The only issue I have with this concept is Gamble's concept of the corporation as a person. I suppose speech is money.SAD!
(Really makes an oxymoron of 'free speech',no?)
The root issue is as Gamble states, and I can see that if you're going to start with the idea that corporations behave like "sociopaths"
the logical follow is that corporations are people.
I, for one, prefer the term " myopic profit chasing entity". A corporation is a legal construct that people hide behind.
Let's save personhood for human beings, sociopaths included. After all,throughout history, the worst people were just that:
Pol Pot
Attila the Hun
Hitler
Jack The Ripper
you get the idea here...
5
As the founder of an international private support group for white-collar wives who are or were married to the sociopathic elite "Masters of the Universe" who now call prison home, I applaud your efforts, but what you are suggesting is akin to parents telling their teenage sons they can't have an "unceasing bacchanal" while they are away. It's easier to train your dragon than train a corporation to have ethics. Corporations are the church of the rich and embrace deism rather than theism. operating like wolves in sheeps clothing and are ethical agnostics who practice at the altar of the almighty dollar. They live in a world created by them and for them under the mantle of "kill or be killed" to ensure they can feed their own. Like sociopathy, corporate greed is incurable but does respond to treatment because at the root there is conscience. Like Frankenstein, they possess empathy. Unless society begins to measure success in ways other than monetarily, this monster will yield its drunken power unapologetically. Thewhitecollarwivesproject.org is working in the trenches of corporate crime to show the true consequence of greed because when "Masters" are facing prison time, like clockwork they lay at the feet of their wives and children in the fetal position, begging for sympathy and forgiveness. Pathetic, and "Masters" no more. Folks, we are at that place where ethics be damned, but as Buckminster Fuller said, "We are called to be architects of the future, not it's victims."
10
Yes, it's called Benefit Corporation...and there are hundreds of us out there doing just that. https://benefitcorp.net/what-is-a-benefit-corporation
6
While Mr. Gamble has pinpointed the problem of corporations being beholden to maximizing shareholder value and thus amoral, opening up yet another avenue for litigation adds more complexity and bureaucracy to the problem that drains coffers and stalls progress.
A carpenter armed with a hammer looks for a nail. In the same vein, an attorney views the problem from the context of litigation and regulation.
An entity can only serve one master. Requiring corporations to act in a way that conflicts with the law will simply give ambulance-chasing lawyers another way to bring litigation and delay the courts with frivolous lawsuits.
We won't be free of the scourge of amoral corporations until we remove the profit-centric requirements, and start holding victimizers responsible for their actions. Being able to point to 'villains' that actually go to jail instead of being bailed out by their powerful friends would also quell the citizen uprisings over various corp misdeeds.
A polluting corp or violator of human rights won't open a sweatshop or fail to install protective devices if the CEO, executives, and board know they'll be personally on the hook once they're found out.
Pure socialism isn't the answer but we're living the extreme downside of capitalism. We need another type of society, one dedicated to service, not greed. We're about to destroy the USA so we might as well build something new from the ashes of our Phoenix.
1
@W
"An entity can only serve one master. Requiring corporations to act in a way that conflicts with the law will simply give ambulance-chasing lawyers another way to bring litigation and delay the courts with frivolous lawsuits."
I agree and disagree. Directors can only serve one master, but restrictions can be imposed on how they complete that service.
It is agreed that directors serve the corporation's shareholders. They don't have to do so at the expense of the environment, the dignity of employees, public health and safety, human rights or the welfare of our communities. See "Time to Change Corporations: Closing the Citizenship Gap."
Amending the duty of directors in the corporate law to reflect this change would be a huge step in the right direction. It would give directors the power to be good citizens while serving on boards. It would also re-invigorate captialism (a more benign socially responsible capitalism) as companies will be forced to retool to make their operations conform the new standard.
Brilliant solution by a lawyer!
Shareholder lawsuits. Settlement pays 40% after expenses. TO THE LAYWERS. That is after $1/fax page. No wonder the lawyers have still kept the fax machine alive.
How about making it easy to sue lawyers, corporate and others. Maybe small claim lawsuits against lawyers with no limits on amount. That is only way to sue lawyers and law firms without having a lawyer.
2
The beauty of Gamble's suggestion of an ethics code in each corporation's bylaws is that the creation of such a code involves a process, however unwilling, of self-inspection and choices between priorities. Even if you do it without your heart in it, it will be visible and have consequences. the idea recognizes the utility of hypocrisy, called wisely the homage that vice pays to virtue. As a lawyer Gamble knows the importance and influence of process. Get those people together in a boardroom and start them talking. Say all you want about how it won't work, but be ready to give it a try. The image of a sociopath corporation is powerful. No one wants to be tagged with that.
6
@Frederic Truslow
Why not just remove "attorney client privilege when lawyers advise on circumventing the law! Worked for corporations and you see how lawyers advise companies to break the law and every once in a while go after employees and scare them. Justice costs. Corporations have the money.
1
@Anil There's a reason for the privilege -- the lawyer and the client have to be able to talk in private. So the best solution is to encourage or embarrass corporations into setting out ethical principles they then are stuck with. This is the way it used to work 60 or 70 years ago.
Google starts with "do no evil" but now... Every company has an ethical provision in its bylaw but the top needs to lead. HR these days are a paralegal department, an adjunct to the actual Legal Department.
Beyond that, ethics itself is fuzzy at times. Absolute morality, political morality, and populist morality. Sometimes they intersect but often not.
Then there is the publicly traded companies. There are companies like Google, Facebook and Snapchat whose bylaws give founders unimpeded authority. Good if the founders are philosopher kings but mostly they are just human. Shareholders? Mural funds, index funds and pension funds precede retail shareholders. Then there are the activists and raiders. Yeah, the old greenmailers.
Amazon is famous for customer focused but what about its competitors and employees.
