RE: [greenyes] FW: Corporation as Psychopath

["Brennan, Terry" <tbrennan@no.address>]

Hello,

Although I have not read this whole string of e-mails, I do think about this
topic a lot, so I contribute I'd respond on my lunch hour.  I would be
interested in other views.

Corporations are amoral by nature - not good or evil, or in between.  Their
goal is to make money, and if they don't maximize that effort, shareholders
can sue.  Because corporations are amoral and have no empathy, if they were
people they would be considered sociopaths.  But they are not human.

People who work for corporations have morals, but work within the confines
and goals of the larger corporation.  Most, I'm sure, are good people, no
matter what the behavior of the corporation.  There are some (few) who adopt
the amorality of corporations to excel in business. They have (we all have)
the potential themselves of becoming sociopaths, and some break laws and
become "corporate criminals." Some don't break the law but still become very
wealthy at the expense of others and/or the environment which supports all
life.

Small businesses get bigger in part by effectively maximizing profit.
Businesses that focus on issues like social or environmental responsibility
without profit as the goal (these can be good PR) or adopt unrequired
policies that aren't as competitive do not tend to compete as well, do not
often turn into big companies, and are usually out-competed.  Some owners of
companies choose responsibility over profit understanding it effects growth
and competitiveness.

Morals must often be imposed upon companies to prevent damage to society.
The two ways I see to ensure morality in the business world are through
purchasing power (making it competitive to have moral practices and
policies) and regulation. Using purchasing power requires an educated
public, and, unfortunately, corporations seem to be better (better funded)
at "educating" (PR and advertising) than anyone else.

We use regulation to protect human health, the environment, labor, etc.
Regulation can also be used to ensure equality in free speech for democratic
societies, and to minimize disparity of wealth through the regulation of
profit-sharing or pay rates. We also use regulation to try to ensure
sustainability. If resource use isn't regulated, then each company will try
to obtain and use as much as it can for profit. This is the basic lesson
from Garret Hardin's "Tragedy of the Commons."  Ideally, equal regulation
provides a level playing field for businesses to compete without degrading
society, quality of life, and the environment. 

"Regulation" has been given a bad rap because it can restrict business
profit and make doing business more difficult, and because it paid for (as
all government services are ) through taxation and user fees.  Political
boundaries in our global market place and environment have made equal
application of regulation difficult.  Globalization without equal regulation
creates market inequities.

Just my thoughts,

Terry S. Brennan

The views expressed here do not necessarily reflect those of the California
Integrated Waste Management Board or the State of California 


-----Original Message-----
From: Doug Koplow [mailto:koplow@no.address]
Sent: Wednesday, February 25, 2004 10:09 AM
To: NScott@no.address; greenyes@no.address; hspie@no.address
Cc: amyperl@no.address
Subject: RE: [greenyes] FW: Corporation as Psychopath


I knew my post would be a bit controversial, but have enjoyed hearing the
views of others on this topic.  From the position put forth in the initial
forwarded post that all corporations are bad, a good deal more nuance has
arisen in the comments of others.  Among the points made are:  smaller
corporations are less of a problem than big ones; international corporations
are a bigger problem than domestic ones; publicly-held corporations increase
the impetus for short-term thinking relative to privately-held ones; and
that the profit motive is ingrained in human nature.  

Others have continued that argument that corporations have no accountability
as they destroy the earth, take advantage of workers, and do other
pernicious things. 

It's not likely that I'll change the minds of those who hold that private
enterprise for profit is an evil that must be replaced.  However, I do hope
that a more nuanced view will prevail.  

Clearly, there are many industries where corporate activities provide jobs
without damaging those they employ or the wider environment.  Similarly,
there are many sectors of the economy where large scale multinational firms
do not dominate.  Where there are large economies of scale, either in
production or in the administration of an activity, you will see large
firms.  These firms are sometimes privately-owned domestic corporations,
sometimes multi-nationals, and sometimes government-owned enterprises.
Examples of disasterous management, dissolution of wealth, environmental
destruction, etc. can be pulled from all three categories.  Recourse for
those harmed is often least available when the enterprises are
publicly-owned  - especially if owned by corrupt and unaccountable
governments (unfortunately, a pretty big swath of the world).  

