Friday, May 13, 2011

The fictional citizen

What a strange title for a blog post, no?  What is a fictional citizen?  Why do they exist?  And are they better or worse than being a real citizen?

So many concepts that go with fiction, aren't there?  But there are very real fictional citizens and, no, they aren't hiding in shadows or scurrying across borders or any of that sort of thing.  These are ones that have been known for ages, and tend to be despised by the modern Left for the 'power' they wield.  Ah, the criticisms: that a carte blanche is given to these fictional citizens and that they run roughshod over everyone!  Day in and day out I hear the complaints of the Left about these fictional citizens and yet, for all the moaning, griping and complaining, no one ever bothers to find out exactly what the actual, real problem is with them and how they might be dealt with.  So, as a person used to reading fiction and even trying my hand at some derivative fiction, plus running role playing universes in which I get to run the rest of the universe while players play at being people in such universes, I will give that a shot.

In this instance the fictional citizen is made by law and is thusly a legal fiction.

We call these legal fictions by a few names: companies and corporations.

Hitting on the word corporation it hints at how we get the 'citizen' part attached to these legal functions.  You are a corporeal citizen, that is an independent individual that has flesh and blood attached to you.  However one of the words we use when individuals die is to 'discorporate', that is you are no longer attached to your corporeal form any longer.  You are not incorporated into it, in other words.

When a legal fiction is incorporated, that is all the necessary legal papers are drafted to create the corporation, it then becomes a 'corporate citizen', a concept I am quite sure most have heard of at some point in their lives.  Now these fictional citizens have somewhat different constraints on them being merely legal incorporations and not individuals incorporated with a body, which is corporeal existence.  Legal fictions can hold property, then can hold funds and goods, they can be owned by one or millions of people, they get their own special tax code, they get all sorts of things we don't leverage upon real citizens because they are fictional constructs that we create to do business.

There are things they can't do, in general, like get up and walk around.  Their headquarters may move, yes, but that is done via a different process than you, as an individual, getting up from your chair and walking around.  Corporations may process air through air handlers for their offices, but they cannot breathe.  Only by allowance from Congress can they keep and bear arms in combat, although they can make armaments that is only for sale not for corporate use.  Corporations cannot vote in elections, another area of difference between you, as an individual, and a corporation as a fictional entity.  While they may exchange funds or goods with another company and found a new company, that is not the same as having sex and giving birth to a child, which is biological in its origin, not created by forms filled out and slips of paper passed around to be signed and counter-signed.

Some similarities are striking, however, in the way we see corporate citizens.  They have the right to freedom of speech, which the Left moans about greatly, but they are also beholden to the same limits on speech for slander and libel.  They have freedom of worship, as there are religious based incorporated entities often associated with charities.  They can petition government, which is another problem the Left has with corporations, that and their ability to contribute to political campaigns.  A search warrant is required to search a corporations' properties, and they are protected from unlawful search and seizure of their property and goods.

Then there are the ways that these incorporated citizens are actually superior to corporeal citizens.  They have no life expectancy, and can (in theory) live forever.  As they exist as incorporated entities, they can change their place of corporation and gain corporate citizen rights in other countries without being seen as having a dual allegiance problem.  Individual corporations can gain much power and money, over time, and generally wield influence when petitioning a government beyond the ability of a normal citizen to do, which is the nub of the grief from the Left on this topic, I believe.  And they can be scofflaws and still exist, which is a major bonus for a company that makes enough profit to shrug off fines and lose individuals who do wrong for the company's benefit.

The major problems and grief that associate the Left on their problems with corporations tends to be the power accumulation bit, along with the making money from wrong-doing part.

Do they ever address these problems?


Not a hint of how to solve the problems, just complaints.  Lots of complaints.

To help out the faint of heart I will suggest a couple of things to 'reform' our concept of legal fictions while still keeping them as a viable option.

As almost everything the Left complains about revolves around power and undo influence of corporations, the question must be asked: how do they get so much of them?

The answer is astonishing: they can exist forever and remain free even after wrong is done for them by individuals.

Can these be addressed without losing the concept of the 'corporation' as a viable social tool?

Yes, they can.

