BC Business
Is ‘the corporation’ an economic darling of the developed world or a psychopathic agent for global destruction? How to answer that question credible responsibility and manage your own image in a climate of rising expectations.
You could dismiss this gap as semantic confusion except for two things: Number one, the public expectation that companies must assume some social responsibility is growing. At a time when innumerable multinational corporations are vastly more powerful than many of the world’s governments, the public is demanding a higher level of corporate social engagement, of ethical and environmental accountability. Number two, the high-profile failure – the ethical collapse – of a string of exemplar companies has left a large portion of the public shaken and even more skeptical than usual. Businesses that don’t respond to that skepticism will face an increasing risk to their markets and their license to operate – ultimately to the very profitability on which they depend. This entire issue – that of Corporate Social Responsibility (CSR) – came to a fairly polemical head this year with the release of the documentary The Corporation. Based on a book of the same name by UBC law professor Joel Bakan, the movie argued that the relentless profit orientation of the world’s corporations is analogous to a mental illness – and not a minor one. On The Corporation website (thecorporation.tv) the authors explain the diagnosis like this;”“The operational principles of the corporation give it a highly anti-social ‘personality’: It is self-interested, inherently amoral, callous and deceitful; it breaches social and legal standards to get its way; it does not suffer from guilt, yet it can mimic the human qualities of empathy, caring and altruism. Four case studies, drawn from a universe of corporate activity, clearly demonstrate harm to workers, human health, animals and the biosphere . . . [In short], the institutional embodiment of laissez-faire capitalism fully meets the diagnostic criteria of a ‘psychopath’.” To be called a psychopath, an entity without conscience or morals, is a ringing condemnation. Four case studies, however, don’t seem to be nearly enough to make the case; you could easily find four clinical psychopaths in the city of Vancouver without dismissing the whole population as mad. But the movie presents a compelling, sometimes depressing array of corporate perfidy and a persuasive argument that the legal and institutional structure of the corporation makes this malfeasance not just possible but likely – that the corporation, by its very nature, promotes and rewards amoral behavior. Stripped to its essentials, the argument is that corporate officers are legally bound to serve their boards of directors who, in turn, answer only to shareholders – presumably investors whose exclusive interest is to increase their wealth without having to bother with the details. It’s a frightening vision. It’s also tragically flawed, according to Fraser Institute executive director Michael Walker. “The corporation is nothing more than a social contrivance that enables people to cooperate,” Walker says. And as a human creation, “the corporation reflects all the wonderful and not-so-wonderful features of human behavior.” The argument also fails in assuming that corporate executives answer only to shareholders, says Dr. Brian Bemmels, associate dean at UBC’s Sauder School of Business. There is a long list of interest groups that exercise influence in the head offices and boardrooms of the world, says Bemmels. Employees and unions, customers and consumer advocates, bankers and creditors, environmentalists, governments and the public at large all have legitimate interests that you have to balance off against the shareholders’ desire to make money. These quibbles notwithstanding, it’s a mistake – “a cop-out” – to rely entirely on Adam Smith’s ‘invisible hand’ in regulating the global marketplace, says Milton Wong, one of Canada’s most conscientious capitalists. Wong is the chancellor of SFU and chair of HSBC Asset Management Canada, an investment counseling firm that manages $3 billion in assets, including the large portion that Wong built up personally in his own firm, M.K. Wong & Associates. He is also founder of the Laurier Institution, a non-profit organization dedicated to promoting the economic and social implications of cultural diversity. Wong says he’s an Adam Smith fan, but thinks the father of modern economics is too often quoted out of context. “Adam Smith wrote a treatise on morals (The Theory of Moral Sentiments, 1759) prior to The Wealth of Nations,” Wong says. “The Wealth of Nations is very good, but it has to be read in a moral context.” Similarly, Wong argues that the machinations of capital must occur in a morally regulated environment. “Governments,” he says, now quoting urban planner Jane Jacobs, “are the guardians of the capital markets.” When governments fail, as they obviously did in regulating such obvious malfeasants as Enron and Worldcom (the jury is still out on the government laxity in the shenanigans at Nortel), as Wong puts it, “All hell breaks loose.” This kind of talk gives Michael Walker chills. He is a libertarian skeptic about government intervention and is armed – and at least as dangerous as Joel Bakan and company – when it comes to marshalling anecdotal evidence that government can be just as morally bankrupt as industry. Besides, Walker says, “The president of General Motors is subject to infinitely more scrutiny [from the list of stakeholders that Brian Bemmels nominated] than the prime minister.” “That debate [on the ability and right of government to intervene] will go on forever,” rejoins Wong. But here is the inevitable and ultimate conclusion: “Corporations have to move to the high ground.” It’s the right thing to do, and as public expectations rise, it is increasingly the direction that will do the most to protect the corporate bottom line. Related stories: Believe it How to earn your wings