Mr Gamble has a good heart but the world is not neat and tidy. The best you can do is to teach your children well. Corporations start with education, ethical education, from grade schools to B-schools
We have failed to protect the real persons that live in this manipulated society of entitied "personhood". We can not compete with, or even coexist with, "the private islands of power" that makeup their own rules while we must abide with a latticework of public laws. Currently, corporations are like Trump, the sociopath, who thinks he can kill in public and not be punished. Susan wrote about B corporation certification that would govern that class of corporations for society's benefit. Good, a start for public oversight. Another, make the corporate "person" pay Individual Income Tax, like the rest of us. Further, silence this "right" to public speech and political action including lobbying. The stockholders have this individual right and it is a duplication or doubling of their power to think they can have another amplified say.
8
Indeed. This is exactly what the benefit corporation statutes adopted in 35 states allow companies to do. Delaware's version fits precisely into Mr. Gamble's description, with shrehoder derivative suits, the business judgment rule, etc. More than $2.7 billion has been raised by these companies to date. The late, brilliant Lynn Stout wrote a very accessible book on the on the shareholder primacy problem, "The Shareholder Value Myth," and I wrote a book called "Benefit Corporation Law and Governance: Pursuing Profit with Purpose" with more detail on the new form.
7
He had an epiphany? A few of us dummy lawyers in the Midwest had that “epiphany” in the mid-80’s when Wall Street convinced Delaware judges that a corporation had a legal obligation to “sell itself” to a corporate raider who it knew was a short term investor, planning on laying off thousands of employees, destroying the company, selling off assets, leaving behind broken towns that had spent millions building infrastructure, not to mention hurting long term legitimate shareholders who counted on the company for dividends every year. Nothing else mattered except the “shareholders”, even if they were raiders, banks, hedge funds and others who had bought the stock for short term profits and once the company sold itself, those large shareholders would dump the stock. See, Federated Department Stores in the late 1980’s when Mr. Campeau was supported by Wall Street selling itself off, get loaded with debt, and go bankrupt. See, TWA and Carl Icahn. Short term Wall St. speculators made their money and left behind broken shells
It got worse when analyst calls were only ways for the CEO and CFO to say they were squeezing 2 cents a share more that quarter so the stock would not “be punished” by Wall Street. The trade off was company executives’ stock options would be boosted and they would make more money, even while doing one more round of RIFS and telling their employee to “work smarter not harder”.
Nice to know some brilliant Wall Street lawyer had this epiphany recently.
15
This proposal offers the corporate world yet another layer of buzzword wallpaper. It's candy for remote shareholders, chum for lawyers and yet another civic-minded costume for all those hard-working "managerial professionals" clogging our economy with bureaucratic make-work and reducing the human factor to a set of numbers.
It's the wrong solution for the right problem.
7
Unethical behavior makes money and now, in the present administration, unethical behavior is now enshrined as being a positive trait. This is the path that corporations, government and the brain dead or greedy voters that have supported this type of behavior. It is not going to an easy task to change our current direction.
3
When companies are required to only consider shareholders, their focus is taken away from the workers and communities who built their wealth. Stakeholders must be honored for their commitment, often over generations. Compare them to shareholders, who increasingly are PE pirates seeking nothing more than the dismantling of companies to maximize profit by selling the pieces, loading up the remainder with debt, paying themselves outrageous management fees, then walking away from decimated stakeholders.
3
The impracticality of Mr. Gamble's thinking is NOT the risk of litigious parties or frivolous suits. It's that a new insurance industry will be required that is analogous to malpractice insurance.
A corporation's insurer will tend to find arbitrated payoff to a plaintiff cheaper than going to trial. The costs of that will have to be passed on to clients and consumers. I have personal experience of being sued by a party that was found at fault in an auto accident because the paintiff’s attorney knew that my insurer would rather pay a low liability claim than defend me, their client, in a trial, even though it was stipulated by law enforcement that I wasn't at fault. I wasn’t harmed, but this is why auto insurance rates are as they are.
More likely than a more ethical corporate culture is a new dimension of gaming the system.
What corporations need is a level playing field of fair regulation at the legislative and administrative law level, managed by states and federal agencies. But the heavily-funded lobbying industry, which serves clients who are competitors among themselves, has deep pockets (funded by client/consumer prices!) for preventing fair regulation.
So, there's no choice but to muddle along while working to have a Democratic Senate and a Democratic presidency.
2
This exists - any for profit organization can gain legal status as a “for benefit” organization in approximately 39 states (so far) by establishing in their bylaws they consider environmental and social impact in their governance vs. an assumption of “maximizing shareholder value”. The concept is to maximize stakeholder value! Further, a good roadmap begins by taking the B Corp assessment which can help a company begin the journey and aspire to “B certification” based on minimum scores reflecting financial, environmental, and social impact management. B Corp = “be a force for good”...
3
As long as investors are prepared to entrust their moneys to Barnie Maddoff like folks who promise huge returns CEOs cannot do much. Maximizing stockholder wealth mandate for large MNCs is the cause of all this turmoil in the country. Companies consider their employees dispensable and eliminate them as overhead and not human being with lives of their own.
Again consumers want cheaper goods made in China which are bought with no thought of the employees who used to make these goods but who are now unemployed. Only a few of these unemployed people are prepared to retool their skills and move on to other jobs. Blaming the CEOs is not enough - the general populations which is never satisfied with what it has is to blame.
**Thank you** for voicing what’s been going on in my head the past few years. As an investor, I would absolutely support a well-run company that acted with ethics - knowing I’d receive a lower ROI. If companies acted this way, maybe Socialism wouldn’t be so popular; the masses wouldn’t feel like they were being ground into the dirt.
2
Having worked for two sociopaths at two state government agencies, this does not only occur in the private sector.
I am thankful to have survived and retired.
4
He suggesting they become moral and think independently -- at the expense of their fabulous pay, accounts, and they'll be placed in a position to stop protecting their colleagues. How's that gonna fly?