First is a 'Three Strikes and You're Out' law.  We do this for repeat offenders that are actual people, so why not apply it to corporate citizens as well?  Any company that accumulates three felonies (federal, State and they are cumulative) then gets immediately discorporated so as to never reform again.  It gets broken down and sold piecemeal at auction, its intellectual property is put in the public domain, its records are kept by the State for review, and the company vanishes from the marketplace.  After its debt is paid off then the remains are divided amongst the shareholders as cash. It doesn't matter if its a local mom and pop store that was dealing drugs on the side or some huge behemoth.  Transnational companies will find that after they have lost their corporate holding in America, they can't get back into the country as a company: their overseas goods can still be sold here, but they cannot return from the dead.  And as the 'Strikes' penalty accrue to the parent company, that means any organization that they have any role in operating would be barred from starting up in the US, and the requirement for third parties that are separate entities would be the only way for such companies to sell their goods and services in the US market.  Americans could still purchase from overseas suppliers, of course, and take on that third party role for themselves as citizens, not corporations.

Yes a corporate death penalty, simple, isn't it?  Now lets extend this concept one more step.

Second is a life expectancy for a corporation set by law.  Between your entering majority and leaving this life is in the neighborhood of 60 years, of which a good part of that is spent accumulating the necessary goods and wealth to have a good life, perhaps raise a family, and generally ensure your continued existence via your use of liberty and freedom.  Thus the prime time of your life is about 40 to 50 years long.  Why should a corporation last longer than that?  If you want to pass some goods and cash to your children you can have a corporations made at your death to do so, and they get that as a great start to their lives!  Isn't 40-50 years long enough to actually do something with a company?  And wouldn't it be a benefit to the marketplace to have no long-term giants standing around, but to have them finally die off after a given period of time?  The time span must be one that is set in a way so as to make it something that the average physical citizen can understand as a concept: forever doesn't seem right due to the accumulation of wealth and power of such entities, but 20 years is way too short.  By setting a definite expiration date for a company much good can be done for markets and society, while allowing corporations to do what they were made to do, achieve that and then end with that achievement as something that can be pointed to and understood... without the company still hanging around.

Like your death the company does get to give away its assets after its debt is paid off.  Those are the physical assets, only, and intellectual property goes into the public domain.  Intellectual works originated in a company and held by a company only last as long as the company does, even if sold or traded away, they go the way of their originator.  This will, finally, get rid of companies lobbying to have copyright extended past a person's death which one or two powerful companies with great influence on this topic have done to distort the original intent of 'limited time' for materials under copyright.

Together these two concepts start to 'level the playing field' of competition in the marketplace as incumbent corporations in a field have a definite life span so that the worries about a monopoly are addressed and anti-trust law can be taken off the books as by the time a company gets enough sway in a market to try and act as a monopoly, it is also tending to be past the early part of its life and has a ticking clock against it.  Those seeking the benefit of creative destruction in the marketplace to churn it, now will have a maximum beat of that churn: the life of a given company.

Enacting the second would require giving a period of time to existing companies: say the half-life of the new life expectancy or the life expectancy minus the amount of time they have been around, whichever is greater.

The Three Strikes law would be a clean slate, but be enforced immediately upon its becoming law, so that any ongoing cases will count against corporation, while past ones would not.

Thirdly is in the area of speech, particularly political speech.  We, for some reason, see fit to limit donations from corporeal citizens.  The concept is to apply those limitations to incorporated citizens, exactly as they are to actual citizens, save that it would apply to all parts and segments of a company.  In principle there should be no reason to see the speech rights of a company as different from that of an individual in any venue.

These three concepts dealing with corporation life span and speech would do much to address the abuses of companies over the long-term.  Bad corporate actors like Enron will still be made, that is a part of the human condition, nothing can change that save better accounting requirements for public disclosure.  These are the main three that would address the problems of the Left and bring corporations to be something that we don't expect to be around as continued beings.  Remember, you can still have one made on your death date to help your children along for a period of time, but at some point that, too, will go away.

By these changes a major shock would be given to the US economy: businesses that are huge (Boeing, Ford, Fannie, Freddie, the Federal Reserve, IBM, GM, GE) would have expiration dates coming around in a couple of decades.  Things we don't think of as corporations, but are legal fictions as entities would also face this: private libraries, hospitals, private universities, charitable organizations, political parties, advocacy groups, PACs.  What this means is a major re-thinking of how we run our society and addressing our own temporary existence by first having to deal with the expiration of companies.  Within two decades major institutions, good and bad, would evaporate off the landscape leaving vast market areas open for new entrants. 

