Corporations Are Not People: Why They Have More Rights Than You Do and What You Can Do About It (11 page)

The FTC mission is to ensure that people are not hurt by unfair business practices; so why doesn’t the FTC do something
to stop the unfair practice of exploiting children and undermining parents? Because Congress passed a law in 1980 saying that the FTC is
not allowed
to do something. The law says, “The Commission shall not have any authority to promulgate any rule in the children’s advertising … on the basis of a determination by the Commission that such advertising constitutes an unfair act or practice in or affecting commerce.”
⁴⁷

Increasingly, corporations influence and embed marketing into the actual curriculum itself. BP and other corporations participated in the writing of California’s environmental curriculum.
⁴⁸
Materials provided to schools by Chevron suggest that global warming may not exist, while the American Coal Foundation class materials state that increased carbon dioxide levels in the earth’s atmosphere could be beneficial.
⁴⁹
The American Petroleum Institute (API), with four hundred corporate members, offers “lesson plans” for kindergarten through twelfth grade, including “Progress Through Petroleum.”
⁵⁰

Kindergartners and elementary school kids will learn that “most of our energy needs are being met by nonrenewable energy sources—oil, natural gas, coal, and uranium (nuclear). This is because these energy sources are more reliable, affordable, and convenient to use than most renewable energy resources.”
⁵¹
The API lesson plan does not mention climate change, oil spills, toxic wastes, or any air, land, or water pollution issues. The lesson plan offers an “Environmental Progress Report” that promotes the industry’s investment in “improving the environmental performance of its products, facilities, and operations—$11.3 billion in 2006 alone.” What about offshore drilling and the environment? Didn’t BP’s Deepwater Horizon oil disaster in April 2010 nearly destroy the Gulf of Mexico? Yes, kids can learn about offshore drilling and the environment: “Floating platforms, anchored to the ocean floor, allow energy companies to recover oil and natural
gas reserves located under deeper parts of the ocean—and have proved to be valuable habitats for marine life.”
⁵²

The Council for Corporate-School Partnerships says nothing is wrong with corporations embedding into children’s education. Then again, the council was founded and funded by the CocaCola Company, a corporation under Delaware law that operates in two hundred countries with over $35 billion in annual revenue. One need not be too cynical to think that the council’s opinion might not be a good-faith assessment made with due regard for the American interest.
⁵³

On to College: The Subprime Student Loan Game

In the age of corporate bailouts, the Wall Street financial system privatizes huge profits and socializes big risks. That model of enriching a very few at the expense of the many has created a new “industry” of for-profit colleges. For-profit corporations now own more than two thousand colleges or universities. The number of students enrolled in for-profit colleges has increased 500 percent in the past several years, to 1.8 million.
⁵⁴
These operations effectively transfer hundreds of millions of dollars in federal student loans and government guarantees from the American taxpayers to corporate executives and shareholders.
⁵⁵

Most of these students (1.4 million) attend for-profit colleges that are owned and controlled by fourteen corporations. Wall Street values the publicly traded corporations at $26 billion, due to huge revenue flows based on high tuition, minimal standards, and government backing for tuition payment. In 2009 alone, American taxpayers provided these corporations and others that operate for-profit colleges with more than $4 billion in Pell Grants and $20 billion in guaranteed student loans.
⁵⁶

Among corporate schools examined by a United States Senate investigation, “over 87 percent of total revenues came directly from
the federal government, but 57 percent of the students who enrolled between 2008-2009 have departed without a diploma but with a high probability of debt.”
⁵⁷
The sixteen largest for-profit schools had profits of $2.7 billion in 2009, with some corporations doubling profits between 2009 and 2010 alone.
⁵⁸
In 2011, when the Department of Education proposed to apply minimal performance standards (based on actual student graduation rates) to corporations that take billions of taxpayer dollars, the corporations threatened a lawsuit challenging the constitutionality of such action.

A recent U.S. Senate committee investigation focused on one school owned and operated by Bridgepoint Education, Inc., a Delaware corporation traded on the New York Stock Exchange. In 2005, Bridgepoint Education used financial backing from a global private equity firm called Warburg Pincus to acquire a religious college in Clinton, Iowa. Bridgepoint bought the school, Franciscan University (originally Mount Saint Clare College), from the Sisters of Saint Francis. At the time, the Bridgepoint CEO announced, “Bridgepoint Education and the Sisters of Saint Francis have much in common. We believe in quality academic training and in service to others.”
⁵⁹

The new corporate owner then changed the name to Ash-ford University. Before the corporate acquisition, Franciscan University was spending $5,000 per student on instruction. After the buyout by Bridgepoint, Ashford University spent $700 per student on instruction. The savings were not passed on to students, who now are charged as much as $46,000 in tuition and fees. Most of the tuition payment actually comes from taxpayer-funded federal programs. In the 2009-2010 school year, Bridgepoint’s Ashford University received $613 million in federal student aid funds. Most of the revenue (86 percent) at the university comes directly from the United States government—in other words, from all of us. With all that revenue, how did
instruction spending per student fall from $5,000 before corpo-ratizing the school to $700 after?

From three hundred students at Franciscan University in 2005, enrollment (including online students) at the newly corporatized Ashford University zoomed to nearly seventy-eight thousand by 2010. Bridgepoint Education spends $2,700 per student to recruit new students (who need new federal loans). Bridgepoint directed $1, 500 per student to corporate profit. Most of the students who enroll quickly drop out. Fully 84 percent of students who enroll in an associate degree program at Ashford University are gone by the following year, and 63 percent of students in the bachelor’s degree program do not return the next year. Bridgepoint employs more than seventeen hundred people to recruit new students; it employs one person to help students with job placement.
⁶⁰

Bridgepoint paid its CEO, Andrew Clark, $20.5 million in 2009, and another $11.5 million to four other top executives. The CEO refused an invitation to testify at the Senate hearing.

