Corporations can be Deadly to Your Well-being and Health

By Saliem Fakir · 5 Jul 2011

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Picture: backseatstreet
Picture: backseatstreet

The Aurora debacle – the mining company taken possession of by President Zuma’s nephew Khulubuse Zuma - has earned the ire of workers and the public as a whole.

It is of great relief to workers that Aurora has finally been liquidated and the liquidator himself fired. How a company, for so long, could wrought such extensive damage to people’s lives and health as well as do so much damage to the environment bears testimony to the impunity companies are able to act with.

It is also testimony to how slowly the law comes to the rescue of victims. Despite deaths, suicides and ill-health that poverty ground out of already fragile bodies, legal wrangling dragged the situation on for far longer than it should have.

Had it not been for the unions and media exposure, Aurora would simply not have come to our attention nor would it have been under pressure. It took the force of court to finally bring this mess to an end, but at what cost? What is the lesson from Aurora’s malpractices?

The whole saga with Aurora raises fundamental questions, not only about rogue corporations, but also about the nature of corporate power versus public interest, as a whole, especially if the corporate world is left to its own devices.

It leaves one wondering whether corporations, left to their own devices, are capable of behaving ethically. Would they act with impunity if there were no countervailing forces like the state, strong consumer bodies, unions and others?

The evidence suggests that if there is not sufficient social capital earned, then the public can least afford to trust corporations to act responsibly on their own.

Depending on which country you live in, people who run corporations can be welcomed as heroes or simply be seen as Robber Barons that have been given legal sanction to plunder and let loose their violence against the public.

Often economic theory, for the wrong reason, can lend its hand to justifying perverse corporate behaviour like the economist Schumpeter’s oft-parroted phrase “creative destruction.” 

Taken too literally, corporate hacks can throw scorn on workers, rivals or consumers and justify harmful actions as part of the “creative destruction” process that they view as natural and necessary for corporate sustainability and growth.

The decorum of civility that corporations muster can be a façade. Adam Smith long ago observed this tendency, called their bluff and warned that if merchants were given too much space, their ability to outweigh the interests of the general public would take precedence.

The limited liability company can be said to be the modern era’s greatest invention. Using this model, a group of investors can lump together their precious savings to take on impossible ventures in commerce, which they would not ordinarily have been able to do by themselves.

The first forays of the limited liability company saw ships sale to far off conquered lands in the form of the East India companies, to bring home riches in spices and gold to their shareholders. This romantic ideal of the great corporation still endures.

The corporation quickly turned into a private collective acquiring the status of legal persona free from the risk of personal liability. As a result, the corporation overcame insurmountable obstacles to its existence once it removed the risk to personal assets and confined or limited this risk to a new legal persona.

The granting of legal tenure and the freeing of personal risk and even protection from public pursuit for malevolence and other misdemeanours have made corporations adept at avoiding public sanction -- and greed can often get the better of them.

The corporation’s attitude towards public relations is not one of how to be a good citizen, but rather about how to avoid getting caught being a bad citizen. It is ironic that this is the new ethos, which has become commonplace when doing business where the profit motive is paramount above everything else.

Thus, if a company is closed down or sued for liability, there is no recourse to the individuals who sponsored its existence or carried out acts in its name. This was always going to be the thorniest of concessions granted by the state for which it acted as a good counter until corporations themselves became as powerful or more powerful than states.

The above may not be true for all corporations, but it becomes somewhat palpable for consumers who feel ripped off, workers who feel they don’t get a fair share of the wealth and environmentalists who watch astonishingly how corporations violate environmental laws and regulations.

Not all corporations are rogues and not all corporations get away with it. But a limited liability corporation outside of good public or state surveillance will take the law into its own hands. For all the corporation’s pretence of being hero, creator of jobs and wealth, the limited liability company quickly becomes a public liability.

In the Aurora case, it is not the limited liability company provisions that albeit belatedly saved the public from rogue behaviour, but the presence of countervailing forces that ultimately brought worker and public interest to bear.

History is rich with examples of corporate misdemeanours. Take Enron, Halliburton or Blackwater; take the silicoses case against Anglo Ashanti with workers being poorly compensated for the health risks imposed upon them. As more cases like this start building up, corporations will suffer the common fate of public mistrust.

However, all is not just a free ride. We are still lucky to have good laws in this country. Some have been tried and tested; others have just come onto the scene to break this asymmetry between the abuse of corporate power and vulnerability of citizen. 

The Consumer Protection Act, which came into effect in October last year, empowers consumers with significant recourse on issues ranging from misleading contracts and quality of service to transparency around pricing of goods.

The Act has already led to the establishment of a Commission and Tribunal. 

This, together with the Competition Act, the National Credit Act and the right to pursue company CEOs and managers as personally liable for negligence against third parties under the new Company’s Act, strengthens the hands of consumers and workers. 

Nevertheless, you can be sure that there will be more Auroras, if you let your guard down.

Fakir is an independent writer based in Cape Town.

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Lee Cahill
5 Jul

It's up to Civil Society

Neither big business nor big government ultimately serves the interests of the people. Both are systems focused on the accumulation of power and wealth - little else. It is up to civil society - and civil society alone - to ensure that neither business nor government abuses the power entrusted to it by voters, shareholders and workers. Unchecked by civil society, neither will police itself ...

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