The requirement to discorporate fully, pay off debts and give any remains to shareholders or those that own the company, means that those institutions have to be re-made, re-purposed, re-designed, re-configured and, generally, require people to ask if they really WANT a replacement for it or can get support to make a new version of it.  I am sure that some long-lasting niches would find themselves barren of incorporated individuals as they have actually served their purpose and it isn't worth trying to re-make them.  Others, like the entire venue of education, would be re-made by totally new start-ups willing to compete on the playing field of providing value for the money in the way of a good education.  Banking would have a huge turn-over, and the financial system of the US would break down... not in the 'collapse' sense, but in the 'break down into smaller, more agile pieces' sense.  With the end of large banking institutions and other financial institutions, there would be major upheaval in those markets, yet where needs are vital there would be new entrants ready to step into and step up to the challenge.

Political parties would find that they had to re-start afresh, that old parties used to doing things one way would be gone from the landscape and new successors would be formed by the people to take their place.  Gone would be the certainty of Red and Blue, Left and Right, This or That: the two-party system exists solely due to the incumbent parties able to keep new entrants out, thus politics has stagnated in America and power has concentrated into the hands of the few and that has depressed electorate turnout to 50% or less in the Congressional election cycles.  In a couple of decades there would be no Republicans, no Democrats, no Socialists, no Communists, no Greens, and even the smaller parties that have been around for decades would soon find a death date approaching.  I am sure that some would try to continue on the parties under a different name, but they would have to be totally re-situated, get people to enroll in them, get support, find candidates... and compete at the local level with anyone else trying to start a party.

* * *

The above are ways to creatively address problems and offer solutions that do not 'break' the capitalist system nor make it into a crony system of preferred companies getting rewards while those that are not preferred getting penalized by government.  Are they good methods to employ?  I cannot say for certain, but they certainly are much further along in addressing 'problems' in the political landscape and should wipe the very reason for those problems to exist right off the map while retaining all the good features of the capitalist system and penalizing the bad actors immediately and removing the accumulation of wealth and power via a regularized form of known and understood methods that will cause churn in the marketplace without being upsetting to the market as a whole.

Attempts to tinker capitalism into 'playing nice' has meant high government overhead in the form of regulations, and those very regulations tend to be in favor of large corporations able to lobby government over a number of legislators and legislative sessions.  Smaller companies have a major problem with regulations that impose pre-conditions at size levels as being anti-small business and a barrier to entry to becoming larger.  This is not only a penalty but a non-market based pressure imposed upon the marketplace so as to reward larger entities over small ones by securing the larger entities from competition.  Soon they become 'too big to fail', and yet they do fail due to size and lack of competition to cause innovation in such large organizations.  By placing a known, exact life span on all companies, big and small, the carpet protecting big companies is pulled out from under them and all new entrants to becoming large must face up with the barriers erected to protect large companies, thus leveling that playing field for all players as the cost of becoming large is a set, known quantity.

The 'Three Strikes' system is perhaps the easiest of all parts of this to do as it is something that is known and understood by all of us: recidivists need a major penalty applied to them, and since these are not flesh and blood entities the ultimate price can be paid more easily to stop these actors from ever acting again.  A company with a single 'Strike' against it finds that their ability to expand is only slightly hampered as expansion requires a trained workforce able to uphold corporate ethics with regards to the law.  Yet a company can continue on past that in a relatively easy fashion, although parts that it attempts to shed have the 'Strike' attached to them, also.  There is no way to cleanse an organization of that save via discorporation and breakdown: death is the final end for such problems.  So selling off portions of a company as subsidiaries means that those parts have a separate load of burden upon them.  Remember if this is done without a final expiration date, then that portion could continue on forever with that single 'Strike'.  A company purchasing it, however, is faced with the moral dilemma of having to purchase that company and either keep it wholly separate, or accept its 'Strike' by fully incorporating it during any reorganization that dissolves the company into the larger structure.  This would be a new category of business ethics and how to deal with bad actors in the marketplace, and yet it would only be a major hamper on a business that already has two 'Strikes' against it as they could never reorganize the smaller unit into the larger one.

