Is 'Corporate Citizen' an Oxymoron?

theodp writes "Citing expert testimony from a recent House Science Subcommittee hearing on Globalizing Jobs and Technology, The Economic Populist challenges the conventional wisdom that maximizing profits should be a corporation's only responsibility, suggesting it's time for the US to align its corporations to the interests of the nation instead of vice versa. Harvard's Bruce Scott warns that today's global economy is much like the US in the later 19th century, when states competed for funds generated by corporations and thus raced to the bottom as they granted generous terms to unregulated firms. Sound familiar, Pennsylvania? How about you, Michigan?"

Comments

Private versus Commerical interests...

[Zarf]

As a working technologist for the past two decades (I started in IT as a pre-teen) I have been content to let the suits figure out the economics and leave me to play with my toys. But, in the last few years since having a family of my own I have begun to see how unsustainable some "corporate cultures" really are and how a business could be seen as a way to find and keep people you think are "of quality" around yourself.

I don't think most businesses operate like this because we are developing a "management class" in America. These are people who graduate from school as bosses. They don't work their way up to become a boss or manager they come out of the factory sparkling and new as managers.

That creates a fundamental disconnect between the work force and management. It's one that creates a first and second class "citizenship" in the corporation. In many ways if you believe there is such a thing as a "corporate citizen" then this new path through the corporate ladder means that we have reverted to a feudal system in society.

In other words, we may be making "American Style" Democracy obsolete or unworkable. Democracy (in America) is already evolving ... the vote of people with control over special interests counts more than the vote of common people. That's because the lobbyists like to eat.

What this means is that corporate profit maximizing interests usually count more than individual or family interests over time. And that means whatever feeds profits best will win. If human rights feed profits, great. If family stability feeds profits, awesome. If healthy employees help profits, wonderful. But, how do retirement plans feed profits? How does universal health care help profits?

These things do help profits by creating a more stable society where individuals can take risks, make inventions, try new careers. But, they don't help any particular corporation. They don't help profits in the 18 month window. These are things that are financially stupid on anything but the 100 year scale.

Take the example of the educational systems in India. A net profit loss for fifty years that eventually lead to an economic boom in the 1990's. That's my big example of a long-sighted investment in the people that will not pay off any particular corporation in a time-line that can be appreciated by share-holders en masse... however a visionary could see it.

It is a sad fact that some of the things that help the citizens of a nation help all corporations that do business in that nation... and that means that a corporation that is doing those things is helping its competitor. That could mean that strategically undermining a nation may in fact boost profits for a corporate entity which can do things to hurt its competitors and find ways around that damage to make itself more competitive.

The goal of a government (in my view) should be to seek ways to balance the goals of profit making against long term goals. Both sets of interests serve human good because employees are citizens and so are share holders and they benefit all from profits in the short term and that is good. Governments can create incentives for long term investments in your competitors by creating short term incentives to do so using tools such as those dreaded taxes and tax breaks and inventing artificial economies such as the "Income Tax" industry which CPAs and income tax software vendors make their fortunes on.

The interesting thing is that Governments create jobs using red-tape.

Re:So, basically

[MacDork]

stringent organization of the economy and society, and aggressive repression of opposition. In addition to placing the interests of the individual as subordinate to that of the nation Yep. Partly.

Yet, mostly not. FTFA:

is often asserted as a weapon to try to persuade corporate managers and directors that they should take actions that benefit particular shareholders of a given corporation, regardless of whether those actions may impose high costs on creditors, employees, the communities where corporations have their operations, or other stakeholders

Should Sony skip free with a few vouchers after committing half a million instances of felony computer trespass? GGP sure thinks so...

(Yeah, that last part's a straw man, but so is GGP... honestly, how does total crap like that get modded insightful?)

Re:Two responsibilities

[Rolgar]

If you make the penalties sufficiently harsh for the severity of the crime, and can prosecute the organization and individuals involved, and reduce the number of appeals so the company can't expect to indefinitely delay their punishment, the two responsibilities will align, because lawbreaking would become unprofitable. I'm all for due process, but the appeals system is abused to no end because it's like a whole second chance. More appeals judges need to dismiss frivolous appeals with an increase in penalties so the only appeals will be truly questionable decisions.

Re:So, basically

[Original Replica]

Though a cynic might argue that aligning the interests of the nation to that of its corporations is what is going on now, and that that is merely a different form of fascism.

OK I'll be that cynic. It makes perfect sense that such problems should arise, money is essentially a tool used to trade power, influence, and ownership. So when you have corporations with as much money as many powerful countries, that they would begin to exert the same levels of influence as countries. The problem with this is that they are countries with only one law: profit. More enlightened countries understand that by improving the lives of their citizens and the lives of citizens in countries close to them, they improve the value of the country itself. The real wealth of nations is in the quality of life of it's citizens, much more so then the exchange rate and quantity of it's currency.

Oil, soil, copper, and forests are forms of wealth. So are factories, houses, and roads. But according to a 2005 study by the World Bank, such solid goods amount to only about 20 percent of the wealth of rich nations and 40 percent of the wealth of poor countries. So what accounts for the majority? World Bank environmental economist Kirk Hamilton and his team in the bank's environment department have found that most of humanity's wealth isn't made of physical stuff. It is intangible....The rest of the story is intangible capital. That encompasses raw labor; human capital, which includes the sum of a population's knowledge and skills; and the level of trust in a society and the quality of its formal and informal institutions. Worldwide, the study finds, "natural capital accounts for 5 percent of total wealth, produced capital for 18 percent, and intangible capital 77 percent." Social institutions are most crucial. The World Bank has devised a rule of law index that measures the extent to which people have confidence in and abide by the rules of their society. An economy with a very efficient judicial system, clear and enforceable property rights, and an effective and uncorrupt government will produce higher total wealth.

When you have economic enities as powerful as nations that do not work to preserve and improve the intangible capital within their domain as a priority higher than simple short term monetary profit, then all society loses wealth. So really this is just a more enlightened enforcement of that requirement to "maximize profit".

Re:So, basically

[rhakka]

I own an S-corp LLC as well, that doesn't mean I think it's *right*. but you play by the rules of the game you're playing.

corporation personhood is an abomination. I'd be happy to see it go. having a taxable entity is great, but having a nearly impervious shield to liability most assuredly is NOT.

Re:So, basically

[Original Replica]

"What would accomplish more? Suing the shareholders who were not involved but merely own the company? The crew of the ship who likely did what they could to prevent the incident much less don't have the funds to cover all the cleanup costs? Or the overall corporate entity which handles the operations and has the funds to cover cleanup costs? Obviously suing the corporate entity would have the greatest effect, and most likely the management would then reprimand the ship's crew as well."

I disagree. I exactly think it should be the shareholders who should be sued, as a group. If the ship's route and scheduling, crew size, and oil spill first response measures are dictated by "maximizing the shareholder's profit" at the (implied) bidding of those shareholders. The shareholders are owners of the company, they should be involved in any legal proceedings against it. If a million different people own the company, then a million different people will be pissed when they have to write a check to pay for the poor behavior of that company, and they will be more likely to take action to prevent future poor behavior then if they are barely aware of the problem, because all they every look at is the stock price.