8
It is about the right time to inject values and ethics guidelines into corporate culture that is now solely centered on interests
5
There’s this scam where somebody ask a transit user to buy them a bus ticket, and then, they sell the ticket and pocket the money. I don’t know what they use the money for but they are either homeless or close to it.
I don’t see much difference of the sociopathic behaviour of the shareholders, board members and their underlings and the behaviour of some of the homeless or near homeless. There’s this constant search for a revenue stream, any kind of a revenue stream.
4
I suspect Mr. Gamble was not paying much attention in his Business Organizations class. I had exactly the same revelation without ever interacting with any corporate executives.
In addition to their duty to make money for their stockholders, corporate officers have a duty to obey the law. The problem is not necessarily that corporations are amoral. The problem is that we, the people of the United States, are not making laws that appropriately constrain their behavior. A good start would be to prevent corporations from participating in making the laws that govern them.
12
@Joe "A good start would be to prevent corporations from participating in making the laws that govern them."
A good idea Joe. The corporation would have to lose its status as a person.
2
@Joe I agree. I'd like to see a law prohibiting any legislator from voting on a bill from which they personally benefit.
Convenient that he had this epiphany after retiring from corporate practice.
16
@attorney
no doubt about it; always convenient to "atone" after profiting. Problem is, the sociopaths are in power.
t
2
You need to get out into the world of aggrieved consumers, employees, and other non-shareholder folks to discuss honestly the ethics of money, because that’s where the hurt is.
The ethics construct presented here stays only within the closed circle of board of directors and their shareholders. You will never operationalize ethics in finance there.
Ethics was never part of the equation of globalization, and the world’s top financiers have been profiting immensely without it.
Mr. Gamble’s “epiphany” of inserting ethics now, into the river of blood money flowing at the speed of light from from tax haven to tax haven all over the world, is weak even as fantasy.
You need to bring the law to bear on these rentier, hyper capitalists Mr. Gamble aptly characterizes as sociopaths. You can’t just ask them to please be good boy scouts.
He’s dreaming that shareholders would sue their board of directors for NOT putting ethics before profit, the way they can sue them now, under the law, for not maximizing their profits.
There’s actual legislation to enforce maximization of profit, but nothing binding about ethics.
Can you see debt-industry sociopaths telling their savagely greedy stockholders to put ethics before profit? None of them understands anything about morals.
Upton Sinclair’s quote comes to mind: “It is difficult to get a man to understand something when his salary depends upon his not understanding it”.
oz.
9
Elizabeth Warren has the best idea: put labor representatives on every Board Of Directors.
10
We cannot trust these firms to self-police because, well, not adequately self-policing is exactly the market failure these rules would address. So I'm not convinced by his groundless assertion that “directors will not want to engage in a required process of ethics formation that is transparently a sham.” Prior experience suggests exactly the opposite.
A federal commission should craft these ethical obligations and standards, to avoid the temptations from writing your own regulations. Under something like Warren's plan, the rules would only apply to very huge companies. That is a fair system in which all relevant firms are identically regulated, the rules and their interpretation are clear and consistent, and these ethical obligations are written into the standards of company conduct.
4
Corporations in the capitalist system are designed for one purpose - to make (and retain) as much of a profit as they can. You can dress them up with all the fancy corporate goverance rules you want. They will just be window dressing to make them look better. They will change nothing.
2
If the Supreme Court declared that a corporation can be a person, then this would seem to be an evolutionary consequence of that decision..
Humans are born with an instinct for survival. Importantly, though, we have a brain and nervous system---facilitating development of conscience, judgement and morals to moderate the survival instinct.
Profit seeking is the equivalent of a corporation's survival instinct, If Bylaws are an integral part of the company's anatomy, then they should be a mechanism to monitor the entity's actions with conscience, judgement and morals--in addition to maximizing shareholder value.
1
@Marc G: Unfortunately, with globalized capital markets any firm that has a "stakeholder" orientation. i.e., one that had worker and community directors, would find that foreign capital would vacate for more profitable ones.
That is the beauty of capitalism: a purchase of one share of stock for one day takes precedence over working in that firm for 20 years and the community in which it is located for 50 years.
1
@Marc G
Bylaws are static. Business activity is fluid, adjusting to success and failure in the course of days, months and years.
Most business decisions being made these days seem to be operating in the course of hours, dancing around those stoic bylaws.
Long-term planning in the hands of faceless, interchangeable workers will never produce a successful long-term plan. The buck never stops, the worker cashes their paycheck and moves on. The owners inhabit their own private world and behind a rapid-fire of barely-legal financial transactions, the modern business world sinks into a comfortable, immovable assortment of income layers.
Ethical behavior, civic concerns and empathy for all the people those business activities affect: completely optional, no matter what the bylaws say.
The society withdraws into enclaves, the owners meander leisurely through the philanthropy bazaar, and the barely employed collect bottles and tinker with their brain chemistry.
America is made great again.
I’m sorry. I just had to chuckle after reading this piece. During four decades in the corporate world, much of it in the upper ranks, I have a hard time recalling any episode where the profit motive did not trump all other considerations. Even when a company vowed to “do the right thing,” the decision to proceed was always based on the impact it would first have on profits. I can’t tell you how many times I felt like an outsider looking in when I would say that ethical concerns were paramount even as the sycophants around me would disagree.
The premise of this column is, indeed, noble, but I wonder how much it takes into consideration the real world.
7
@LIChef
I would say it is extremely cognizant of the real world and offers an idea to fix a problem that is potentially evolutionary.
The truth is that when corporations were first invented, their duty to the public interest was embodied in the corporate law. It wasn't until a Race to the Bottom in the second half of the 19th century that state legislatures eliminated those duties (and not until almost 100 years later that the reason such elimination was a mistake became apparent.) See "Time to Change Corporations: Closing the Citizenship Gap."