While this sort of system may seem to advantage the adversaries of companies, that is activist groups pushing lawsuits, it must be remembered that those organizations, themselves, fall into the same category of law for the 'Three Strikes' provisions and that 'targeted' companies can run themselves in an ethical and law abiding fashion and escape a 'Strike' by turning in bad actors before they are found by outsiders and reimbursing those that have suffered due to the actions of that individual from the corporation.  Self-policing and turning oneself in to authorities with an admitted misdeed has always gotten lower penalties as the individual involved recognized their culpability and is seeking to make amends and restitution to society and to those they harmed by the action of turning themselves in.  That behavior MUST be rewarded by lowering penalties and seeing that the company does not and will not allow itself to benefit by the actions of the few bad actors within it.  Corporate ethics go from being a joke and 'its all about money' to not only a worthwhile pursuit but something that companies will seek to enforce in a meaningful way by turning such bad actors in when they are found.  An outside organization cannot inflict harm where a company polices its own actions well enough to find bad actors before 'activists' or law enforcement.  This is what is known as being a 'Good Corporate Citizen'.

In some ways the first two concepts can be seen as an either/or situation, as they both begin to address bad corporate actors with the ultimate end to corporations: the first against the bad actors and rewarding those that act in an ethical manner by lowering penalties to the company (not the individual) and the second by putting a life span on all companies.  If both were put in play there might be some trend to companies willing to do wrong as they don't expect to be around that long.  We already have that problem as we can see the Enrons and Madoff's of the world are more than willing to throw ethics overboard in search of pure gain.  Nothing can be done to stop such actors in life, save to penalize them harshly.  That is part and parcel of being human and no set of laws made on this Earth can address them from doing such things, only set into place a system that discovers them, faster. 

Companies nearing the end of their natural life might be inclined to behave in an irresponsible fashion as they don't have much time left.  Yet for their corporate history they have avoided 'Three Strikes' in total and will either have a good set of corporate ethics (to be admired and upheld to all corporations as 'how to do it') or they will be in the precarious position of one or two 'Strikes' bringing their sudden demise.  If the ethics of a company go so rapidly downhill so as to cause those, then they will be unlikely to remain around for long as their ethics suck to begin with and they won't be around long enough to lose all touch with their founder's ethics, as that founder just might still be around to run the show or criticize it from the outside if he or she has sold it off.  That would be a major warning sign and red flag in the business community that the corporation is losing touch with its initial purpose and should be scrutinized.

In many ways these are self-reinforcing laws that put upon companies the same requirements as individuals have in corporeal life: people who lead good lives don't tend to go bad when they get older and set in their ways, and those with bad intents tend to run into problems sooner rather than later.  There will always be people like Bernie Madoff, and only good corporate accounting standards can help to show Ponzi Schemes up for what they are, there is nothing to stop those who wish to 'cook books' from doing so.  What can be done is to make the penalties steep, very steep, for such actions and the effects of them cumulative.

The final part, of speech, is one that helps to extend our ideas of exactly what being a 'citizen' is all about in the way of exercising our liberties and freedom.  If the 'threat' to society, as the Left would have it, is from corporations being big and overwhelming with speech and money, then the problem is not with the speech or the money, but the means to accumulate same.  Money is not speech: it costs nothing to go out on the sidewalk and rant.  Similarly it costs very little for a company to hawk its wares on the sidewalk with a bullhorn or to get a name space on the Internet to set up shop: your overhead is minimal for such, too, so that is a level playing field with minor barriers to entry.  Money spent to get a message out doesn't help if the message is muted on television, the ads blocked by software, or just 'tuned out' by the recipient audience. 

Newspapers make money not through subscriptions, but through circulation of advertisements, and a few new entrants to newspaper markets that are not subscription based are becoming major competitors by having circulation of news to entice people to pick up the papers on their way to work.  If you don't pick up the paper, you don't help the company, if you do pick it up you help them: the choice is up to you if you want to get an advertising vehicle at your own cost or for free.  Free does not guarantee that people will actually read the ads, just that they will be in a media in the hands of individuals in which it might be presented before them.  Money doesn't get you access, and even if it does get widespread distribution, that doesn't mean that people will actually pay attention to it or LIKE the message.  No one is forcing individuals to GET THE MESSAGE no matter HOW MUCH you pay to distribute it.  Money is not speech, nor speech money, although some after-dinner speakers can command a hefty sum, needless to say, but they are effective speakers which is a both a gift and a job that one can study for.

At the end of this I find the parallels between how we treat legal fictions as citizens and real citizens to be an interesting one.  If the concept is extended to something like 'income' then could we replace all corporate taxes with a single, flat income tax?  The question of 'what is income?' then moves from an academic question to a real world one.  Is it just being paid by an employer?  If so then it is not a 'sales tax', and would be leveraged on any contracts that have set payment amounts on a regular basis to a company to provide a good or service: the company is working for someone, it is being employed by them. 

