Corporate Power

I taught Business Ethics for many years and during those years I came across a great many reports of the abuse of the power of corporations. It became increasingly clear as I read and thought about this misuse that it stems from the fact that the publicly owned companies ignore the stakeholder because they are primarily (if not exclusively) concerned about the return on the dollar, i.e., profits that can  be paid out to shareholders (and overpaid CEOs who typically make 400 times as much as their  average employee). What I now take to be an obvious fact has many ramifications.

I have posted before about the oversight on the part of the founders who were so sensitive to the abuse of power and who simply did not see the possible abuses of power that might result from the millions of dollars the corporations rake in every year. — and this despite the fact that Jefferson, for one, was fully aware of the dangers of immoderate wealth in the hands of a few. But the founders simply couldn’t see this coming, clearly. They did realize, however, that the Constitution was a document that required up-dating from time to time; it is not written in stone. Henry Adam thought that when Grant was elected there would be a drastic overhaul of a document he realized was already out of date. But that didn’t happen. But, surely, one of the issues that needs to be addressed in our day is the abuse of the power of corporations that can simply buy elections and determine who is allowed to hold public office and what those who have been elected will do when in office (if they want to be reelected).

In 2010 the Supreme Court decided by a vote of 5-4  in the “Citizens United” case that corporations are “persons” and have rights of free speech as protected by the First Amendment. Under that umbrella, they were given the green light to contribute to political campaigns — which they have subsequently done, in spades. Elections were increasingly a battle of the rich against the also rich, but the contributions of the corporations — not to mention those who run the corporations — have upped the ante considerably. Now we find ourselves faced with continuous requests for money from candidates and political parties to “take on” the corporations — as though this can be effectively accomplished.

I don’t buy the notion that corporations are persons and I think the claim I have seen argued that, as persons, they might somehow be shamed into behaving ethically is a bit dubious. If the shame were to result in lower profits corporate CEOs would simply pass along the losses to the customers until the PR people could direct attention elsewhere and convince the public that no real harm was done. This was the case with the Exxon Valdez oil spill in the waters off Alaska a few years ago when Exxon sent a team of people up to the region of the spill where they cleaned up several hundred yards of oil from the shoreline and then had it filmed and used the film in a public relations campaign to convince customers that they had eradicated the effects of the spill. Ignored altogether, we have since discovered, were hundreds of yards of shoreline out of sight that remained covered in oil. It seems to be in the corporate DNA to do whatever it has to do to “right the ship” in the case of an accident and make sure the image of the company is not seriously damaged. They have public relations people who do nothing else but address this issue. And they have lawyers, who they often call “ethics officers,” whose job it is to see that they take no steps that could possibly end them up in court — because they identify morality with legality and pride themselves in “doing nothing wrong.”

The recent attempts by the current administration to weaken, if not eradicate altogether, the E.P.A. and other regulatory agencies is extremely disturbing because history has shown that the corporations will not police themselves and if their feet are not held to the fire they will do whatever it takes to increase profits, full stop. In an economy like ours regulations are anathema to the corporations and their highly paid officers. But from the public’s perspective they are essential.

Furthermore, those corporations should not be regarded as persons and given the right under the First Amendment to contribute to political campaigns. The founders missed this one, but we are becoming increasingly aware of the abuses of power by the corporations and the need to rein them in by limiting their impact on the public domain. The first step, clearly, is the rejection of the Citizens United decision which at least two of the judges who voted for it now realize was a mistake. And, if we cannot revise the constitution, we can certainly modify it to see to it that controls are placed on otherwise unfettered power. That is, we can if we have the will.

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Christmas Time

 

Hark the Herald Tribune sings

advertising wondrous things….

(Tom Lehrer)

It is that time again when we all wonder what those bright packages under the tree hold in store for us. Because, let’s face it, Christmas has become an orgy of gifts and greed, and it all starts at Halloween. The fiction that it is about giving and not about receiving is exposed in the TV advertisements showing the kids exploding with delight as they open the largest and most promising of packages or shrieking ecstatically as they discover the latest in electronic toys. Thus, it would appear, it is time to think about industrial capitalism and what it has meant to the growth, or diminution, of the human spirit.