While potentially evolutionary, the idea in fact recognizes and would reverse a mistake made more than 100 years ago.
4
@Robert C. Hinkley You are right on, Mr. Hinkley. I believe that these facts and solutions are well developed in the recent book "Prosperity: better business makes the greater good" by Colin Mayer. Every economist should be studying it and getting on board. Laws about corporations must be upgraded.
I had thought that corporations became entities in order to protect the sociopathic shareholders and Boards who hire the best sociopathic underlings to carry out their orders and maintain daily operations.
But ANYTHING is worth a try.
3
The very real problem with the idea that corporations must consider the impact on others is that it’s almost impossible to do that. Every new technology or idea has the potential to harm some people while helping others. To reference an old trope: the automobile rendered buggy whip makers obsolete. By Mr. Gamble’s standard, it would have been unethical to invent the automobile. Or computers or digital cameras or the telephone or Amazon....
This is a deeply silly and entirely unworkable idea.
1
@Shiv
Not so. Mr. Gable's idea doesn't involve "protecting others." He identifies five specific elements of the public interest, including "future generations." Only by violating these interests do corporate directors possibly run afoul of the law and face potential liability.
The idea is timely and shifts the burden of proof that is now in the law (which some have said amounts to nothing more than don't steal or allow related persons to steal for you).
The idea is headed in the right direction. It could be made more specific, but conceptually its well though out. It just needs to go farther by making it the obligation of management in every corporation part of the corporate law.
2
@Shiv
The rendering buggy whips obsolete metaphor is a bit different than underpaying workers, overpaying management, and raping the environment. Complex situations will arise, as we see in considerations about automation and off-shoring, but there are still some pretty clear-cut goals that could be achieved by overhauling the soul of the corporate world.
3
@Shiv
I think you are being deliberately obtuse. Harm would have to be real and measurable to be proved in court. Given (as the author notes) the high burden of proof that would be required, I doubt frivolous lawsuits would be the issue.
Consider how many children got irreversible brain damage before corporations were required to take the lead out of gasoline and paint.
1
The gentleman should check on Canadian and UK laws where- by boards have to consider all stakeholder in making decisions.
Also, maximizing long-term value means implicitly having to consider other stakeholders than shareholders as it may plausibly be argued that disregarding other constituencies will create survival issues for the corporation in the long term.
7
The Corporation is legally a person. Not imbued with human instincts or humanity. Hence, how do we account for what it does or doesn't do. If it breaks the law we fine it millions and billions of dollars. This does not do much to curb its behavior. Incredibly these fines are paid without a blip on the balance sheet or their credit rating. Directors and Officers, the human manipulators of these Corp. are seldom touched. Without any true penalty which can touch the Corp., greed rules. E. Warren may be right, Federal Charters for corporations; the very threat to a Corporation's life. This touches not only corp. management, but stockholders, supposedly the true owners, in the pocket book making them more aware of their stake, responsibility and the need to protect it.
7
@impegleg
Good observations. Like any institution the corporation is created with noble purposes in mind (e.g. to facilitate capital formation that will grow our economy), but then can become perverted to benefit the people who run them at the expense of the public interest. (The same can be said of governments).
The way to solve this problem is to put limits on the people running the institution to make sure this doesn't happen. Mr. Gamble would do that by getting corporations to change their governing documents (e.g. bylaws).
The better solution is to change the law so that the directors of all corporations become more respectful of the public interest.
The optimal formulation for this is to ensure the pursuit of corporate profit does not come at the expense of the environment, human rights, public health and safety, dignity of employees or the welfare of our communities. This can be done by simply adding these words to the duty of directors embodied in every state corporate law (or by making it the national law and requiring at least big corporations to re-charter federally (as Senator Warren suggests). See The Code for Corporate Citizenship in "Time to Change Corporations: Closing the Citizenship Gap."
The Code would give precedence to those five obligations to the public interest over the duty of directors to preserve and enhance shareholder value (make money). A leading Australian newspaper called this idea a corporate Hippocratic Oath as far back as 2007.
6
@impegleg its called fiduciary duties...this whole contrived, let me feel better about my former legal career, freudian slip effort re: "corporate ethics" is just a scam to deny fiduciary duties owed, they are owed to the corporate form as well, i..e the non "human" of all this, is completely controlled by accountable duty bound "humans" who largely, when in hierarchical situations, fail to RISE to such standards to protect their charges, the community they thrive in and the owners they WORK for, in my situation there were EMPLOYMENT contracts, all breached, nothing to do with a lack of "corporate ethics"
1
@Robert C. Hinkley, am I correct that your suggestion would simply further "humanize" the corporate form? aint happening, unless of course your idea is adopted and then we'll really be dealing with AI enhanced invisible "targets", that with law, never get hit. The problem is the Court, period, CU needs to overturn and other findings must set precedent to protect against any AI potential "Humans" in this country.
Gamble's applies the Nuremberg Defense to capitalism, that "the people who hired him and that his firm sought to protect — 'are legally obligated to act like sociopaths.'"
1
The business and law schools should all be required to teach their own version of the Hippocratic oath: First, do no harm. From the moment I entered the corporate world, I was asked to violate every humanitarian impulse instilled by parents, clerics and educators. Churning of accounts, i.e., fraud, is one of the first things you learn as a stockbroker. (Read Liar's Poker, by the brilliant Mike Lewis.) And outsourcing of employee benefits is the elimination of employee benefits.
Moreover, I could write a book about corruption at defense contractors in Silicon Valley. UTC, Ford, Aerojet, JPL, Lockheed, Dalmo Victor, etc, they all play by the NASCAR rule: If you ain't cheatin' (the taxpayer), you ain't tryin'. Oh, and their business model is murder on a grand scale, women and children included. .... Don't forget blowback. Osama bin Laden and the mujahadeen were trained and funded by Reagan's CIA. The Gipper also wrecked large chunks of Central America. The coffee barons in El Salvador were/are Gipper goons.
