Tiffany Tong

April 7^th, 2008

Evil or Necessary Evil?

“Make a case for which “side” of the debate the film’s creators explicitly or implicitly adopt. Does the film succeed in offering enlightenment on some of the key issues involved in the debate? Why or why not?”

In “The Corporation,” it is argued that corporations are inherently evil because they are legally a person, yet they have no moral conscience for its actions. I argue that corporations should retain the best of its characteristics and change the other less desirable ones because while corporations can provide services with a level of efficiency and innovation that no other social institutions can match, they still remain a social institution.

According to “The Corporation,” there are two main ethical problems associated with corporations: their inherent nature and the problems with regulating its vague and controversial boundaries<!–[if supportFields]> CITATION Ach03 l 4105 <![endif]–> (Achbar & Abbott, 2003)<!–[if supportFields]><![endif]–>. Firstly, corporations are artificial human creations which sole purpose is to maximize the bottom line. The corporation is legally bound by law to put profits for the shareholders, people who have financially invested into the corporation, above the public good<!–[if supportFields]> CITATION Ach03 l 4105 <![endif]–> (Achbar & Abbott, 2003)<!–[if supportFields]><![endif]–>. In addition, corporations are given the legal rights of a person, such as owning private property, yet, no one directly bears the moral responsibility for the consequences of its actions, unlike a real person<!–[if supportFields]> CITATION Ach03 l 4105 <![endif]–> (Achbar & Abbott, 2003)<!–[if supportFields]><![endif]–>. Friedman, however, says that “only people can have responsibilities <!–[if supportFields]> CITATION Fri92 l 4105 <![endif]–>(Friedman, 1992)<!–[if supportFields]><![endif]–>,” which is contrary to what the law suggests. If Friedman’s claim is true, then it seems like the law cannot have any binding force on the actions of corporations since they cannot actually be held responsible.

Also, “The Corporation” argues that if corporations are a person, then from historically evidence, the actions of corporations are found to be similar to a psychopathic one<!–[if supportFields]> CITATION Ach03 l 4105 <![endif]–> (Achbar & Abbott, 2003)<!–[if supportFields]><![endif]–>. This is because corporations display characteristics such as “reckless disregard for the safety of others,” “deceitfulness: repeated lying and conning others for profit,” and “incapacity to experience guilt<!–[if supportFields]> CITATION Ach03 l 4105 <![endif]–> (Achbar & Abbott, 2003)<!–[if supportFields]><![endif]–>.” This similarity is not surprising, seeing that there are only minimal checks and balances on the power of corporations.

Secondly, the ethics of what should be the limits of corporations’ sphere of influences are complicated and controversial. Many questions cannot be answered without a consistent framework of ethics we can agree upon, which we currently do not have. These questions include what can be privatized? Ought basic human needs, such as water, be up for privatization? What are the limits to ethical marketing? Ought marketing targeted at young children, with malleable brains, to make them life-long consumers be allowed? What are the boundaries for corporations to be involved in aspects other than the business sector? Ought corporations have any involvement with politics or the military? “The Corporation” implicitly argues that the answer to all these questions should be no, because such actions will be putting profits before the public good<!–[if supportFields]> CITATION Ach03 l 4105 <![endif]–> (Achbar & Abbott, 2003)<!–[if supportFields]><![endif]–>. However, some would argue that the efficiency and innovation privatization brings is more valuable than the problems it creates; more will be elaborated later.

Thirdly, I believe another major problem is whether or not the structure of corporations works in harmony with the state centric structure of countries. Economically, corporations are designed to undertake two actions as much as possible: one, externalize<!–[if supportFields]> CITATION Ach03 l 4105 <![endif]–> (Achbar & Abbott, 2003)<!–[if supportFields]><![endif]–>, and two, tear down barriers to trade (O’Neil, 2007). Externalization is a process in which corporations try to “make other people pay the bills for its impact on society” so that their own costs and responsibilities would be minimized<!–[if supportFields]> CITATION Ach03 l 4105 <![endif]–> (Achbar & Abbott, 2003)<!–[if supportFields]><![endif]–>. Being legally bound to maximize profits, corporations have become “externalizing machines” where they trade off morality for profits<!–[if supportFields]> CITATION Ach03 l 4105 <![endif]–> (Achbar & Abbott, 2003)<!–[if supportFields]><![endif]–>. However, contrary to popular belief, most economists do believe that externalities, “the effect of a transaction between two individuals on a third party who has not consented to, or played any role in, the carrying out of that transaction,” should be corrected through different means, such as regulation or taxation, in order for the economy to avoid market failures<!–[if supportFields]> CITATION Ach03 l 4105 <![endif]–> (Achbar & Abbott, 2003)<!–[if supportFields]><![endif]–>. But the development of laws to restrain corporations has not increased with the pace of corporate expansion, thus allowing corporations to over-expand without paying the correct costs.

