Politics & Policy

Corporations Never Die

And neither, apparently, do their pasts--no matter how distant and irrelevant.

“Corporations never die,” declared the 19th-century law professor Henry Sumner Maine. I am fond of this dictum and have used it in a lot of anthropology classes. Corporations don’t die because they are specifically designed by all-too-mortal humans to outlast us. Generations come and go; buildings crumble; fortunes wane; but we can create a kind of organization that, in principle, just goes on and on.

As soon as I say this, I can count some student pointing out the obvious: “Corporations do die.” They fly off into the ether like Pan Am; they rust into oblivion like US Steel; they glue their fingers to the delete key like Arthur Anderson; they disappear into the vortex of penny stocks; they flare out like Enron; they flop, drop, skid, and scatter their ways to a thousand dusty deaths.

And sometimes a kid fresh from Economics 101 reminds me that, according to Joseph Schumpeter, the demise of companies fuels capitalism. The old and obsolete are replaced by vigorous new innovators.

Yes, yes, of course, real corporations do die, everyday in fact. They are swallowed up in the maw of history. But that’s not the point. Corporations are designed to outlive their founders. They are meant to be “perpetual” in a legal sense–unless, as sometimes happens, they have a built-in sunset clause. “Corporations never die” is a handy idea for getting across that essential quality of clans, churches, baseball teams, and cemeteries. Someone has to be around next year. No matter how bad things get, corporations have successors.

The Georgia Railroad Company was founded in 1833 to build a railroad from the city of Augusta to the interior of Georgia. In 1835, it became the Georgia Railroad and Banking Company. In 1881, it leased out its railroad properties and the next year split off its bank as a subsidiary called Georgia Railroad Bank. In 1929, it became the Georgia Railroad Bank & Trust Company, which was acquired in 1954 by the First Railroad & Banking Company of Georgia. In 1982, this company sold off its railroad business. In 1986, it merged with the First Union Corporation. And in 2001, First Union merged with Wachovia Corporation.

So the Georgia Railroad Company of 1833 never died. It lives on, stealthily, in today’s Wachovia Corporation.

Corporate Confessional

For this bit of corporate history, I am indebted to Wachovia Corporation itself, which last week posted the timeline on its website along with other documents, including a 111-page report that Wachovia commissioned from the aptly named “History Factory.” Wachovia was responding to pressure from the City of Chicago, which required it to “disclose any historic ties to slavery,” in order to continue its involvement in an affordable housing project.

The executives of Wachovia, it seems, are making a public confession. Between 1836 and 1842, the Georgia Railroad Company “owned or authorized to be purchased” 162 slaves. According to the History Factory, in 1838, for example, the president of the company received permission to pay $1,200, payable in railroad stock, to purchase a blacksmith. October 1838 board minutes note the purchase of clothing for the slaves for the coming winter.

As these snippets indicate, the History Factory has done Wachovia proud in nailing down its original corporate sins. The Factory also documented the misdeeds of another company absorbed into the marrow of Wachovia corporate skeleton. From the 1830s to the 1860s, the Bank of Charlestown accepted “up to 529″ slaves as collateral for securing loans or mortgages.

In all, the History Factory found some 400 “predecessor institutions” that had contributed their corporate genes to the present-day Wachovia. Seven researchers working “more than 1,800 hours” in 24 repositories came up with only two clear instances of slave-dealing among those 400-some predecessors, but they also documented that various individuals affiliated with some of the predecessors were themselves slave owners or traders. Robert Morris, the first president of the Bank of North America, for example, “amassed at least part” of his fortune through the slave trade.

The current executives of Wachovia have responded to these findings with touching humility. Here is Stan Kelly, president of Wachovia Wealth Management, in a message to his colleagues: “As a white man, I’m working to get personally connected to this chapter in our company’s and our country’s history…”

It sounds to me like poor Stan has been to one too many diversity-training workshops. Let me help, Stan. First, don’t try to respond to this “as a white man.” See if you can respond just as a serious person. In that light, neither you nor the company you work for bear any particular responsibility for antebellum slavery. You didn’t trade railroad stock for an enslaved blacksmith. You didn’t take slaves as collateral for loans. You have not traded in human souls. Nor has your company. Offering, as you do, “heartfelt apologies on behalf of Wachovia” is, at best, an empty formality. You cannot apologize for that for which you bear no responsibility. Doing so “on behalf of Wachovia” demeans your colleagues who are guiltless of holding anyone in bondage.

“Corporations never die,” declared Maine, but he also, with plain commonsense, referred to this as a kind of “legal fiction.” The long chain of corporate transactions that links Wachovia to the Georgia Railroad Company and the Bank of Charlestown is a thread of legal continuity, but it is not a chain of moral culpability.

We are responsible for our own acts, not those of men who lived more than 150 years ago. I know, Stan, that you have been subjected to ardent appeals from people who say that the profits of those earlier enterprises are mingled with the fortunes of today’s Wachovia Corporation and that therefore Wachovia is indeed morally responsible for those long-ago transactions in human beings. But just because someone ventures a claim in tones of moral urgency doesn’t mean that claim is valid.

In this case, the theory is specious. The companies that engaged in those transactions were themselves the victims of the great tides of history. They rusted, sank, gasped, and expired. Their owners went to their graves, repentant or otherwise. Legal title to the corporate remains passed to other people who had their own follies and mischances–and they too had their successors.

Your odd “as a white man” e-mail confessing your shame over Wachovia’s history reached me though an acquaintance who works in Wachovia’s Wealth Management division. I am struck that any company that really wants to manage other people’s wealth ought to have a more robust view of personal responsibility. Are Wachovia’s clients and shareholders to be expected to help Wachovia pay down its imaginary debt to those who claim to speak on behalf of the victims of slavery? Your e-mail doesn’t say, and Wachovia’s website is likewise silent on the issue. But it is hard to think that a company that commissioned an itemized account from the History Factory of the transgressions of its predecessor companies is going to stop with CEO Ken Thompson’s press-release apology “to all Americans.”

What’s next for Wachovia? CEO Thompson is vague, mentioning only efforts “to promote a better understanding of the African-American experience,” and his company’s “strong focus on diversity.” It is good to know the African-American experience is now safe in the hands of the investment bankers. So the door is open to finding some way to expiate the accidents of corporate successorship.

I hasten to add, I have no personal connection to Wachovia. It is only the latest of many American companies to get caught up in this sciomachy. But if we are all going to apologize, I don’t want to be the last in line. I apologize for the role of higher education in so ill-equipping some of America’s business leaders that, when they are faced with grossly defective moral reasoning, they see no option other than to embrace it.

Peter Wood is the author of Diversity: The Invention of A Concept.


The Latest