Balzac is right. Behind every great fortune lies a great crime. The wealthiest nation on earth is far and away the most dangerous nation on earth. And it's not just the bodies stacked like cords of wood, from Indochina to Iran to Honduras. It's the opportunity cost of "defense". (From whom? Of what?) Imagine what an extra trillion bucks/year could do for infrastructure and health care and education.
13
@Mark Buckley Another great read in a similar milieu is Po Bronson's "The First $20 Million is the Hardest."
Too bad he didn't see the documentary, "The Corporation" in 2003. It might have gotten him moving a bit sooner. This is a start, but it's very late as our government and (corporate owned and controlled media) are completely broken by corporate influence and money.
https://en.wikipedia.org/wiki/The_Corporation_(2003_film)
5
Gamble and the NYT should mention that Karl Marx noticed the sociopathic behavior of capitalists almost 200 years ago. Give credit where credit is due.
6
So we need to stop electing sociopaths to Congress. At least Trump has made it easier to identify them.
4
rein in the number of males in the boardroom (and everywhere). enough with men running everything. you have messed everything up for way too long. the writer of this article. the photo. yuck. enough with the males.
@cait farrell It seems you are aware that women in executive positions tend to govern corporations very much like men on the issues discussed in this article. Much like the political landscape. Power corrupts women in the same way it does men.
6
@cait farrell Vilifying a subset of humanity (men, white, et al.) isn't the answer, and if you want a rebuttal to your male-bashing, read "The Myth of the American Male," an eye-opening book from a former Vice Chairman of NOW.
He too had an epiphany, and he debunks all the "men are evil" tropes for your reading pleasure.
Sounds like good ideas! Now, is any politician in either the House or the Senate willing to stick their neck out, draft that bill, and bring it to the floor? Anyone?
1
Sounds like Elizabeth Warren has something along those lines.
“The corporate entity is obligated to care only about itself and to define what is good as what makes it more money,”
Well, DUH! It took him how long to figure this out? And his solution is to transfer safety, labour and environmental regulatory power and oversight to corporations? Sure, our gvts don’t do it anymore, but I doubt the corporations will do anything that’s not self serving, eh Boeing?
3
Better late than never Mr. Gamble, to repent by denouncing the executives owned by the mighty powerful god Greed...in dictating governance for self-enrichment as the only goal driving the corporate world, social justice being just a negligible afterthought best left for the feeble-minded with a conscience to deal with (that knows right from wrong!). Too bad that self-redemption is considered a weakness, and the loyalty to powerful Mr. Money an all-encompassing goal to be reckoned with. Ought we not feel for these poor rich fellows, drowning in their own garbage, possessed by what they own, subservient to their material wealth, otherwise spiritually empty?
I don't want to be cynical but why do these people always find God after the check clears.
11
@robert conger. ...or when they have a book coming out.
5
Read here, from 2010, about the "Harvard School Of Sociopathy". This insight has been around a while.
https://littlebloginthebigwoods.blogspot.com/2010/10/harvard-business-school-has-no-clothes.html
4
It’s no secret that sociopaths/psychopaths tend to ascend to, and hold, top corporate, legal and political positions. If you’re doubtful, the documentary “I Am Fishead” might open your eyes.
Are corporations innately sociopathic by their structure? Or are corporations sociopathic because of the influence their leadership? It’s kind of a chicken and egg debate. Either way, the sociopaths are benefiting at the expense of the non-sociopaths.
And it would seem that the unabated and growing disparity between the wealthy, sociopathic class and the rule-abiding “underclasses” must reach a tipping point. It’s anybody’s guess when and in what form the revolution will come, but rest assured, it will come.
“Corporations are people, my friend.”- Mitt Romney
5
@EJ He says Corps are sociopathic because the officers are exempt from responsible and are judged by maximizing shareholder value which can be interpreted narrowly as profit-minded to the exclusion of all else.
A corp that makes $1 more by killing thousands of people must choose the amoral route or risk being sued. A shareholder can sue for failure to maximize and the CEO is bound by the board to do so. It's a ridiculous system set up by psychopaths.
What he's advocating for are essentially benefit corporations, which already exist. For example: AllBirds, Patagonia, and Casper.
Hmm, the man worked at AIG, the company at the epicenter of the financial meltdown. Some would argue that AIG was the underlying cause. And that wasn't enough to have this epiphany?
6
Some years ago I watched a French movie about a corporation involved in a take over fight. In the movie, the leaders and board of directors of the corporation involved spent a lot of time debating the potential social impact of their decisions. To American companies, this would be a big laugh. No one in America, except perhaps an executive at home downing scotch and soda, spends half a minute worrying about social impact. Doesn't come into play.
We have gone way overboard with the idea that a corporation has no soul and no purpose other than grind out money. Under the current view of fiduciary responsibilities, a corporation would be legally obligated to sell deadly drugs so long as they were not against the law. Anything goes.
DISH Network, the satellite television program provider, once promised its mainly rural subscribers that it would never carry porn programming. Then, the responsibility to shareholders was cited as the reason to breach that promise. There was just too much money to be made in porn to pass up. Likewise, corporations have said they can't pay their workers more because of obligations to shareholders. In other words, if there is more money to be made, they have to make it, take it, grab it, get it any way they can.
Ultimately, this is a destructive path that could lead to environmental and social disaster. Indeed, many people say it has done so even now. There has to be a higher purpose to human life than making money by any means available.
5
@Doug Terry I worked with Charlie Ebbers as a former broadband provider rep serving Echostar/Dish, and I can say for certain Dish hosted porn from the beginning but it was a closely held secret. They had enormous fiber traffic from Boulder, CO where one of the largest porn purveyors is located.
Why did Charlie and the board keep it hidden? To max profits and keep their image. But behind the scenes the corp acted amorally: it was in the corp's but not their customers' best interests.
