Fair Commerce Landing Page

Fair Commerce Reform Landing Page.
(This document)

Fair Commerce Reform Legislation.

Capitalism mixed with the powerful invention of Corporations have shaped the modern world.

Corporations are being treated by the Supreme Court more and more like Persons with First Amendment Rights. (We address the need to claw back First Amendment Rights from Corporations elsewhere. )

Yet if Corporations were to be treated psychologically as persons, they would be categorized as pathological personalities. ^[1]

This legislation addresses this insidious problem:

Corporations (with their pathological personalities) are mentors to each and every one of us.

We work for them, or we know people who work for them. We buy their products, we laugh at their advertisements, we cheer their sponsorships.

Humans make decisions for Corporations under the rules of Fiduciary Duty.

It is the current vision of Fiduciary Duty — 'to maximize shareholder value' — which is the core of the pathological personality of Corporations. The simple word for it is greed: corporations care not for the consequences to others, only to those they have a legal duty to serve: beneficiaries and principles.

What is true of Corporations in this regard is also true of other similar investment structures. The mechanism for the similarity is Fiduciary Duty.

Those decisions have corrupted the world and continue that corruption.

But there is a simple fix.

We need to make the dealings of Fiduciary Duty constrained by Fairness as well as Profit.

Fiduciary is not defined in a single place. For our purposes, we will share these key definitions:

Basically, if "Person A" entrusts their money to "Person B," then Person A becomes the principal and Person B becomes the fiduciary and needs to do all they can to make money with the principal’s assets, or the fiduciary is at risk of being sued.

This makes a lot of sense in simple examples: if you give your money to a bank, or even a friend, you expect them to take care of it and give it back in whole, and even with some interest.

But what if the person we lend the money to uses it to support immoral activity? Or, what if we gained the money through immoral activity?

What if this activity is harming society in fundamental ways?

According to those definitions, that is not the fiduciary’s concern.

Millions of us work directly for corporations or similar structures.

Corporations own over one quarter of all the world’s wealth. ^[6]

So we look to them for examples of how to behave. (This is a core psychological trait)

Our boss’s, boss’s, boss is a fiduciary.

They have a responsibility to know "material facts," and make decisions that generally should maximize the value of the principals they serve.

And this is the rubber-meets-the-road activity of Corporate and Private Equity Capitalism.

I (Vector Hasting) once lived in a remote village in Transylvania.

It was like going back a hundred years and living in Hobbiton.

Every week there was a "Trade" and a "Market." The Market was for household goods and the Trade was for large agricultural items like cows and horses and commitments for a ton of hay or corn.

It was capitalism right there in the undisturbed heart of what had been one of the worst victims of Communism in Eastern Europe.

And to a person, they would say: "trading for profit is wrong: it must be a Fair Trade."

That is the foundation of Capitalism: fair trade for equal value, where the value is determined by a Free Market.

Even these peasants had fiduciaries: people would send their animals or goods to Market with a trusted family member or neighbor. Those trusted agents might sell the cow or blanket or whatever at the best price they could fetch.

But the fiduciary could not cheat the person they made a deal with! Nor could they cheat the person who gave them the asset to sell.

To them, a fiduciary duty *included* fairness. ^[7]

And so it was for untold centuries: fiduciary duty meant trading for equal value because people would hope to trade again another day in the same community.

In theory, the contract-law requirement of "Good Faith and Fair Dealing" should dove-tail with fiduciary responsibility to prevent unfairness.

But in practice, that is no longer true, and hasn’t been true for too long.

In different places at different times, Empires and Colonialism discovered a means of exploiting people beyond the confines of the community. The idea of "Good Faith and Fair Dealing" turned out to be dependent on the power of a community to enforce shame. There was not enough shame in the exploitation of people far away to enforce the idea of Fair Dealing with those "others."

Suddenly unfair advantage became routine.

Think of the Greeks sacking Persia.
Think of the Romans sacking the Greeks.
Think of the Conquistadors' conquest of the Americas.

And so forth and so on.

In America, our ancestors used genocide to grab land from the First Peoples of America. The First Peoples had used warfare among themselves to grab lands before the Europeans came.

Americans owned slaves.

Now we have corporations exploiting our people and our planet because the idea of an overarching Fairness duty has been lost to ancient history.

