Wednesday, July 2, 2014

The Myth of the Corporate Soul

Corporations are people, or at least the legal equivalent thereof.  The world changed on January 21, 2010.   With little fanfare, corporations became people.  On that date the Supreme Court of the United States decided that corporations, be they American or foreign, are afforded the same rights as a single individual when it comes to contributing money to a political cause or candidate.  The same applies to corporations speaking their mind through lobbyists.  

There are many discussions that might follow, but a perhaps interesting inquiry considers the moral and ethical choices a 'corporation' might make.  Does a corporation have a guiding conscience?  Is there a 'knowing what's right' apart from any other criteria that constrains the decision-making process and guides the whole of the organization?

Of course not.  Despite the legal word-play, corporations are not people.  
Corporate governance is primarily a matter of state law. There are thousands of businesses incorporated in Delaware simply because laws there are more lenient regarding the obligations that directors have to shareholders.
Within that constraint of law (or not), the business model governs the corporation, and the goal is profit.
Examples of corporations taking advantage of laborers and consumers are many. Enron bragged of how they cheated grandmothers who depended on them for electricity in California and cheated their own employees by recommending they buy more stock in their pension funds as company executives were selling. Tyco's top officers used millions of investor dollars for their own personal expenses. American Airlines' former chairman secretly took huge pay increases while negotiating pay cuts for the company's pilots, flight attendants and mechanics.   ~The Global Policy Forum
Wall Street and the banking industry have illustrated the consciencelessness of the corporation. Lacking an ethical governance and oversight, the corporation is just a hungry animal in violent competition for its food.
A mild surprise in the inquiry:  it isn't just the corporations; investors behave much the same way.
"When we looked at the investors, we ran a series of very interesting studies on how people would invest in pension funds. We literally gave them pension fund opportunities where there were social issues embedded in the portfolios they could invest in. What we found is they underinvested in social investment funds, even when it was quite irrational for them to do so – they seemed to discount those funds relative to funds that didn’t have these components.
When we queried people and we asked them, “Well, why are you doing this?” they were fundamentally looking not at the current returns, but basically believing that ultimately they would be forced to make sacrifices in their dividends and the payouts they would receive in the future ...."  Karl Moore of the Desautels Faculty of Management at McGill University, talking management for The Globe and Mail
There are people of genuine conscience.  Our difficulties arise as we attempt to regulate such things as morality in the business realm.  Those with Hobby Lobby went to court on the issue of abortifacient contraceptives.  It's a valid point that they could not in good conscience support or endorse or provide the means of abortion.  But those are people speaking on how they choose to live and do business. A corporation itself has no thoughts on the subject.

The narrow focus on the contraceptive question is unfortunate.  The issues of conscience in business go far beyond.  Questions of fair labor practices and wages, ethical suppliers and manufacturers, and even to the utility of offered products compared to pointless luxury.  Can government regulation resolve these?  Perhaps not.

Our well-intended efforts to legislate morality in the business world must walk a narrow line.  On one side, it's free enterprise; on the other it's government oppression.  Elements of socialism hover in the wings.  Ideas?  What's the underlying problem?