Shareholder maximization was never a “rule” or a legally binding precedent. Corporate folk wisdom spun from Milton Friedman and Reaganism and Gordon Gecko-era greed. Time to pay the the piper draws nigh...whether this happens through legislation or pitchforks, it is up to the corporate sociopaths to pick their poison.
2
He has concluded that corporate executives — the people who hired him and that his firm sought to protect — “are legally obligated to act like sociopaths.”
This was an epiphany? I've known this for a long time and I didn't have the access to them he did. All you need is the definition of a corporation.
trump is the definition of a corporation. Only look out for yourself and don't care about anything else.
2
I like his suggestion. Without laws some internal compass a corporation is a psychopath for profits only. Corporations must faithfully serve the communities they make a profit from or they are of no value to humanity.
1
"what kind of person they want their corporation to be"
That's the problem, right there. Do you sit next to a corporation at lunch? Are you stuck in traffic behind a corporation? Has anyone ever spotted a corporation in the voting booth? "Hey, kids, it's time to go to Aunt Corporation's house for Christmas dinner!"
A corporation is not a person.
2
@SapperInTexas "A corporation is not a person."
Seems like the Supreme Court granted personhood to corporations a while back.
3
@Frank Baudino Not one of the court's best decisions.
2
Please see the seminal book called the Shareholder Primacy Fallacy by the late Lynn Strout, a legal scholar and professor. Here's a readable blog about why the idea that Boards MUST MAKE MONEY AT ALL COSTS is a complete fiction. http://evonomics.com/maximizing-shareholder-value-dumbest-idea/
I wish the reporter had provided the context that Mr. Gamble's ideas exist within a body of scholarship - including women economists, legal scholars, and business owners.
4
Typical recommendations by someone who has never run anything bigger than a Lemonade stand.
There are fiduciary requirements and duties and there are legal requirements when you are an officer of a company.
The rest is fluff and will only get you sued or hamstrung by activists who own a single share of your company.
You don't like a company - don't invest in it and don't buy their products or organize a movement that does both.
1
Yah, right. Corporations, their CEO's, CFO's, Chief Counsels and Boards are going to do something that echoes that refrain from "Guys and Dolls":
The one that goes, "...sue, sue me, what can you do me..."
If what Mr. Gamble proposes -- having been to the mountain and had a conversion to truth, justice, and the American way -- then his code should be imposed by the SEC in regulations with clears lines for corporate amelioration and litigation.
Gamble should find a good corporate lawyer to consult about that.
1
As one commenter noted, and as the late Professor Lynn Stout probably would have agreed (https://www.youtube.com/watch?v=k1jdJFrG6NY), legally, companies have more discretion to take socially responsible actions than is often assumed. Plus some of what Jamie Gamble proposes already is being done by B Corp legislation and practicing B Corps. Nevertheless, he is taking things in the right direction. But why not go much further. How about a vision of an economy with socially and environmentally responsible companies, both large and small, the norm? None of the green economy/climate change plans/initiatives getting attention have such an element, but it is there for the taking. Relatedly, see this posting for a webinar this Wednesday on how far Patagonia is taking such an idea, https://community.sustainabilityprofessionals.org/event/patagonia. They state: "We're in business to save our home planet." But why just limit it to this one company? Here are many more ideas on what this could involve, https://www.ramapo.edu/mass/files/2018/06/PolskyA_Green_Economy_for_NJ.pdf.
8
@Matt Polsky
Agreed.
The optimum formulation is to ensure the pursuit of corporate profit does not come at the expense of the environment, human rights, public health and safety, dignity of employees or the welfare of our communities. See The Code for Corporate Citizenship in "Time to Change Corporations: Closing the Citizenship Gap."
The Code would give precedence to those five obligations to the public interest over the duty of directors to preserve and enhance shareholder value (make money).
Rein in the corporate lawyers.
Who has a "duty" to defend "zealously" the boardroom sociopaths? And charges $1,000 per hour doing so?
Change the law governing legal ethics of the profession.
What if the law required all actors in the justice system, from judges to prosecutors to defense attorneys, to render justice rather than to win at all costs no matter the consequences no matter the injustice?
How about a professional and legal duty not solely to the client, but also a broader duty to fairness?
And if you can't change the system, how about quitting your lucrative partnership and joining the prosecutor's office?
Wishful thinking.
To borrow the proverb from scriptures: Lawyer, heal thyself.
4
“The corporate entity is obligated to care only about itself and to define what is good as what makes it more money,”
Mr. Gamble’s proposal is this: that every company devise a set of ethical rules to be part of their bylaws, a move that would potentially open them up to shareholder lawsuits should they fail to stick to those rules.
------------
Yeah.. that's complete nonsense.
Corporations are NOT obligated to only care for themselves, but rather their leaders are deliberately compensated to only care about THEMSELVES. Compensation plans are designed to make executives selfish minded, and the corporations reap the benefit of the behavior.
An "ethical set of rules" already exist in most corporations, but rarely are executives compensated to insure they are followed and practiced.
This lawyer is talking out of both sides of his mouth here. The issue is compensation.. and compensation practices for executives.. because at the end of the day.... they will always follow their compensation.
You want to see this fixed Mr Gamble.. then get with the program and reign in compensation and properly tune it to drive ethical behavior.
5
It would be too easy to make the obvious cynical comments. So, I won't. But nothing like this will ever happen in America. Or anywhere else.
1
Indeed, there is an innovation in corporate governance --called a "Benefits Corporation"-- which enshrines the principles described by Mr. Gamble. People incorporating in 34 states currently can elect this legal form of organization.
I teach an MBA course on business, society, and the environment in which we spend several weeks exploring the practical ramifications of the traditional "maximize profit C corp" versus an alternative imperative to balance benefits to all stakeholders --people, planet, and profit-- in the corporation's operations.