To begin with, there’s no question that capitalism has improved the lot of the average human in capitalistic countries, if we measure in terms of “things” and allow that happiness is equated with standard of living. The average Westerner lives better than a medieval king. But if we take a deeper look, together with Robert Heilbroner, who wrote the book on capitalism (well, Karl Marx wrote THE book, but Heilbroner’s book The Nature and Logic of Capitalism is worthy of serious thought) we find this:

“. . .the accumulation of wealth fulfills two functions: the realization of prestige, with its freight of unconscious sexual and emotional needs, and the expression of power, with its own constellation of unconscious requirements and origins.”

More to the point, however, is this observation about the possible costs of judging all success and happiness by how many toys we can accumulate in our lifetime, a cost that involves replacing of moral values with commercial values:

“The de-moralization of economic activity removed any need to justify the logic of capitalism, provided that it did not directly violate the law or outrage the deepest moral convictions of society, but it made meaningless such questions as: Which of two equally profitable undertakings is the better? Can one call wasteful any undertaking that returns a satisfactory profit? Is it possible to condemn on moral grounds legal and profitable actions, such as the decision to relocate a plant at the cost of community disruption? . . .

[Capitalist ideology] succeeds in offering definitions of right and wrong that exonerate the activities and results of market activity. This is accomplished in part because the motives of acquisitiveness are reclassified as interests and not passions; in part because the benefits of material gain are judged to outweigh any deterioration in the moral quality of society; and last and most important because the term ‘goodness’ is equated to private happiness, absolving all licit activity from any need to justify itself on moral grounds.”

Note the displacement here of moral virtues with what we might call “practical” values. Ethics is displaced by civil law, for one thing; “goodness” is equivalent to private happiness. If an action breaks no laws, makes someone happy, and results in profit, there is no need of further inquiry. The end of profit does, in fact, justify any means to that end. This is the new ethic which has displaced the old ethic that demanded justification and moral grounding for any action involving other persons, especially possible harm to others. An anecdote might help illustrate this point.

I was in charge of bringing speakers to campus at the university where I taught as a part of a lecture series that dealt with ethics in business. We invited the “ethics officer” at a large and successful company in Minneapolis to address the issue; she turned out to be a lawyer whose job was to see to it that her company did nothing that might end them up in court. “Ethical” became equivalent to “legal.” But, as Heilbroner suggests, they are not the same.

Again, some years ago I recall teaching a graduate course in Business Ethics and reading a book by a sociologist who examined in great detail the behavior of a number of employees who worked for several large corporations on the East Coast. What he found in common was the tendency to separate their actions on the job from their actions off the job. In the former case they could “live with anything” required of them to do their jobs — even to the point of burying toxic waste. In the latter case they insisted that they needed to look themselves in the mirror every morning and treat their families and friends with respect. In a word, they lived two lives. One life was centered around a loose grasp of traditional ethical and Christian values, the other centered around expediency, what was necessary to keep their job and please their bosses. Now, given that the workaday world has become the center of a great many lives in our nation, there would appear to be less and less concern about what one sees in the looking-glass while shaving or brushing one’s teeth, sad to say.

This has a direct bearing with today’s topic, of course, because it suggests that, in fact, we have become a society that has, as Heilbroner suggests, replaced traditional ethical concepts with commercial values and avoids altogether asking tough questions about our everyday activities if they might border on the unethical. Material gain has indeed placed itself at the center of so many of our lives as the most important thing. When we no longer seek the moral high ground because we seek instead the promotion, the new car, or are busily reaching for the package under the tree with our name on it, it is a sure sign that the human spirit has shrunk; as a nation we are at risk of losing our collective soul. Thomas Jefferson worried about this in 1788:

“What a cruel reflection, that a rich country cannot long be a free one.”

Christmas is merely the reductio ad absurdum of the displacement of ethical values, replacing the true meaning of a Holy Day with out-and-out greed. Peace On Earth and love of our fellow humans have been replaced by pleasure and self-indulgence. Right and wrong have been replaced by what feels good.

