, BP appears to have acted with impunity considering that it failed to conduct cleanup exercise to eliminate all the oil spilt as traces of oil can still be found on the seabed. BP’s actions indicate the extent to which big and politically well-connected corporations have become a threat to the environment, according to Anderson and Cavanagh (2000, p. 66).
Again recently in 2015, the German giant automaker was involved in an emission scandal that demonstrated the extent to which companies are only bothered about the profits they generate at the expense of the environment. Following investigations conducted by Environmental Protection Agency (EPA) in 2015, it was found that Volkswagen had installed “defeat device” which is software that allowed the automaker to pass the emission tests conducted on its cars in the United States (Rhodes 2016, p. 1). The software operated in such a way that, when the Volkswagen cars were being tested, it ensured that the nitrogen emitted is within standards but reverted immediately while on the road, thus producing large amount of nitrogen and carbon into the environment, which is a threat to the environment. The company reportedly cheated in its emission just to be able to have its vehicles passes the test and make high profits in the market without taking into regards the harmful effects of nitrogen to the environment. Volkswagen was forced to recall over 11 million cars that were fitted with the software (Goel 2015).
Rio Tinto is another big corporation whose activities have been a threat to the environment. Although the mining giant promotes itself as a protector of the environment, the reality tells otherwise. The company has been criticized in most countries, where the company operates mining activities for environment degradation and pollution. What worries environmentalists is that the governments have always failed to rain on this mining giant to stop environment degradation something that is thought to be so because of the connection that this company have with powerful government officials and cartels in different countries. The Peaceful Uprising (2012) report indicates that, in Salt Lake County, Rio Tinto is responsible for 30% of total air pollution in the area that always receives as “F” ranking in terms of air quality. In Bingham Canyon, Rio Tinto has been accused of emitting more carbon beyond the maximum limit allowed under the U.S. environmental laws (London Mining Network 2010). Besides, the company has been accused of using bulldozers and chemical defoliants in Bougainville to destroy rainforests that have been an important resource for the local people. Rio Tinto has also been accused of using toxic mine waste in its mining activities that it dumps onto the land and waters that end up in rivers, thus exposing local residents, their animals and aquatic animals at danger. Unfortunately, all these occur under the clear watch of the government agencies in charge of mining operations that have failed to intervene to save the local people and the environment from continued degradation by Rio Tinto. These among other incidences clearly indicate how corporations have become so powerful that they threaten the environment.
Corporations play a key role in the development of a country. The developments that have occurred in various parts of the world are largely attributed to industrialization and the growth of businesses that creates goods and services and jobs for the population. However, the analysis has indicated that indeed corporations have become too powerful to the extent that they present a threat to threat to the global economies, civil societies and the environment. The global economies, civil societies and the environment have become under increased threat from big transnational corporations that use their connections to the powerful political elites to amass wealth through pursuit of high profits while destroying the global economies, frustrating the civil society and destroying the environment at will impunity. However, there is a need for governments to rain on such corporations to ensure that the global economy, civil space and the environment is protected and their sustainability maintained.
Anderson, S., & Cavanagh, J 2000, Top 200: The rise of corporate global power. Institute for Policy Studies, Washington, D.C.
Campbell, B 2015, Corporate power, deregulation and the threat to public safety, viewed 4 October 2016 https://www.policyalternatives.ca/publications/monitor/corporate-power-deregulation-and-threat-public-safety
Dunbar, J., & Donald, D 2009, The roots of the financial crisis: Who is to blame? viewed 4 October 2016 https://www.publicintegrity.org/2009/05/06/5449/roots-financial-crisis-who-blame
Estes, Ralph. 1996. Tyranny of the bottom line: why corporations make good people do bad things. Berrett-Koehler Publishers, San Francisco.
Farrell, S., & McDonald, H 2016, Apple ordered to pay €13bn after EU rules Ireland broke state aid laws. The Guardian 30 August, viewed 8 October 2016 https://www.theguardian.com/business/2016/aug/30/apple-pay-back-taxes-eu-ruling-ireland-state-aid
Ferrero, I., Hoffman, W. M., & McNulty, R. E 2014, Must Milton Friedman embrace stakeholder theory? Business and Society Review, Vol. 119, Issue 1, pp. 37-59.
Freeman, R. E 1984, A stakeholder theory of the modern corporation. Cambridge University Press, Cambridge.
Freidman, Milton. 1990. “The social responsibility of business is to increase its profits.” In The Essentials of Business Ethics (Peter Madsen and Jay M. Shafritz, ed.), Meridian, New York.
Goel, A 2015, “Volkswagen: The protagonist in diesel emission scandal,” South Asian Journal of Marketing & Management Research, Vol. 5, Issue 11, pp. 1-9.
Griffin, Jennifer J., and John F. Mahon. 1997. “The corporate social performance and corporate financial performance debate,” Business & Society, vol. 36(1):5-31.
Grant, Randy R. 1998. “Measuring Corporate Power: Assessing the Options,” in Corporate Power in the United States (Joseph Sora, ed.), H.W. Wilson Company, New York.
Henkel, J. R., Sigel, B. J., & Taylor, C. M 2012, “Large-scale impacts of the Deepwater Horizon oil spill: Can local disturbance affect distant ecosystems through migratory shorebirds?” BioScience vol. 62, no. 7, pp. 676-685. doi: 10.1525/bio.2012.62.7.10
Khadem, N., & Butt, C 2015, Which of Australia’s biggest companies are not paying tax. The Sydney Morning Herald 17 Dec., viewed 8 October 2016 http://www.smh.com.au/business/the-economy/which-of-australias-biggest-companies-are-not-paying-tax-20151216-glpl3a.html
London Mining Network 2010, Rio Tinto: A shameful history of human and labour rights abuses and environmental degradation around the globe, viewed 4 October 2016 http://londonminingnetwork.org/2010/04/rio-tinto-a-shameful-history-of-human-and-labour-rights-abuses-and-environmental-degradation-around-the-globe/
Mohr, L.A., Webb, D.J., & Harris, K. E 2001, “DO consumers expect companies to be socially responsible? The impact of corporate social responsibility on buying behavior”, Journal of Consumers Affairs, p-45.
Peaceful Uprising 2012, Rio Tinto: The dirty secret in our own backyard, viewed 4 October 2016 http://www.peacefuluprising.org/rio-tinto-the-dirty-secret-in-our-own-backyard-20121114
Roach, B 2007, Corporate power in a global economy. Tufts University Global Development And Environment Institute, Medford, MA.
Rhodes, C 2016, “Democratic business ethics: Volkswagen’s emissions scandal and the disruption of corporate sovereignty,” Organization Studies, p. 1. 0170840616641984
Sciulli, D 2001, Corporate Power in Civil Society: An Application of Societal Constitutionalism. NYU Press, New York.
Tiwana, M. S 2014, Opinion: Why are threats to civil society growing around the world? viewed 4 October 2016 http://www.ipsnews.net/2015/06/opinion-why-are-threats-to-civil-society-growing-around-the-world/
Tiwana, M 2013, Neoliberalism and public unrest: Time to make the connection. Aljazeera 11 July, viewed 4 October 2016 http://www.aljazeera.com/indepth/opinion/2013/07/201374123247912933.html
Tiwana, M 2015, Challenging threats to civil society from powerful business entities, viewed 4 October 2016 http://www.rightingfinance.org/?p=1321
Uddin, M. B, Hassan, R., & Tarique, K. M 2008, “Three dimensional aspects of corporate social responsibility,” Daffodil International University Journal of Business and Economics, Vol. 3, No. 1, pp. 199-212.