Nosferatu,” Guadalajara Film Festival

Is it ethical for business corporations to have unlimited life? The question arises when we understand how perpetual corporate life allows unlimited profits to arise that overcompensate investors in a way not reported by accountants. What is not measured is not reported, taxed, or distributed more fairly.

The overcompensation to investors is not trivial, increasing inequality in a way that economists rarely notice. An exception was Professor Edith Penrose who, when analyzing the result of foreign direct investment on host countries, noted that it resulted in “the acceptance of an unlimited, unknown and uncontrollable foreign liability.”1

In the nonprofit world, as GuideStar founder Buzz Schmidt once observed, we ignore the corporation at our peril. Schmidt noted that a whole range of strategies, including “mission-related investing, social venture capital, social impact bonds, philanthrocapitalism, impact assessment schemes, and the like” had captured a “surfeit of policy-maven mindshare, digital ink, and seed funding.” But these strategies, he added, had largely fallen short. More importantly, Schmidt noted,

They are largely silent with respect to what may be the main event—traditional commercial enterprises and the fundamental implications of that work for social progress. After all, it is commercial enterprises, both large and small, that employ most of us, generate the great preponderance of our financial and intellectual capital, and impact our environment, communities, and governance in ways—both positive and negative—too numerous to count and too great to ignore.

Here it is worth recalling that corporate charters developed in England for political, not economic reasons. The Corporation of London originated as a way for William the Conqueror in 1067 to delegate some of his power to the citizens of London to self-govern. The power of corporations to live forever was a political requirement, not a commercial one. This power is now an anachronism. It no longer fits the purpose of sustaining democracy, prosperity, equality, or individual wellbeing with efficiency and fairness.

These concerns promoted the US war of independence, as documented by Richard Grossman and Frank Adams in their 1993 booklet on Taking Care of Business: Citizenship and the Charter of Incorporation, where they stated, “Having thrown off English rule, the revolutionaries did not give governors, judges or generals the authority to charter corporations. Citizens made certain that legislators issued charters, one at a time and for a limited number of years.”

Once, corporations were chartered for no more than 20 years, with those causing harms having their charter revoked earlier. Today, harms being introduced by modern corporations could threaten the existence of human life on the planet, yet corporations are allowed to last forever. That fact alone should be reason enough for the rights of perpetual succession in all corporations to become subject to periodic review!

It may be thought that unlimited corporate life is necessary for economic functioning. This is not true. I have personally raised millions of dollars to fund high-risk new ventures while providing investors with limited life property rights. I used 15-year leases to fund the creation of a vineyard and later a major irrigated cotton farm. Another venture I cofounded was financing films. Our investors only obtained income from the copyright for seven years before its ownership reverted back to the producer. This eliminated ongoing costs of being accountable to investors.

My inspiration for using limited life investments did not come from US history. It arose during my Harvard MBA program when I became a summer intern in the Treasury Department of a major global oil corporation based in New York City.

The Treasury unit decided which investment would be accepted from pitches made by operating divisions around the world. All projects would present cash projections for at least 20 years. This was in 1962 when the global economy was more stable, marked by fixed exchange rates among leading world currencies. However, even then, because of political, economic, and operating uncertainties, no projected cash returns after ten years were recognized for any country and, for most, the period was less than ten years.

Yet the operating life of the investment could be four or five times longer. This meant that the cash recovered after the investment “time horizon” could generate “surplus” profits four or more times greater than the initial investment cost.

As there may be no limit to human greed, economists do not have a word for profits that are surplus to the incentive to invest. Because of this, they describe what I refer to as “surplus” profits as “economic rent.” But many economists use this term to describe the cash incentive to bring forth an investment. This cash is measured and reported by accountants. However, accountants have no basis for identifying and reporting profits surplus to the incentive to invest.

Words are tools for thinking and analysis. If we do not have a word for profits in excess of the incentive to invest, then we cannot even consider the consequences. The dominant way of thinking about countering capitalism’s inequities is through the tax and welfare system. But there is another, more powerful path, which is to change the nature of property rights.