Turns out that the devil is in the details . . . we have a finely developed (although not always effective) way of assessing corporate financial performance for investors: a conventional financial audit. There is one organization (see https://bcorporation.net/) that is working on developing a similarly rigorous annual audit process for social and environmental performance of corporate organizations. If this article piques your interest, check out B Lab to learn about how organizations like Kickstarter, Patagonia, and Danone Yogurt are putting them into action!
3
The notion that corporations "are legally obligated to act like sociopaths" seems to be a perpetuation of the "pernicious nonsense" of maximizing shareholder value. I think Mr. Gamble is right on that ethics should be imbedded at the heart of corporations, but I think his characterization of this "legal obligation" is just perpetuating the shareholder value myth. Here's a great HBR article that explains more: https://hbr.org/2017/05/managing-for-the-long-term#the-error-at-the-heart-of-corporate-leadership
"do-gooder proxy contests and lawsuits grounded in little more than platitudes".
Well, I'm glad the author Mr. Sorkin is not biased or anything like that. By the way, the biggest platitude is that the market leads to the greatest good for the greatest number (see Recession, Great or Crisis, Financial). Apparently some platitudes are better than others (with apologies to George Orwell).
4
What Mr. Gamble is calling for is a new philosophy.
Plato based his philosophy on kidnapping all children under the age of 10, excluding women from the legal system (Go ask the Oracle!) and permanently installing a Silver Army between the Ruling Golds and those pesky Bronze worker-bees.
Well, we all know what THAT looks like, don't we?
The five points presented are excellent questions.
They are the questions I want to see answered.
But I can't help but feel that Andrew Sorkin, this article's author, is preaching with his eyes squeezed shut so that he won't see the future tsunami that is already bearing down on us.
* Global climate collapse
* Fracking
* Microplastics
* Crop failures, worldwide
* Overpopulation
That bill is coming due.
It was all created by the "Sociopaths".
All solutions to any of that are being (legally) shouted down.
THIS is the bottom line of "Citizens United", where corporate money is used to silence citizens.
Thank you, Jamie. This is needed.... like back in the last century.
Elizabeth Warren: "I've got a Plan for that!"
4
“The corporate entity is obligated to care only about itself and to define what is good as what makes it more money”
The article does not make clear that this is a change from an earlier model for corporate responsibility. In the 1960s, my boss had me read various business-school textbooks. They agreed in asserting that an executive had duties to four constituencies:
(1) The shareholders
(2) The employees
(3) The customers
(4) The larger community
These textbooks taught the student that it was a crucial and difficult part of his job to balance these often conflicting interests. There was also a claim, sometimes implied, sometimes explicit, that serving all four constituencies effectively was the way for a corporation to be successful and profitable in the long run.
Joel Bergsman, music observer, and others have comments reporting a similar earlier model; Benjamin Kuipers’s comment gives useful references about how the earlier view changed.
Mr. Gamble proposes a change in corporate bylaws that writes in something close to this earlier model and permits directors to work around their legal obligation to maximize shareholder value. That is a potentially useful first step, but the legal change will do little unless it is accompanied by a change in corporate culture.
In working toward a more responsible corporate culture, it may be useful to know that we are proposing a return to a widely accepted corporate ideal of 50 or 60 years ago.
Guy Carden
Pullman, WA
3
@LG
Didn't this change of POV begin with the increased popularity of the MBA degree, and other professional management programs, in the late 1970s / early 1980s?
4
@Sussee Q
I think the big business schools started out with the multiple-constituency / stakeholder position (“managerial capitalism”) and changed to various versions of shareholder value gradually over time.
Steve Denning has a useful 2017 article giving a view of the history:
https://www.forbes.com/sites/stevedenning/2017/07/17/making-sense-of-shareholder-value-the-worlds-dumbest-idea/#121f28e42a7e
Dunning cites crucial academic sources for the shareholder-value position in 1962, 1976, and 1990, and assigns substantial political responsibility to Reagan and Thatcher in the 1980s.
By the way, Denning argues against both the classical multiple-constituency position and the shareholder-value position – I think he'd find Gamble's proposal impractical.
Guy Carden
Pullman, WA
The bylaws are a start. They might be laughed at and/or ignored without a few more changes to reinforce them. We forget about the destruction of American norms and the American work life we've seen with corporations chasing quarterly results. I'd reduce the earnings season to one, not four. Quarterly forces corporations to squeeze out every penny and usually it's the consumers and employees that suffer. Health insurance has been cut, deductibles have risen, meds are out of control, pensions barely exist, employees work longer for relatively less, there's no joy at work as productivity is relentlessly chased and employees are increasingly monitored. As for products, they've gotten cheaper and more disposable as shortcuts get taken. We are victims of our fervor for capitalism. And frankly, as Gamble points out, we need to pay attention to global warming and the damage done or all this is moot. Maybe we should enforce clawbacks -- make those already enriched by evil deeds pay restitution. It might act as a deterrent. And for any of this to work, including Gamble's ideas, you have to take money out of government. Our government is so corrupt right now, you'd have a hard time getting dirty money out. Look at Mitch McConnell and his and Chao's machinations. Or the bills he kills in return for investment in KY. And he's the corrupt Cabbage Patch character that's the Senate's gatekeeper. What a tangled mess.
3
We all keep acting like someone else should do what needs to be done to save us all. The basis of the argument is corporate greed which is actually individual greed with short term goals. We have not and are not thinking well about the future for all of our children. We're all to driven by advertising and seeing what the wealthy have that we also want. This is an endless cycle where even wealthy people don't think they have enough--really, does anyone really need another billion?