 Christmas time is here by golly

Disapproval would be folly.

Deck the halls with hunks of holly

Fill the cups and don’t say when……

(Tom Lehrer)

Gutting the E.P.A.

One of the more insidious aspects of Mitt Romney’s energy plan is to allow individual states to grant permission for Big Oil to drill on the federal lands within their borders. This plan would effectively circumvent the Environmental Protection Agency, though our large corporations would love to see that agency disappear into the night.

But as one who has taught business ethics for years and who has seen countless numbers of cases in which federal agencies stand between each of us and poisoned air and water, contaminated foods, and harmful drugs, the idea that the EPA might be weakened strikes me as a seriously stupid on Romney’s part. The recent issue of OnEarth the magazine of the Natural Resources Defense Council provides a case in point.

In this issue we are told about a  legal case brought by NRDC in conjunction with the EPA against British Petroleum in Whiting, Illinois (about 20 miles southeast of Chicago) where BP has a refinery that processes crude oil from the Canadian tar sands (which in themselves are another environmental disaster. But that’s another story.) The refining process, as determined in a study by the Sierra Club in 2010, is a hazard to the health of people within a few miles of the refinery, causing health problems such as asthma, emphysema, and birth defects.

The court ruled in behalf of the EPA and British Petroleum will have to shell out $400 million “to install [scrubbers ?] and prevent 4,000 tons of pollutants — including sulfur dioxide, soot, and toxic substances such as benzene — from billowing out of the refinery each year.” The settlement requires that BP reduce the facility’s greenhouse gas emissions and inform the public about the results of its pollution monitoring. As OnEarth goes on to point out, “the settlement means that refineries around the country will face more rigorous standards when they attempt to modify their operations.” And yet, the EPA is the agency that the Republican candidate for President would gut and render impotent in the name of “jobs” and, of course, higher profits for the wealthy.

We need to realize as this election approaches that there are issues much larger than merely the state of the economy that are in question. The mantra of “lower taxes” and “more jobs” needs to be tempered by a realization that we need to regard the long term as well as the short term. When jobs are created they need to be in industries that have a social conscience and will not undermine our health and safety. And if lower taxes mean cutting back on the authority of such agencies as the EPA it may very well entail the turning loose of unconscionable companies like BP who care only about “the bottom line” and not a bit about our health and the future of the planet.  (You may recall BP was the culprit in the gigantic oil spill in the Gulf of Mexico in 2010 brought about by the company’s unwillingness to build in safety measures in their drilling equipment. The repercussions of that spill are still being felt in the region) There are indeed large issues at stake in this election and we need to be aware of the cloud of rhetoric that surrounds us in an election year and can be just as threatening to our well-being as the fumes from an oil refinery.

Can Reason Rule?

Pascal tells us that the heart has reasons the mind knows nothing about. David Hume added that reason is a “slave of the passions.” I used to think these men were simply wrong and I resisted their claims because as a philosophy professor I was determined to try to help young men and women think more clearly about complex issues. After all, what’s the point of thinking clearly if, in the end, a person is just going to be ruled by emotion (the “passions.”)?

But as I grow older I have come to the conclusion that these men were right. Ultimately, our decisions — the important ones — are determined not by what we think, but what we feel. We accept or reject claims not based on their reasonableness, but on whether or not they fit into our belief system. (Strictly speaking, our beliefs do not form a “system,” as George Elliot reminded us. They are a rat’s nest of conflicting feelings and hunches mixed together in chaotic fashion to protect us against a fearsome world.)

This is why even though it is certain that there will be an earthquake of mammoth proportions in California along the San Andreas fault, thousands of people insist upon living there. It is why thousands also continue to live in the shadow of Mt. St. Helens, even though it is certain that there will be another eruption that will kill thousands. We believe what we want to believe, and while in extreme forms this amounts to denial, for most  of us it amounts to little more than ignoring the facts or looking the other way, keeping reason in neutral while being ruled by their emotions. Don’t hassle me with the facts, I want to live here!

