Redesign (concentration) | Food Policy for Canada

Changing the legal status of the corporation

Creating the no-growth economy

Changing the legal status of the corporation

All significant agribusiness firms are corporations, a business form with several popular characteristics: limited liability for shareholders and managers, legal personality (i.e., the corporation is treated as a "person"), easy transferability of ownership, continuity of existence, and concentration and specialization of management (cf. Sethi, 1977). These same characteristics present problems for the development of sustainable food systems and will need to be changed. Convincing governments that such changes are necessary will require a well organized and lengthy campaign.

The North American corporation today bears little resemblance to its original form or purpose. Originally conceived as an instrument of public good, a series of legal modifications to the chartering and rules governing corporations changed the corporation into a vehicle for private profit and power (Mintz and Cohen, 1976; Nader et al., 1976; Kierans and Stewart, 1988; Ikerd, 2023). Several legal strategies have been proposed to return the corporation to its original purpose. In its original form, corporations (and, thus, agribusiness firms) are more likely to contribute to the development of a sustainable food and agriculture system.

Over 40 years ago, Nader et al. (1976) proposed that many of the original features of corporations be reinstated by changing the legal requirements of incorporation. Such regulations would require that the incorporation be for a fixed (but renewable) time period, that the corporation have a single purpose (i.e., concentration on a specific product or process), and that limitations be applied on size, activity, geographic area and permitted level of indebtedness. In a reformed system, corporate directors and shareholders could be totally liable for financial, environmental, political, health and social activities and would need to provide information to the public to help in the assessment of these functions. Corporations could be required to distribute all annual profits to the shareholders. Non-voting shares could be abolished and employees and other stakeholders could have designated seats on the Board. The Board function would clearly be separate from management (for more, see MacRae et al., 1993).

AlI these restrictions would likely make agribusiness firms more responsive to local and regional needs, a critical feature of sustainable systems. Ultimately, the legal status of the corporation should be reconstituted in such a way that corporations are subject to the same kinds of constitutional provisions to which public bodies are subject regarding the rights of the person (Nader et al., 1976; Satin, 1987).

Such changes will be heavily resisted and require extensive alternations to numerous acts. Federally, for profit corporations are governed by the Canada Business Corporations Act. But firms can also incorporate provincially if their activities are confined to that province and each province has its own acts. Although considerable work has been done on the necessary legal changes under US law, less has been done in Canada.

Caps on ownership and size

A constitutional rationale for restricting ownership and size for both non-residents and Canadian citizens is the Peace, Order and Good Government authority of the federal government. Income inequality is regularly identified as a cause of social instability. The trends in Canada are not encouraging, so initiatives that close the growing gap should be a priority. As with many provisions that use this dimension of the constitution as authority for federal interventions, federal legislation can be designed in coordination with the provinces, to set a minimum national standard for restricting corporate dominance of economic resources.

Using a combination of provincial legislation on farmland ownership restrictions and amendments to the Competition Act (most likely article 78, Abuse of Dominant Position) and Investment Canada Act, ownership and size restrictions will need to be put in place for landholding, firm size, and control of other critical food system resources. Given the challenges of identifying thresholds of market dominance discussed earlier, considerable research will need to be done to identify evidence-based ceilings for ownership and size in different segments of the food system. Doing so, however, is not entirely foreign to government as US and EU jurisdictions have frequently set acceptable thresholds for concentration and market dominance and forbidden mergers and acquisitions that have crossed that threshold (Shughart, undated).

Income tax revisions

There is little doubt that the North American tax regime encourages corporate concentration (cf. Nader et al., 1976; Francis, 1986; McQuaig, 1987; Wolfson, 1988; Ward et al., 1989). The specific elements that have created this situation, and solutions to alleviate the associated problems, however, are less clear. Changes have been proposed in two general areas: corporate tax structure and individual taxation with an emphasis on increasing taxes for high-income groups. The implications for
sustainable food systems are not entirely clear as little work has been done in this area, but these kinds of changes would likely constrain the growth of agribusiness firms.

Kierans and Stewart (1988) proposed five tax changes to control the corporation: a tax on business costs, particularly non-renewable resource costs, eliminating the unequal treatment of capital gains (see also McQuaig, 1987), replacing the federal sales tax with a value added tax, removing the corporate tax, and stopping the deduction of takeover costs (see also Francis, 1986: Blenkarn, 1988). Wolfson (1988) has argued that tax code revisions to discourage firms from continuously substituting
capital for other resources are the most critical. The tax regime, he has argued, provides too many incentives for investing in capital equipment and structures, and in resource exploration and development. These incentives are a major driving force for excessive firm size and profitability, and ultimately corporate concentration. Many of these revisions were proposed by the federal government's Carter Commission in 1967, but little of the report was ever adopted because of massive opposition from the business community (McQuaig, 1987).

Annual wealth taxes, and inheritance, accession or estate duties have also been proposed as vehicles to transfer wealth away from the wealthiest families (Francis, 1986; McQuaig, 1987; Brander, 1988). Of these, one of the most interesting proposals evolved from the discussion over the Carter Commission report. A five-year evaluation rule was suggested by which shareholders would be taxed every five years on the increased value of their stock (excepting small businesses). The effect would be to increase the movement of stock, as holders would likely have to sell some stock to pay the tax bill. Analysts believed that this would result in a reduced level of ownership concentration (McQuaig, 1987). It was never adopted, although several European countries have taxes of this nature (McQuaig, 1987; Kierans and Stewart, 1988).