Moreover, while the job of politics is to set up barriers to protect one’s country, the fundamental nature of neo-classical economics is to break down barriers to trade (usually set up by governments) because of the benefits brought by comparative advantage (O’Neil, 2007). Thus, there is no surprise that the allegiances of a corporation, as a product of neo-classical economic theory, to profits trump their allegiance to nationalism, as in the IBM case presented in “The Corporation.” Asking corporations to remain loyal, without substantial benefits, within a state-centric system is contrary to its nature. Anything kind of regime that gives corporations an edge, even if it is a totalitarian regime, will gain popularity and support from corporations. Corporations will not think twice before changing loyalties if there are enough profits involved because loyalty cannot be translated into monetary terms.

According to Friedman, companies should only care about their shareholders because it is unethical to do otherwise: company executives have no idea what is the best way to spend “someone else’s money for a general social interest<!–[if supportFields]> CITATION Fri92 l 4105 <![endif]–> (Friedman, 1992)<!–[if supportFields]><![endif]–>”. The executives are imposing taxes and then deciding “how the tax proceeds shall be spent,” without consultation with the general public or the stockholders<!–[if supportFields]> CITATION Fri92 l 4105 <![endif]–> (Friedman, 1992)<!–[if supportFields]><![endif]–>. He argues that company executives should only do what they are best at, namely, running the company and maximizing the return on profits to the shareholders. However, I argue that, even if we use the anthropocentric framework, we cannot justify corporations putting the interests of shareholders above the interest of the general public for the following reasons:

Fundamentally, corporations are social institutions designed by the people to work for the overall good of the people, similar to how the institution of law is to protect all the people, not just a privileged few. To sacrifice the interests of the general public for those interests of just a certain group is to contradict the original purpose of social institutions. Almost any social institution we can think of was created for this purpose, such as the police, government, and schools; corporations are the only social institution with a contrary purpose.

Furthermore, as a social institution, corporations should also include the interest of the future of our society into its operations. The corporation should aim for long term sustainability, because ultimately, it will be inherited by the future generations. The corporation is using resources that they will inherit; as one Haida saying goes, “we do not inherit this land from our ancestors; we borrow it from our children<!–[if supportFields]> CITATION She08 l 4105 <![endif]–> (Copps)<!–[if supportFields]><![endif]–>.”

In addition, corporations use the institutions and infrastructure that was built with the history and money of all the stakeholders, such as the legal framework that provides protection of their property and the roads that are used to transport their goods. Without these foundations, society, let alone corporations, will not even exist, therefore corporations should respect and take into consideration of these fundamental services provided by the society.

The environment, such as the air or the sun, is shared properties, because no one initially owned them, and thus cannot magically become the property of certain individuals or corporations through ‘legal’ transactions. Corporations cannot pollute without paying because it would damaging the common property of all. As Suzuki argued in his book “The Sacred Balance,” we only know very little about the overall impact pollution has on the environment and ourselves<!–[if supportFields]> CITATION Suz07 l 4105 <![endif]–> (Suzuki, 2007)<!–[if supportFields]><![endif]–>. Without clear knowledge about the impact, the economy cannot place a correct price for pollution, in order for markets to work smoothly. We cannot have optimal pollution because we do not even know what is optimal. Thus, corporations will have to pollute less than currently allowed to adhere to the precautionary principle.

In Friedman’s argument, corporations are supposed to adhere to “basic rules of the society, both those embodied in law and those embodied in ethical custom <!–[if supportFields]> CITATION Fri92 l 4105 <![endif]–>(Friedman, 1992)<!–[if supportFields]><![endif]–>.” However, from past experience, corporations conform to neither of those rules of society. In fact, from the examples seen in “The Corporation,” corporations seem to have a blatant disregard for laws and social norms in the pursue of profits<!–[if supportFields]> CITATION Ach03 l 4105 <![endif]–> (Achbar & Abbott, 2003)<!–[if supportFields]><![endif]–>. Moreover, “ethical custom” is hard to define since it is a relativist view of what consists of correct or immoral behaviour. For example, the local standard for environmental protection can mean the governmental laws that are currently enforced or the standard that was long established by the aboriginal peoples. Often, those two standards conflict; which one should we follow? What criteria are necessary for us to decide which one is morally correct? The standard that has the least impact on the future generations? Or the one that has been established the longest? Or the one with the most enforceability? The local citizens have to reach a consensus about these questions before corporations can operate with legitimacy.