And our currently limited fiduciary duty responsibilities are the legal principal that makes this impossible to stop.

Corporations are legal fictions. So are Private Equity Firms. They are literally made out of legal contracts on paper.

And Law is made by Society. We can change it to serve the greater Good.

To be clear: Corporations and partnerships are awesome machines for Enterprise. They enable the sharing of risk.

Corporations are used by most professionals to pay themselves in order to make the risk of their professions tolerable.

Without corporations, regular people would fear for their life savings if they tried to open a store, or do plumbing for hire, or run a clinic, or any one of millions of activities because any mistake could become personally ruinous.

Corporations and similar structures solve this in two ways. . For activities involving investment, they spread the risk among many shareholders. . For liability, they are a legal intermediary with defined assets that sits between human beings when there are zero-sum disagreements that may involve recompense.

So we have an incentive as a society not to throw out the baby with the bathwater.

Corporations cannot continue to teach us all to act pathologically. Yet we need corporations to be able to act at all (at the scale of complexity of our civilization).

As mentioned earlier, contract law requires the parties to a contract to engage in Good Faith and Fair dealing.

But this only applies to the parties to the contract!

That is the loophole. The duty of Good Faith and Fair Dealing does not translate to things that are legally external to the contract, which are otherwise known as

In fact, fiduciary duty now requires the fiduciary to contemplate deliberate ways to take advantage of externalities if that provides a way to maximize the beneficiaries return on investment!

Not to do so would be to expose the fiduciary to legal jeopardy, because another fiduciary who had taken advantage of structuring contracts to exploit externalities would have delivered a greater benefit to the investor.

Take an example:

The fix we propose is to expand the scope of fiduciary responsibility.

Even though fiduciary responsibility is an ancient legal principle of common law, it is still created by thought and paper.

Therefore we can (and must) rethink fiduciary duty to solve this.

Simply put: we add to the concept of fiduciary duty not only increasing value for the principal and beneficiaries, but maintaining value for the stakeholders.

It is simple, and yet powerful.

It is the answer to the earlier question: what if your fiduciary uses the money for amoral activity? And the converse question, what if your principal was generating the value in an amoral way?

Unless we have fiduciaries also maintain the value of all stakeholders, we are allowing the strip-mining of the public for the gain of a few.

And that is unsustainable.

It will first become intolerable for the public, but it will eventually topple the few as well. For while we live in a world of abundance, it is also a finite sphere.

These effects have been happening for centuries.

But now with Climate Change (which fiduciaries argue they had an obligation to conceal from the public) we are reaching the point of mass destruction because of the unfair practices of the past.

Everyone involved in the chain of commercial transactions are stakeholders in them.

That will include customers, employees, contractors, communities and the environment.

Are we suggesting Corporations have to subsidize those entities!?!

Of course not.

It’s simple.

We are saying they must use their existing Duty of Care to make sure their is fair and good faith dealings for all stakeholders.

Because in theory this is already implied by fair dealing in contracts, we have the presumption that this business discipline is possible.

However, as in the previous example, we have incentives that push toward the most abusive corporate policies that law will allow because of the lack of stakeholder consideration by fiduciaries.

This reform will simply force the same duty of good faith and fairness to all levels of the chain of contracts that are visible to fiduciaries, whose duty includes investigating that entire chain in order to protect and improve beneficiary value.

At this time, we have a proposal at the Federal Statute level.

There is another pathway to instituting this reform: through the Universal Commercial Code, or "UCC."

This is a parallel legal framework for maintaining a level of uniformity between the States so that businesses can more easily engage in commercial practices that ultimately depend on enforcement of contracts across State lines.

The code is authored in a collaborative and bureaucratically robust process which is dominated by two non-governmental organizations: the American Law Institute (ALI) and the National Conference of Commissioners on Uniform State Laws (NCCUSL). There is a good primer on the subject here.

This avenue is not ideal for our purposes for the following reasons:

Despite not being a primary focus for PL2029, there are still many experts within the UCC process who could help create synergies in attempting to have the public demand this reform.

Therefore we encourage and are open to exploring using the UCC as a means to reform fiduciary duty, while our focus will remain be on making this understood by the public in an effort to make it a demand for federal law by our elected officials.