I taught ethics for nearly forty years, including business ethics.  I realized even as I taught those courses that what I was teaching wasn’t really making a huge difference in the lives of my students. In the end I could teach them a few rules and we could discuss ethical principles and methods of approach to ethical issues, deontology or utilitarianism, for example. But in the final analysis, whether or not they did the right thing in a certain situation depended on the kinds of people they were. Hannah Arendt thought it was a matter of being able to look at oneself in the mirror. If a 20-year-old student was dishonest by inclination and character, taking a four-credit course was not going to turn him into an honest man.

In the end, I sided with Aristotle and determined that ethical choices are a matter of character and character is formed early in a person’s life and doesn’t change much as we grow older. But what a course in ethics could do, even business ethics, is to help us sort things out, work through our inclinations and sift through the mud of hunch and prejudice, and determine what ethical principles were at stake and what the best course of action might be in a specific situation. Whether or not in the end the person chooses to do the right thing, again, is a matter of character — or what Hume called “passion — but the path to that decision could be made smoother by careful thought. Reason may be the slave of passion, but without it we grope in the dark and stumble around from notion to hunch and frequently regret later that we didn’t think things through.

There are any number of key issues facing humans today and while it is certainly true that reason cannot dictate what choices we make, it can make clear which paths have been tried before and which are the most likely to prove fruitful in the future. Reason will tell us, for example, that whether or not we accept the fact that the human population is exploding out of control and heading us toward calamity, the continued growth of human populations, taken together with the finite amount of food it is possible for us to produce, will inevitably result in a clash at the intersection of these two trends. The earth has only so much carrying capacity. So even if at present we could solve the problem of starving people in Third World countries by figuring a way to get surplus food to them, at some point it will no longer be a matter of logistics. It will be a human tragedy. Which means, that reason would lead us to the conclusion that if we are to avoid a human calamity on a scale hitherto unseen on this earth, we should plan now and take steps to not only maximize food production and improve delivery systems, but also do what we can to reduce the number of mouths that will have to be fed.

Whether or not we choose to do that will not be determined by logic and reasoning. It will be determined by “passion,” or  “character,” the kind of people we are. But reason certainly demands that we start thinking about it now.

Conflicting Interests

I taught business ethics for years and always found it a goldmine of interesting though at times disturbing cases for discussion. One such case recently surfaced online and it is worth a moment’s reflection. In this day of the infamous 1% it is always instructive to try to see what goes on in the minds of those who control the wealth (and government) in this country. One rarely finds thoughts of duty or honor — though there are always exceptions like Warren Buffett. The article I refer to does not focus on the exception, as it happens. It is more of the same: men at the top who are busy accumulating more wealth than they know what to do with.

The story begins: HOUSTON (Reuters) – Aubrey McClendon, the CEO of Chesapeake Energy Corp, has borrowed as much as $1.1 billion over the last three years against his stake in thousands of company wells – a move that analysts, academics and attorneys who reviewed loan documents say raises the potential for conflicts of interest.

The man himself sees no conflict of interest because he doesn’t seem to understand what the words mean. But, then, dealing with such huge amounts of money might tend to blind a person to even the most obvious moral truths. At some point when dealing with large figures, the mind positively boggles. It is difficult for me to imagine having a loose million to spend, but a billion dollars is almost meaningless. But the article goes on:

The size and nature of the loans raise questions about whether McClendon’s personal financial deals could compromise his fiduciary duty to Chesapeake investors, experts who reviewed the documents told Reuters. . . .The revelation comes as McClendon is scrambling to help Chesapeake weather a multi-billion-dollar cash shortfall amid a plunge in natural gas prices.

One wonders how a man could continue to worry about personal gain at a time when his company is at risk. There is a phenomenon in business known as “embeddedness” in which people become so involved in what is close up they lose sight of the things in the distance — things that, in the end, truly matter, like family and loved ones. . .  and the company that provides one’s livelihood in this case. One should also mention the man’s “fiduciary duty” to the investors. What becomes blurred in the process is  “the right thing to do.”

