What we mean by corporate structure.

Why making a profit is often not enough.

Imagine a large company makes a billion dollars in profit this year. Next year, it makes another billion dollars.

To most people, that sounds like a remarkably successful business. It is profitable, it provides products people buy, it employs thousands of people, and it can continue operating indefinitely.

But the stock market may see it differently.

A company’s share price is based not only on how much money it makes today, but also on how much investors expect it to make in the future. If investors expected the company’s sales and profits to grow, simply making the same billion dollars again may be treated as disappointing performance. The company is still extremely profitable—but its share price may fall because it failed to grow as expected.

For many large publicly traded corporations, this makes growth much more than an ambition. It becomes a powerful and continuing pressure.

Shareholders expect a financial return. Some receive dividends, but many depend heavily on the value of their shares increasing. The board of directors is accountable to those shareholders. Senior executives are accountable to the board. Their pay, bonuses, reputation and continued employment are often tied to revenue, profit, market share and share-price performance.

The message travelling through the system is therefore remarkably consistent:

Being profitable is good. Being more profitable than last year—and promising still more growth next year—is better.

The pressure does not stop with the company.

This pressure also affects which executives rise to the top.

Consider two executives running competing food companies.

One executive decides not to use a legal and profitable marketing strategy because it may encourage people to consume more unhealthy food. Sales remain stable, the company continues making a healthy profit, and the executive believes the company is behaving responsibly.

The competing executive uses the strategy. Sales rise. Market share increases. Profit targets are exceeded. The share price responds favorably, and the board rewards the executive with a larger bonus, greater authority or promotion.

The system does not necessarily record that the first executive acted responsibly. It records that the executive missed an opportunity to grow.

It does not necessarily record that the second executive increased a long-term public-health risk. It records increased sales, stronger earnings and improved market share.

This does not mean every successful executive is unethical. Nor does it mean corporations deliberately set out to make people ill. It means that, when a profitable strategy remains legal and its harmful consequences fall mainly on other people, the executives most willing to pursue that strategy can gain an advantage over those who exercise voluntary restraint.

Repeated over many years, that creates a selection effect:

• Strategies that produce growth receive more investment.
• Executives who deliver growth receive more money, authority and influence.
• Competitors copy strategies that succeed.
• Executives who consistently refuse profitable opportunities risk being regarded as less effective.
• The boundary of normal business conduct gradually moves toward whatever produces the best measurable financial results.

As a result, executives who are willing to push closer to the edge of what is legally, politically or socially acceptable may be more likely to outperform their more restrained colleagues—and therefore more likely to be rewarded and promoted.

That is what we mean by “corporate structure.”

Corporate structure is not simply the legal paperwork used to create a corporation.

In this investigation, the term means the complete system of ownership, accountability, incentives and competition that influences how a large corporation behaves:

• Shareholders expect financial returns.
• Share prices depend heavily on expectations of future performance.
• Boards hold executives responsible for delivering that performance.
• Executive compensation and careers are tied to measurable results.
• Competitors place pressure on one another to exploit successful opportunities.
• Many social and health costs do not appear in the company’s accounts.

No single person has to intend the final harm. Every participant can make a seemingly rational decision within their own role, while the system as a whole repeatedly selects the decisions that produce the greatest growth.

The problem is not simply that some corporations employ bad people. The problem is that the system tends to reward people and strategies that produce growth while often failing to charge the company for the harm that growth creates.

How this applies to diabetes.

A food company can grow by attracting more customers, persuading existing customers to eat more frequently, increasing portion sizes, widening distribution, lowering production costs or developing products that generate stronger repeat demand.

The revenue from those decisions appears immediately in the company’s financial results.

The resulting health consequences may take years to develop. When they do, much of the cost is paid by individuals, families, employers, insurers and taxpayers—not by the company that received the original revenue.

This creates a dangerous imbalance:

The corporation receives the financial reward for increasing consumption, while much of the eventual cost of diabetes is transferred to the rest of society.

That does not prove that any single corporation causes diabetes. It explains why the corporate system consistently favors products and strategies that can increase diabetes risk—and why relying entirely on voluntary corporate restraint is unlikely to solve the problem.

The important technical qualification.

There is no general law requiring every corporation to increase its revenue or share price every quarter. “Required to grow” is therefore not a literal statutory command.

The pressure is created by the interaction of investor expectations, stock-market valuation, board oversight, executive compensation, competition and access to capital. It is strongest in large publicly traded companies whose valuations depend heavily on expected future growth.

There are also exceptions. Some mature companies provide shareholder returns primarily through dividends. Privately owned companies can choose stable profitability rather than continual expansion. Public-benefit corporations can adopt broader legal objectives.

These exceptions demonstrate that the pressure is not universal or unavoidable. But they do not remove the powerful growth pressure operating throughout much of the modern publicly traded corporate system.

Delaware—the legal home of many major U.S. corporations—allows a corporation to pursue any lawful business or purpose. Its code does not contain a general “must grow” rule. Delaware’s Court of Chancery describes the fiduciary orientation more precisely: directors ordinarily seek long-term firm value for stockholders and may consider employees, customers, society and external harms when those considerations rationally support durable corporate value. Delaware Code §101; McRitchie v. Zuckerberg.

How the growth pressure reproduces itself.

No single participant has to demand harm. Each participant can make a locally rational decision, and the complete system can still select for more aggressive growth.

Who is accountable to whom?

The important exceptions.

A credible structural claim must not pretend that every corporation is identical.

• Dividends can reward shareholders without rapid growth. Mature income companies can return profit directly rather than promise continual expansion.
• Private, family-owned and closely held businesses can choose different objectives. Their owners may accept stable profit, continuity, employee welfare or community value.
• Public benefit corporations have a different legal mandate. Delaware law expressly requires them to balance stockholders’ financial interests, the interests of people materially affected by the company, and a stated public benefit. Delaware public-benefit-corporation law.
• Ordinary corporations can act responsibly. Directors can pursue long-term resilience, reputation, customer trust and reduced external harm when they connect those choices to durable firm value.
• The argument is about selection pressure, not inevitability in every case. Exceptions show that alternatives are possible; they do not remove the pressure facing large financialized firms.

Primary and supporting sources.

1. Delaware General Corporation Law §101 — what corporations may be formed to do; no general statutory growth command.
2. McRitchie v. Zuckerberg, Delaware Court of Chancery — long-term firm value, stockholder interests and externalities.
3. U.S. SEC, Pay Versus Performance — required disclosure connecting executive compensation with shareholder return and financial measures.
4. Investor.gov, Stocks — shareholder returns through capital appreciation and dividends.
5. Wood et al. (2023), Globalization and Health — financialization, shareholder primacy and ultra-processed-food corporations.