Home Page


中文 / Zhōngwén


Other Pages:
Key Words

Home Page
Lecture Notes

Site Map
Utility Documents
Useful Links


As legal individuals, are they criminally insane?

by Phil Bartle, PhD

Training Handout

Corporations have only one ethic

The revelations that there were high crimes being committed by huge corporations such as Enron is not where the problem lies.

It is where corporations do exactly what they are designed to do, stay within the law, and do the job well, that constitutes the greatest danger to society and to the future of humankind.

Let us look at what corporations are supposed to do:

So the question is, "Do corporate executives, provided they stay within the law, have responsibilities in their business activities other than to make as much money for their stockholders as possible?" And my answer to that is, no they do not.

Milton Friedman (1912-2006) Nobel Prize-winning economist, economic advisor to President Ronald Reagan, "ultimate guru of the free market system."

Commercial corporations have a single ethic: to make a profit.

Historically, our human institutions had multiple ethics. While they differed, and we might disagree with some of them, they generally had the responsibility to support community and society, promote the good health and good will of the population, and generally support activities with the best interests of people in mind.

Corporations have no such moral requirements.

If a corporation makes a profit at the expense of your physical environment, fine.

If natural resources are destroyed to the worsening of our grandchildren’s quality of life, fine.

If people in far away places are exploited and their rates of morbidity and mortality increase so that a corporation can make a profit, fine.

Profit as a goal or objective is based on a single motivation, greed.

Since corporations are usually owned by their stockholders, who do not watch the every day running of the organisation, nor care, then there is no conscience in the organisation.

Managers are rewarded (career advances, salaries and bonus gifts) only if they increase profits, not if they are good corporate citizens.

The development of free trade, and of a developing global economy, in itself, is a useful and valuable thing for society.

It means that goods and services can be produced in the most efficient way.

Unfortunately, however, labour is not as mobile as capital, because labourers have families and roots in their communities, and cannot move easily to new locations.

Furthermore, corporations can take advantage of international trade by underpricing and overpricing their own goods as they transfer them between their factories in various countries, avoiding taxes and misrepresenting their levels of real production in each place.

Profits can be unfairly increased where there is lack of transparency.

This not only puts them at an unfair advantage against local companies, and reduces the amount of tax revenue for governments, it also defeats the purpose of free trade by raising the costs to the final consumers.

What about the call for governments, at various levels, to be more "businesslike?"

It is true that there could be more in improvements in efficiency in many governments.

Efficiency is the ratio between costs of inputs divided by value of outputs.

We can get more "bang for the buck" by increasing efficiency.

Unfortunately, that observation is subverted by being interpreted that governments should be run like business organisations, as if a government’s responsibility is to make a profit.

It is not.

A government has the responsibility to the well being of every member of its population, not merely to corporations or stockholders.

Corporations have a vested interest in reducing taxes, which will increase their profits, to the detriment of budgets for social services such as education, health and support for the vulnerable.

If a corporation gives a donation to a political party with a platform of reducing taxes and social services, that is a conflict of interest.

The case of Enron also shows that our society, or that of the most sophisticated and wealthy in the world, the USA, does not have the mechanisms for watchdogs and policing the activities of corporations, and only some chance situation where an insider, or staff member, reports a criminal activity, and is willing to sacrifice their career and reputation in blowing the whistle (reporting the crime) will the corporation be brought to task.

Whistle blowers are rarely protected, and suffer damage for blowing the whistle.

What then are the indications of future trends of the fast pace of corporate growth in the world today?

Currently, more than a hundred multinational corporations have annual budgets that are greater than the sum of the national incomes of over a hundred nations.

They are a new post national political force in today’s world, and a force with which to be reckoned.

We, as social scientists, are not supposed to make value judgements.

We do not see corporations as evil, but as social organisations with specific structures and processes.

We do have a responsibility, however, in bringing to attention, when our social institutions are producing results that we do not expect and that are beyond society's goals.

This is a classical case.

If you copy text from this site, please acknowledge the author(s)
and link it back to www.cec.vcn.bc.ca
This site is hosted by the Vancouver Community Network (VCN)

© Copyright 1967, 1987, 2007 Phil Bartle
Web Design by Lourdes Sada
Last update: 2013.04.17

 Home page