G-Corps (Commonwealth Corporations)

“For what shall it profit a man, if he shall gain the whole world, and lose his own soul?” — Jesus of Nazareth

When big businesses in America do bad things — when they make their products worse for consumers through shrinkflation or planned obsolescence; or when they get us hooked on ultra-processed foods or infinitely-scrolling outrage feeds; or when they underpay or overwork their employees; or when they pollute shared rivers, or cut down forests to build data centers for AI; and so on, etc. — they don’t do it because they hate us, or because it somehow excites them to see communities suffer.

They do these things because they are, ultimately, amoral beings. They are simply doing what their corporate structure requires them to do: increase profit for their shareholders.

The profit motive is an interesting thing. It is an emergent property of corporations, not something that is decided by any nefarious individual at the top, or even any set of individuals. In fact, the often-reviled CEO of a company is the biggest slave to the profit motive, not its master.

The CEO knows that if she fails to produce satisfactory quarterly growth numbers, she will be replaced with someone who will.

Replaced by whom? The board, who is initially determined by the corporate charter, then periodically voted into position by the shareholders, and whose primary job is to fire and replace the CEO if she does not act according to their will.

And who are the shareholders, and what is their will? Usually, nobody really knows. Or to be more precise, as a company grows, so do the ranks of its shareholders and their interests become quite diffuse. The shares of large private companies are usually bought up by hundreds of private investment firms, each of which must act as a fiduciary on behalf of its own diffuse set of funders. For a public company, the roster is even more byzantine — if you own a retirement account, you are probably a shareholder of hundreds of America’s biggest corporations, including the ones that are lobbying to get your children hooked on sports betting, or the one building the data center in your backyard. Is it your will that they’re considering when they seek shareholder profit at all costs?

Actually, yes, sort of. Because the will of the shareholders is so diffuse and difficult to determine, boards generally defer to the one interest that they can assume all shareholders have in common: the desire for their shares to increase in value — in other words, the profit motive. You may not want that data center to be built, but your 401k is counting on it.

In this way, every corporation is one big collective action problem. Nobody actively creates the profit motive, and yet no one has the power or incentives to challenge it. This is why businesses become worse as they grow: not because the people controlling the businesses are evil, but because the businesses are not controlled by people at all. The people are controlled by the structure of the business.

But not all businesses act in this way. Though it is rare, some very large companies have managed to break the mold and be very successful doing so: for example, Costco has a number of surprisingly pro-social business practices, including a constraint on profit margins. Arizona Iced Tea maintains an admirable commitment to 99¢ iced tea, and Patagonia is the rare large corporation with a true social mission.

But there’s a reason companies like these can be counted on one hand. The reign of the profit motive, and the havoc it creates, is a structural problem. And as any true entrepreneur knows, when you can identify a structural problem in a business model, that’s good news, not bad news. It means there’s room for innovation.