Jen points out that the large companies in the beverage industry waste
enormous amounts of materials.  If you compare the thickness of an aluminum
can in the US versus many other nations, it is much thinner.  This suggests
that these firms have actually worked to reduce the materials per unit of
product delivered, not increase it.  That is, they pay attention to
efficiency for the portion of the production chain they are responsible for.
Her basic point that they continue to waste valuable resources by not
recycling them remains valid.  

Whether this is a failure of the corporate form per se, or of the
appropriate regulation of the industry is a worthwhile question.  I would
argue the latter.  Government-owned enterprises in many basic commodity
industries are often poorly capitalized and operate at lowever conversion
efficiencies than do private firms.  The resource waste can be enormous.
For example, simply using a band saw rather than a circular saw when
converting raw logs to timber greatly increases the recovery of usable
materials.  Similar examples exist in oil refining, other primary materials,
even electricity production and distribution.  Small or moderate
improvements in conversion efficiencies can have large impacts on the
eco-efficiency of production.

What of corruption and accountability?  Clearly, fiascos such as Enron and
Parmalat indicate problems remain.  But some perspective is useful.  At
least in the US, companies can, and are, regularly sued by those damaged by
their products or by contract violations.  Governments, at all levels,
commonly regulate many of the externalities of production for many
industries.  This regulation is not always comprehensive, and sometimes very
inefficiently applied, but the firms are not free to do whatever they want.


Firms also face tremendous pressure from capital markets.  This is often
presented as a negative (firms are driven to sacrifice long-term rational
decisions to make quarterly numbers for Wall Street).  There are positive
sides as well, however.  Capital markets force corporations (which control
large amounts of societal wealth) to deploy this wealth in an efficient
manner.  Systems to remove capital from sectors that are no longer needed,
or from firms that are poorly run, are extremely important in keeping our
country vibrant.  Redeploying this money, often at quite high risk to
investors, to new and emerging sectors, is vital in creating future
industries. 

Do these systems of accountability work perfectly or all the time?  No.  But
they can be improved, and even in their current form often perform
considerably better than their alternatives.  Consider that with the
Parmalat scandal, Europe's biggest, around $20 billion is missing from the
firm's books, money that disappeared over the past 10-15 years.  This is a
huge loss, to be sure.  But before slaying the corporate form, let's look at
the US federal government, one of the world's most open and accountable.
The current energy bill is being touted by sponsors as costing taxpayers
roughly $14 billion.  Their accounting for costs is incomplete and
non-transparent.  Outside estimates, which I've compiled, run well above
$120 billion.  And what are the external costs of pumping hundreds of
millions more into new coal plants - which the bill does - even if they are
supposedly "cleaner"?  Surely not insignificant.  Do you think the $315
billion transporation bill has any tighter controls?  Or the recently passed
modifications to medicare benefits?

My view is that corporations are an indispensible building block of societal
wealth creation and management.  Within their parameters of operation, they
tend to work quite efficiently.  But, their parameters of operation do not
account for everything.  Identifying gaps in appropriate checks to corporate
action should be where we focus, not attacking the corporate form itself.
Basic elements of market structure, such as rights to sue, rational
regulation, and robust anti-trust policies, remain critical.  But again, all
of these systems are much easier to operate against private firms than they
are/would be if one government agency (e.g., EPA) had to institute them
against other government operations.  

Globalization does raise some risks, such as the loss of some (though not
all) domestic leverage over corporate behavior.  At the same time, however,
global companies that now operate both in corrupt developing countries and
the developed world face increased risks to their corporate image and
developed-world sales from misbehavior.  These pressures can have quite
large financial impacts on multinational operations,  and did not exist at
all for the organizations (local or government-owned) that used to mine,
extract, and pollute in many of the developing countries.  If the WTO is not
functioning adequately to police important aspects of global industry (as
some of the earlier posters stated), it should be challenged.  There is
already wide recognition, for example, that countries are not living up to
many of its existing requirements such as reporting on environmentally
harmful subsidies.  Institutions like the WTO are relatively new and still
evolving; there's no reason that environmental and other social interests
can't have as large a say in this evolution as does industry.

-Doug Koplow



_______________________________
Doug Koplow
Earth Track, Inc.
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