Due to the above problems, do we have to fundamentally change the nature of corporations? Yes! But in the process of deciding what characteristics should change and which should remain, I think the key issue whether the benefits that characteristic provide outweigh the harms it cause. For example, there is little doubt that the efficiency and innovation encouraged in a corporation due to the pressure to maximize profits is a great incentive for people to work harder and come up with creative solutions. So the main question remains to be how can the efficiency of the corporation structure be harnessed to produce more good than bad in the world? I believe we have to rethink our assumptions, internalize externalities, and promote democratic representation by stakeholders and governments and NGOs.

We need to challenge the assumptions the profit driven model takes for granted. For example, the perfect market is assumed to be efficient if, and only if, humans are perfectly rational and that humans can have perfect information and predictive power. Both of these assumptions are shown to be wrong in numerous psychological and economic studies. The simple example that people buy luxuries with their credit card until they are in debt shows that humans are not perfectly rational. (Surprisingly, advertisements sell products so well because they appeal to consumers on an emotional level, which completely contradicts the neo-classical economic theory that corporations are built upon). Humans also do not always know what is the best choice to make because of information asymmetry: either the buyer or the seller knows more than the other party, leading to an unfair price for the products. For example, due to the disconnect between the producers, such as those making Nike shoes in a developing country for a pittance, and the consumers, poor urban youth trying to build self-esteem, many people may buy goods they otherwise would not<!–[if supportFields]> CITATION Kle00 l 4105 <![endif]–> (Klein, 2000)<!–[if supportFields]><![endif]–>.

Internalizing the externalities that companies currently take advantage of is one of the first steps to building a better economic model under which corporations are allowed to maximize profits without harming others. The recently implementation of the carbon tax is a good example of using a government policy, taxes, to correct for the pollution caused by free dumping of carbon dioxide into the atmosphere. Although there is a worry that we cannot know enough of nature to accurately price every pollutant and eventually lead to the same result as without government regulation, I would argue that there is no alternative. In order to survive on earth, humans will have to make an impact; we can either try to strive to calculate and minimize the impact we make or we ignore the fact. Trying to work towards perfection is better than giving up because the project is too complex.

Lastly, corporations should become a more democratic social institution which incorporates and listens to the concerns of all of its stakeholders. It is both morally correct and practically necessary to do so because of the reasons mentioned above. Ultimately, a system where corporations forsake some of its profits for the general good will result in better results for the corporation in the long run. It is an endless cycle where consumers give to the corporations and the corporations give back; increasing the wellness of one sector will eventually positively affect all the others.

There are many new developments around the world that can give us hope that the transformation of the corporation will not be as painful or long as we might think: the accumulating evidence of the success of cooperatives, especially in Italy, and amazing impacts social businesses, such as the Grameen Bank, have achieved all show that there is a new way where corporations can become positive social institutions where the general good does not have to be compromised.

Works Cited

<!–[if supportFields]> BIBLIOGRAPHY <![endif]–>Achbar, M., & Abbott, J. (Directors). (2003). The Corporation [Motion Picture].

Copps, S. (n.d.). Speech of the Minister of Canadian Heritage, Sheila Copps, on the occasion of the release of the Report of the Panel on the Ecological Integrity of Canada’s National Parks. Retrieved April 7, 2008, from Parks Canada: http://www.pc.gc.ca/docs/pc/rpts/ie-ei/report-rapport_3_e.asp

Friedman, M. (1992). The Social Responsibility of Business Is to Increase Its Profits. In J. Olen, J. C. Van Camp, & V. Barry, Applying Ethics: A Text With Readings (pp. 433-438). Wadsworth Publishing.

Klein, N. (2000). No Logo: Taking Aim at the Brand Bullies. Picador.

O’Neil, P. (2007). Essentials of Comparative Politics (2nd Edition ed.). New York: W.W.Norton & Company, Inc.

Suzuki, D. (2007). The Sacred Balance. Vancouver: Greystone Books.

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