Despite these depressing statistics, the Higher Learning Commission accredited Bridgepoint’s Ashford University. Called to the Senate to explain, the president of the commission did not defend the decision. Instead, she confessed that the commission was “behind the curve” on corporate schools and failed to do “good peer review.” She described the explosion of Wall Street-backed corporate for-profit universities as “a new phenomenon on the face of the earth.”
⁶¹

Government programs that help students and families pay for college become a very different phenomenon when they can be exploited by for-profit corporations, backed by Wall Street capital, willing to hire thousands of recruiters to keep the loan revenue flowing while cutting academic and guidance programs. As citizens, parents, leaders in government and education, and taxpayers who provide the revenue to enable $20 million CEO salaries, we ought
at least to have a chance to engage in discussion and consideration before Wall Street unleashes a “new phenomenon on the face of the earth” on unsuspecting students and loan-strapped families.

Corporate university companies are unapologetic about the betrayal of students and virtual theft of tax money. When the Government Accountability Office (GAO) simply reported facts about the for-profit corporate education industry, its corporate lobby group sued the GAO for “negligence” and “malpractice.” They claim that the report is “biased” and “erroneous.” When the government proposed reform that would require some actual education performance before the taxpayers sent billions of dollars to Wall Street investors and CEOs, the industry sued to block the Department of Education reform. The case remains in court, where the corporate lobby argues that the rules are unconstitutional because they are “vague.”
⁶²

No one can doubt that education is challenging and no model is perfect. But why would corporations rush into a Wall Street model of university education that so clearly fails far too many students and costs American taxpayers far too much money? Why would corporations in this business pay their CEOs $20 million for such awful performance? Why does our government not stop this?

The answer to all three questions lies in the massive profit that a corporation can reap from recruiting thousands of unwary students, taking the proceeds of government-backed student loans, and shaving costs from the educational program. That was the “play,” in Wall Street parlance, the opportunity. A CEO who executes the play and delivers that massive corporate profit has accomplished what the corporation was designed to do. So from a corporate perspective, the CEO’s performance was not awful, even if debt-burdened students drop out by the thousands and the transfer of government money to Wall Street and executives runs into the billions of dollars.

As currently designed, large public corporations (meaning those with shares that are actively traded on the stock exchanges) seek profit above all. The design has not required ethics, morals, values, shame, or other human values. Yes, socially responsible investing, responsible corporate conduct, and many efforts to “hardwire” corporations with ethical behavior matter a great deal. Nevertheless, the “market judgment” of global corporations measures profit into the share price and little else. And at least so far, we have not required a “character test” or imposed other responsibility requirements for corporate conduct.

Can we design a different corporation, an entity that engages in economic activity with more responsibility and ethical conduct? Can we conceive of corporations as holding public duties rather than constitutional rights? Or are we destined to become a corporate nation of underpaid hucksters in clown suits, trying to juice corporate profit and executive compensation by pushing school kids around?

I don’t think Americans will accept such a fate, at least not for long. When we begin to insist that corporate money is not “speech” and that corporations are not people, we begin to take back power. Addressing the complex problem of corporate power requires, of course, more than recognition that corporations are not people. We also need a shared understanding of what corporations are and what they should and should not be doing in our national life.

This is the topic for the next chapter. A corporation is not a person, nor is it an association or a group of people. A corporation is a creation of law, a
public
tool of economic policy. If we appreciate this point, corporate “rights” are exposed as unconstitutional folly. Moreover, we can decide to create better corporations. We can require that corporations be much more effective, useful, and supportive instruments for the American people and our economy.

Metaphor… is the peculiarity of a language, the object of which is to tell everything and conceal everything, to abound in figures. Metaphor is an enigma which offers itself as a refuge to a robber who plots a blow, to a prisoner who plans an escape.

—Victor Hugo,
Les Miserables
¹

What is a corporation? One might expect to find a good description of of a corporation in
Citizens United
or the other corporate rights cases, but the Supreme Court is strangely silent on that point. Instead, corporate rights decisions from the Court come packaged in metaphorical clouds. It is not corporations attacking our laws; it is “speakers” and “advocates of ideas,” “voices” and “persons,” and variations on what Justice John Paul Stevens called in his
Citizens United
dissent, “glittering generalities.”

Corporations are economic tools created by state law; corporate shares are property. Yet the majority decision in
Citizens
United
did not explain even the most basic features of a corporation, an entity created and defined by state laws. The Court did not examine why Congress and dozens of state legislatures thought it made sense to distinguish between corporations and human beings when making election rules. One reading the
Citizens United
decision might forget that the case concerned a corporate regulation at all; the Court described the timid corporate spending rule it struck down as a “ban on speech,” government “silencing” of some “voices,” some “speakers,” and some “disadvan-taged classes of persons.”
²

Metaphor Marches On

The use of the “speaker” and “speech” metaphor in
Citizens United
follows the playbook dating back to the corporate rights pioneer, Justice Lewis Powell. In 1978, Powell wrote the
First National Bank of Boston
decision that created the new corporate rights theory to strike down a Massachusetts law banning corporate spending in citizen referenda. He sidestepped the question of what a corporation is, saying, “If the speakers here were not corporations, no one would suggest that the State could silence their proposed speech.”
³
The people of Massachusetts, however,
did
suggest exactly that because corporations are not “speakers.” And the corporations did not propose “speech.” Rather, the corporations proposed to spend corporate money to influence a citizen referendum vote. A law prohibiting this did not “silence” anyone; it defined a prohibited activity of corporate entities in elections.