Thus not all contracts would be 'employer-employee' basis as something like a contract to provide an indefinite quantity of an item over time could not guarantee that any would be purchased, therefore the risk is on the 'employee' not the 'employer'.  Goods made for sale with no pre-existing contract are then not made for anyone specific but made for society, in general, and available for individuals to buy.  That is certainly not an employer-employee relationship.  Nor are items that do not meet up to a contract set of standards for sale, but are generally safe, useful and functional for general sale.  A contract to supply security services at a home or business would be an such a relationship between employer (those procuring the long-term services) and the employee (those supplying such services).  Hiring someone to do something on other than the purely short-term (less than a week, say) creates that relationship necessary to define 'income'.   From that sales of items are not, of necessity, employee-employer relationships, and most fit into the indefinite quantity, indefinite delivery type of contract where the amounts and timing can only be generally defined and, therefore, revenues are not a guaranteed constant.  Employing a roofer for a few days isn't a long-term contract, employing people to keep your lawn up over a year is.  Temps while 'employed' are only temporary or go through a third party for a longer-term relationship, so the direct actor is the Temp Agency, not the one needing the services.

So if we look to extend an 'income tax' idea it would have some ramifications on how we do business with businesses, as service contracts to the home (for cable TV, telephone, Internet, power, lighting, water, sewage, etc.) ARE long term contract types of this sort.  You are employing an entity (private or public) to provide long term services in a very real sense.  You are the boss.  That might make your take on why a public utility should have a monopoly change, greatly, as such things as education for children are ALSO employee-employer relationships especially when specific and identifiable taxes for same based on school districts or other direct tax funding are utilized.  Government acts as the intermediary, but the service is a monopoly one and you, as the boss, should have some say on if you want a monopoly service, or not... that is done via this thing known as 'elections' to change 'laws'.  But once you see yourself as the employer (and have the headaches of employing someone befall you) then you begin to take a different look on exactly what 'income' is and how it is garnered, and what overhead we place upon it in regards to the viability of such work.

The concept of creating more 'real' citizens and accountability has limits when dealing with fictional entities.  The lack of actual questioning of what those limits are and what they mean to us, as individuals, shakes up how we view ourselves, how we utilize our liberty as individuals and with other individuals to form fictional entities, and what the actual driving ideas behind such concepts are.  While the original complaints from the Left are those of the Harpy, the underlying concepts are vital ones that we take for granted and, by doing so, lose sight of what it is we do in life and why we structure certain things the way we do as individuals and a society.


Ash said...

I really like the idea of a three strikes policy.

I'm on the fence about monetary limits. I can see capping straight donations to individual and party -- a unified dollar amount for both citizens and corporations. However, if Dell's Board of Directors decide to spend $3B on commercials telling us of the evils of candidate X they should have that ability. Likewise if Steve Jobs wanted to spend $3B of his net worth doing the same.

I really dislike the idea of a corporate life-span. Maybe some type of applied for extension for Corporations with zero strikes and an impeccable record. Where I see problems are the not-for-profit corporations out there as well as for-profit corporations involved in long-term (multi-generational in some cases) research.

A Jacksonian said...

Ash - I think the Three Strikes is one of the better parts of this. I wanted to explore the limits of how far a fictional citizen can be compared to a real citizen and get them aligned.

Note that there is nothing from stopping an individual from purchasing as much time as they want to tell us about the evils of candidate X: corporations should not have that limit, either. Speech laws would not be able to go after just corporations or just individuals, but all citizens corporate and corporeal.

On the flip side of multi-genereational projects are such as the March of Dimes and MADD, both of which repurpose their original cause to other venues, losing sight of their original purpose. Similarly the foundations of past generations can do some good, but also have moved into venues where they directly wish to sway public policy to their own ends (such things as the Ford Foundation, but there are others that have moved into social policy far away from their original intent, including the Nobel Prizes which are foreign but are used for demonstrative purposes).

A life span is the hardest part to back, truthfully: once you get a three strikes rule you will soon find yourself getting turnover or having a much more ethical corporate climate.

These are presented more to see what the limits are on this (like the Dual Citizenship area I bring up) and seeing if there are areas we have left overlooked in our attempt to give incorporated organizations similar citizen liberties and capabilities (not necessarily freedoms and rights).