Licence to Bill

When someone sets up a practice or an organisation that can charge others for what it purports to offer, what may appear to be a private matter becomes a public issue. What if the body in question deceives people about what is available and charges exorbitant prices? What if the goods and services offered are directly harmful or have dangerous side-effects? How can society protect itself if such an organisation threatens to undermine its stability?

The practice of granting a conditional licence to operate a business originated from the sovereign power setting out the terms for private actors to make gains for themselves in return for benefits rendered to the public realm. In England, the practice could be traced back to Henry VIII who would grant individuals a licence (or charter) to form a company to carry out certain activities (from trade to exploration) that would enable them to take advantage of conditions made possible by past or future actions of the state. The licence was conditional upon the company in question serving the interest of the country, and could expire when its time limit had been reached or be revoked if in practice it led to damages to the common good.

In the US, after independence from Britain was obtained, individual states adopted a similar approach to the granting of corporate charters to individuals wishing to set up companies that would give themselves protection while carrying out transactions with others. These charters forbade activities that would go beyond what were necessary to fulfil their chartered purpose; and the permission granted would be revoked if the companies abused their power or caused public harm. By the late 19th century, however, large companies were able to use their growing influence to undermine the model. Following the Supreme Court case of Santa Clara County v Southern Pacific Railroad (1886), which ruled that corporations should be treated no differently from individual citizens, state power to make corporations publicly accountable began to wane (Grossman & Adams, 1993).

It is time to revive the use of conditional licences because corporations can do so much that can affect the lives of others, but cannot be adequately held in check by the general rules that apply to individuals. Legislatures should begin to draw up licences to operate that will set specific conditions that large corporations must comply with if they are to continue to wield the powers they have.

Any failure to fulfil any of the conditions set out in the relevant licence should lead to clear cut penalties, including in the case of serious violations, the complete revocation of the licence. Major tax evasion, for example, should not be followed by behind the scene bargaining over how much to pay back, but should mean that the full unpaid amount must be handed over plus a penalty that is equivalent to, for example, twice or three times what is owed so it is a genuine deterrent. Threats to proceed with environmental degradation should be met with an immediate suspension of any previously granted right to operate in the threatened area.

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Note: For more on this Licence model and other recommendations to strengthen public accountability and civic parity in a democracy, see Chapter 10 of my book, Time to Save Democracy. Find out more at: https://policy.bristoluniversitypress.co.uk/time-to-save-democracy