What is of main interest here is what passes for “ethics” in a world such as this. It really collapses into the word “legal,” as in whatever is legal is ethical. McClendoin, says, for example, “these are private transactions that the company has no responsibility to disclose or to vet . .. There are no covenants or obligations in my loan documents or mortgages that bind Chesapeake in any way.” In a word, I have done nothing illegal, therefore I have done nothing wrong. That, of course, is nonsense. There are many legal practices that are unethical — such as the conflict of interest in this case. I would argue that legally increasing personal wealth at a time when your company is in dire financial straits is unethical. It might even be argued that accumulating great wealth, more wealth than one could possibly spend in a lifetime, is unethical at a time when there are people who cannot put food on the table. Even John Locke thought there were limits on how much wealth a person could accumulate without crossing an ethical line.

I recall inviting the “ethics officer” from Honeywell to campus years ago when we were sponsoring a business ethics series of lectures on campus. The officer was, of course, an attorney and her job was to make sure Honeywell wasn’t doing anything that could lead to law suits. That was the company’s conception of ethics. The woman had no training in philosophy and had never even taken a course in ethics. She was not an ordained minister. But it didn’t matter, because it was all about keeping Honeywell out of court. Interesting. But what is even more interesting is the fact that this misconception is all too common in the corporate mindset. The focus on the bottom line, embedded as it is on profits, cannot see the ethical implications of the choices that are made and ignores the people who are effected by those choices.

It is a different world from the one I live in, I must say. And if given the choice, I prefer my own world where things are clearer.

Business As Usual

I taught Business Ethics for many years at both the undergraduate and the graduate levels. In doing my research I discovered that, from a moral perspective, there are fundamental differences between publicly owned and privately owned companies. The former must answer to the stock holders and tend, on the whole, to be unprincipled in their treatment of the people they deal with and unconcerned about the world we all live in. The latter are much friendlier not only to the environment but also to their employees and those they serve.

An example of an excellent private company was Malden Mills in Lawrence, Massachusetts which made Polartec and Polarfleece. It was owned by Aaron Fererstein when it burned to the ground in 1995. The man decided to keep the mill in that town as he knew how much the relatively small town depended upon its presence. He also continued to pay his unemployed workers until they could find other employment, at a cost of $25 million. The factory was rebuilt and rehired many of its former employees, but fell on hard times and eventually had to file for bankruptcy. It was a sad ending to a wonderful story. One hopes it was not symptomatic as such stories are rare in the world of business — and virtually absent in the world of publicly owned companies. Indeed, it has become a textbook case of a “poor business decision.”

What is more typical in the world of publicly owned companies is the story in the current issue of Sierra Club magazine about the coal mining companies in West Virginia, such as Massey Energy, that are tearing away the mountains one at a time. The process releases particulates into the air that result in a variety of illnesses in nearby towns, including  a cancer rate double that of more distant towns. In the midst of the destruction at the top of one mountain sits a small cemetery consisting of 37 marked graves that has been around since the 1800s and which has so far been spared. But it is marked, along with a number of other cemeteries in the region, to be moved and “consolidated” elsewhere — away from the coal. The moves are being resisted by the descendants of those buried on the cemetery plots, of course, as the human remains cannot be moved, only the markers. But we have learned how those stories end. They do not end in bankruptcy, they end in misery and unhappiness for many in the name of profits for the stockholders.

When I proposed the course in business ethics to the faculty at my university years ago one of the faculty wags stood up and said there couldn’t be such a course because “business ethics” is a contradiction in terms. We laughed, and passed the course. But there is some truth in what the man said in that meeting: business has done more to raise the standard of living for more people than any other human endeavor, I dare to say. But at the same time, it has raised the specter of uncaring, ruthless, exploitation and has managed to trample on a great many human lives, not to mention the environment, while raising to outrageous heights the standard of living for a diminishing number of others — the now-famous 1% who control so much of the wealth in this country. And as I have mentioned in previous blogs, it has also altered the way we live in the world, substituting the notion of “life-style” for living a good life.

When we talk about “business,” however, we must be careful to specify whether we are talking about small businesses or large ones — private companies like Malden Mills that treat its employees well and do the right thing, at considerable risk to the bottom line, or the large, publicly owned companies that care about nothing else but the bottom line. It’s the latter that give business a bad name. And in most cases, if not all, it is well deserved.