The problem with corporate structure

One of our culture's big challenges is the corporate structure, of course.

The problem is that the owners of the corporations--the shareholders--stand to benefit from from their actions but, because of the principle of limited liability, cannot be held accountable for their crimes.

Shareholders can never be held personally accountable for their corporation's environmental and social malfeasance. On the other hand, the shareholders do benefit from the malfeasance if the corporation profits by it.

CEO's of corporations, therefore, must make profits but need never worry about insulating the owners from how those profits are made.

Make a single-skinned oil-tanker good and cheaply and shareholders benefit from the reduced cost through increased profits. Crash the cheap tanker and spill millions of gallons of oil on the beach and the shareholders grumble about lost profit but no one can hold them responsible for damage done by their property.

This structure makes environmental and social problems caused by corporations hard to solve. The owners have unlimited upside but limited downside. That's a structure that can't even be considered to be based on free-market economics because the market indicators are stymied. There's an artificial floor on the shareholder's losses.

Maybe it's time we found a different ownership structure for business, one where owners were considered responsible for damage done by their property.

Anyway, I'm reading a book called Life, Inc by Douglas Rushkoff. It's a history of corporations. He has a brilliant quote when talking about the birth of the chartered corporation. He says:

[With the birth of the chartered corporation] the emphasis of business would shift from the creation of value by people to the extraction of value by corporations.

Watch Rushkoff explaining the origins of the corporate structure below:

Life Inc. The Movie from Douglas Rushkoff on Vimeo.