Ownership, as NPQ has noted before, is not fixed, but really a “bundle of rights.” Just as this is true with land ownership,2 so it is with business ownership. And it so happens that a more efficient way to democratize both wealth and income is to alter property rights. For corporate entities, this involves replacing perpetual property rights with rights that are time-limited.

Tax and other incentives are available for corporate shareholders to convert existing corporate charters to time-limited ownership. These would provide investors with a bigger, quicker, less risky short-term profit, but they would give up long-term ownership. Pension funds with a fiduciary duty to maximize returns for their beneficiaries would become legally obligated to vote as shareholders to amend corporate charters to adopt time-limited, or what I call ecological ownership.

Ecological corporations are established by changing corporate charters to create “stakeholder shares.” These shares would automatically accrue at the rate of say five percent per year with the equity/property rights of the investor shares. A five-percent rate per year would mean stakeholders would replace investors as sole owners of the company over twenty years.

There are various ways these shares could be distributed/endowed without cost to beneficiaries. As no business can exist without employees, customers, dealers, agents, suppliers, sub-contractors, and host communities, distribution could be tied directly to the market value of their related transactions. This would allow stakeholder shares to be automatically distributed like promotional points systems.

Many individuals could accumulate a diverse portfolio of shares. The government could also increase net income. This is because ecological firms transfer the tax base to individuals who typically pay personal tax at a higher level than corporations. So, increased tax revenue would more than offset the cost of the incentives.

In this way, giant global corporations would gradually convert into nested networks of globally localized human-scale stakeholder-owned and -controlled firms. A condition for obtaining the tax incentive could be that firms would adopt what Larry Fink described as “A new model of corporate governance.”3 Fink is chair/CEO of BlackRock, the largest fund manager in the world, with assets under management of $6.4 trillion. Fink says he wants a new model because he believes the corporations where BlackRock places its investments “must benefit all of their stakeholders,” a condition that Fink concedes lies very distant from present-day reality.

How this can be achieved, however, was identified by the late 2009 Nobel Laureate Elinor Ostrom. She studied how in pre-modern societies competing interests avoided over-exploiting common resources by adopting an ecological form of network governance. This form of governance avoided what is described as “the tragedy of the commons” created by short-term private interests competing to exploit common life-supporting resources that are degraded or destroyed for everyone.

Ostrom described the networks formed as “polycentric compound republics.” Examples of this type of governance can be seen in the architecture of the VISA credit card organization and the nested networks of Mondragón co-ops in Spain. Both have compellingly illustrated the advantages of this type of corporate governance. Firms, like living things, would thrive or die according to how well they fit their environment.

The political attractions of ecological corporations are both local and global. Because ownership is annually redistributed, ecological corporations would democratize both wealth and income. Asset ownership would become localized with resident citizens while still attracting more investment. This would enrich democracy as local citizens obtain stakeholder votes in local corporations. The division of power, checks, and balances embedded into all ecological corporations also would enrich democracy at both the regional and national levels. It would allow infrastructure projects to become locally owned, as has been partially achieved by the Alaskan pipeline, which distributes annually dividends to state residents that have been as high as $2,072 per resident.

All voters would obtain a diverse portfolio of dividends to fund a universal living income.4 Crucially, if corporations met Fink’s objective of providing “benefits for all stakeholders,” then corporations themselves could actually become a “common good.” Common good corporations could then even become, not opponents, but agents for sustaining global common goods like clear air, healthy diverse environments, and a stable livable climate.


  1. Penrose, E. T. 1956. “Foreign investment and the growth of the firm,” The Economic Journal, p. 235, June.
  2. Turnbull, S. 2017. “Democratising the wealth of cities: Self-financing urban development,” Environment and Urbanisation, 29(1): 237-250.
  3. Fink, L. 2018. “A sense of purpose”, BlackRock, Annual Letter to CEO’s, New York.
  4. Described as a “community dividend” in chapter 14 of: Turnbull, S. 1975. Democratising the wealth of nations.