Creating the no-growth economy

A primary fallacy of our economy is the belief that growth is necessary and infinite. Although the basic concepts of a no-growth/respecting ecological limits approach are not new (cf. Martinez-Allier, 1987; Costanza, 1989), they have been marginalized by the economics profession and by business for several centuries. There has been a resurgence of interest in ecological economics in the past two decades, and the foundations of such a discipline are now fairly well established. It is clear that some community food initiatives (see Goal 1) have no-growth/de-growth as an implicit or explicit motivation (cf. Rooney and Vallianatos, 2021). As a commitment to this approach grows, the transition to sustainable food systems can be facilitated, but delving deeply into this subject is beyond the scope of this site.

The operational economic tools, however, are not yet fully developed and will only evolve with further thinking and practice. Victor (2008) has made a significant contribution in his work modelling a no-growth economy. The essential concepts (Schumacher, 1973) are presented below.

1. Non-renewable resources are treated differently from renewable ones (referred to as the economics of permanence).
2. Cheap resources are substituted for expensive ones.
3. Those resources that are irreplaceable are priced very dearly.
4. Value is measured in socio-cultural, political and ethical ways.
5. Markets reflect that individual decisions are rarely made with
full information.
6. Environmental, socio-economic and cultural impacts are internalized.
7. Consumption is minimized, goods and services are produced to meet needs; not wants (cf. Hill, 1982, 1986b for discussions of the distinction).
8. Efficiency is defined through maximizing the use of what is in
. the greatest supply (often labour).
9. The economy is viewed as a whole with thousands of sub-economies.
10. Creative activity is valued as more important than goods
produced.
11. Production from local resources for local needs is the most important kind of production.
12. The focus of economic analysis is on the normative (where we want to go for the long-term) as opposed to the positive.

The challenge is to operationalize these concepts so that they are usable on a daily basis. Robertson (1987) outlined some of the key areas requiring further work, at both the level of the firm, and in local, regional and national accounting and analysis:

1. Reform of resource and energy accounting.
2. Ways to give economic value to efforts to establish self-reliance.
3. Measures of the benefits of social investment by public bodies, the corporation and the individual.
4. Techniques for shifting tax burden away from work and on to
energy and resource use, and pollution, damage, and nuisance.
5. Economic measures of optimal nutrition and health.
6. Economic measures of voluntary contribution to community.
7. Elaboration of economic conversion strategies for different sectors

Progress has been made since Robertson elaborated these needs, but work is ongoing.

Sustainable business models (adapted from Upward, 2013; Upward and Jones, 2015)

Businesses build on such models only enable strongly sustainable outcomes (positive environmental, social, and economic value) throughout their value network. By doing so, they support the possibility that human and other life can flourish on Earth forever (Ehrenfeld, 2000a; Willard et al., 2014). In this conception,a single business entity can only self-declare its sustainability relative to its entire value network. Value is created by meeting fundamental needs (as opposed to wants, see Hill, 1982, 1986b) and is created with an organization’s customers, share-holders, social, and environmental constituents. Strongly sustainable businesses interact with the natural environment, society, and economy, the milieux and people (whether chosen or not) on which the business is ultimately dependent. Success is reconceptualized as “tri-profit”, calculated as the net sum of the costs (harms) and revenues (benefits) from a firm’s activities in each of the above milieux.

Upward (2013) has elaborated in considerable detail the operational principles, operations and logics of strongly sustainable businesses and how leaders must think and analyze a firm's circumstances to be a flourishing enterprise. Many firms are moving in this direction, in particular those certified as B Corps, but few have been able to fully reflect this design and approach, given all the barriers in the dominant approach to the economy.

Land and Reparations

Reparations for racism and dispossession is a very complex topic with multiple dimensions beyond the scope of this site (see James et al., 2021 for some core elements). Canada has some limited experience of reparations for historical injustices (for example, Japanese internment survivors, Resident Schools Settlement, and the Africville Apology) and that must be built upon to address profound injustices related to land and white settler appropriation of private property. Developing and implementing detailed plans for reparations will take some time, and land is central to this process (see Kepkiewicz and Dale, 2019). Land Banks and Community Land Trusts (see Substitution) can be linked to Reparation processes. Mapping the foodshed of indigenous communities is also a critical part of identifying land that needs protection for extraction and other forms of resource exploitation to assure indigenous food sovereignty (Thompson et al., 2019). At the Redesign stage, food system change would need to be integrated with such plans in a coherent and comprehensive way. See also Goal 1, Self- and Community-provisioning, Redesign.

Many countries have historically (and not necessarily successfully) passed land reform legislation (see Wikipedia for a list). The Land Reform process underway in Scotland may hold important lessons for Canada, in that successive legislation from 2003 - the Land Reform (Scotland) Act 2003; the Community Empowerment (Scotland) Act 2015; the Land Reform Scotland Act 2016 - provide for priority community rights to acquire land under conditions of particular importance to communities and to sustainable development. Although to date it has not been very helpful for community acquisition of agricultural land (Kristeen Shields, NFU University, 2021), it may be valuable for self-provisioning.

Canada will likely need a land reform act to address issues of reparations, inequitable patterns of land ownership, and the negative ecological consequences of excess farm size (e.g., habitat destruction, biodiversity loss, reduced soil health associated with too large equipment to manage farm size). There is some historical precedence for certain dimensions of such an act, in the PEI Land Purchase Act of 1875 which as a condition of joining Canada passed this act to redistribute land away from absentee English landlords (for more see Wikipedia and McCallum 1999). Some of its principles are still reflected in PEI ownership restrictions (see Substitution).