We are maxing out World resources at an astounding rate. We have not and still do not pay the full price of what we buy, use and throw away. We act as though water, air, etc. are free and they are not--we are running out. We have not been paying the full price for many years and are playing in a huge Ponzi scheme that will crash in our children's or grandchildren's lifetime. We pay mega amounts for plastic to protect everything we buy including for transocean shipping so things are not broken even when they sink into the ocean. But we don't protect our water. We like what scientists have provided in terms of understanding how to make our lives easier, our houses warm or cool, but we have not listened when they say we are in deep trouble. All you need to say is I'm not buying things I don't need. I'm willing to pay more to assure that I'm gaining a product or service that cleans up after itself.
4
It is really hard not to be snarky. An attorney at the top of his game, is several years into (early) retirement before it occurs to him that the corporations he represented weren't exactly ethical? Didn't look beyond the bottom line? Didn't care about negative impacts on the community or world from their corporate behavior?
To say this would "not exactly come as a revelation" to most readers is a bit disingenuous. ( and aargh, I'm sure HE benefited from his work for AIG; the name still fills me with consternation because while he was big bucks, like others. I lost)
He blames it on the law. Well, after greed, I blame a lot on poorly written laws as well.
But I know that laws slanted in favor of businesses - big businesses - are often actually written by lobbyists paid by those corporate entities, the same corporations who grease the palms of many a pol, to insure that the legislation is "business friendly."
Still, I like the idea of a governance rule which mandates a different variety of contract - those outlining ethical standards. But I still would like some teeth in the law and penalties for violations.
Such rules must be in concert with reformed rules about campaign financing, so that government cannot so easily be bought and sold.
They are supported by candidates like Elizabeth Warren.
2
I shouldn’t have been, but I was shocked that Caroline Kennedy is on the board of Boeing. Nothing against her personally, but what does she know about designing and manufacturing a plane? Or running a complex corporation? I’d much rather have employee experts from various levels within the corporation on the board to ensure essential questions are asked.
Right now it seems corporate boards are made up of tribal executives all on each other’s boards reinforcing shareholder short term profits. I can see them patting each other on the back for what a good job they are doing - with little care nor questioning of the larger societal and ecological implications. Now it appears they have glamour in the tribe as well.
Warren’s plans are concrete and would break up the self compensation, self righteous, closed loop of today’s board. Vote Warren!
6
Not new news. I think free enterprise ought to be a valuable component of any successful, democratic country. But shareholder value capitalism is completely undermining all capitalism and is one of the contradictions that will, as Marx said, eventually bring it down. The masters of the universe who could reform things seem to have no interest or the ability to do so. It could all end in violent overthrow which won’t help anyone.
2
Mr. Gamble suffers from a serious case of cognitive He says in effect the law makes corporation heads act as profit-grubbing sociopaths. Then he makes clear that his fix is strictly voluntary and leaves all the power in corporation hands. Frankly his proposal sounds worthless. Far better is Elizabeth Warren's plan for more regulation to rein in these "profit sociopaths" Calls for voluntary compliance for corporate America are a a hoax.
4
This is interesting.
Of course "corporations" are not the same thing as businesses generally.
Typically corporate governance reform--the idea we need to better align the interests of shareholders and management--is more a question of agency, duty and accountability. Not ethical capitalism, which would apply to any business, large or small.
But maybe there is some truth in the idea that under current law corporate managers have no discretion to act ethically, absent some express permission from shareholders as this guy proposes.
But that prompts the question: are closely held private companies (where shareholders have a large say in management decisions) any more ethically minded?
You see Patagonia and Chik-Fil-A forgo sure profits to follow their particular ethical principles. But not sure you see the same thing from Koch Industries or Bechtel.
I guess I'm wondering, is this a corporate governance issue (i.e., an agency problem) or just a broader issue about business and capitalism generally (presumably better addressed through direct regulation)?
But I can't say that it doesn't sound like a bad idea to let shareholders choose if they want to prioritize ethical considerations over the bottom line.
4
@Mmm
Good questions.
That being said, it doesn't have to be either or.
Rather than let corporations choose whether they want to prioritize ethical considerations, why not temper their obligation to pursue the bottom line with obligations not to harm the public interest (e.g. the environment, human rights, public health and safety, dignity of employees and welfare of our communities)?
@Mmm, interesting comments, but I did read the article differently on one point: I read it as a technique to provide 'cover' for actions that have no immediate profit value. When I lived in a corporation, attempts to provide value to the customer were only allowed if we used the language of how it would benefit the company. It seems an attempt to allow other considerations to bear and bring balance to decision-making.
If the law requires corporations to be sociopaths, it stands to reason that those who rise to lead corporations would have native skills in that area. Sociopaths naturally rise to corporate leadership.
Corporations left to define their own codes of conduct will, because of the first observation, never define those codes in a way that might interfere with profits.
The only ways to limit corporate excess is external regulation and limits on corporate power. For one, corporations should be forbidden from making political contributions or spending money to influence political issues.
We allow corporations to exist (without state imprimatur they could not exist) on the theory that they benefit society. Allowing them to influence our politics is clearly not beneficial to democracy.
8
The requirement to "show intent" or prove "bad faith" is the
Get-Out-of-Jail card the corporate world and gov. institutions have gifted to themselves.
The bar is so high, that, as we have seen after 2008, and now Trump's corrupt administration--that few obvious bad-actors are ever held accountable.
I think that is the real problem today.
4
How about changing the DNA of all companies, corporations and non-profit’s in the US? All Business within the US would have to recharter their LLC, INC and all other business entities would have to file new federal charters to ensure their mission follow something analogous to benefit corporations.
What you measure causes a behavioral reaction. B-Corporations have a rich and detailed measurements system which outcomes would be public and could be changed based on the outcome desired.
To me the essential question is:
Does capitalism exist to support the good of all societies and the planet?
Or does society and the planet exist to support business entities and executives?
Right now, the laws and resultant behavior say we the people agree that society exists to ensure businesses grow exponentially, via exploitation of workers thru pension and wage theft, that businesses can control our democracy via lobbying and political influence and they can wreck the very environment of the world we live in.
6
Sociopath: a person with a personality disorder manifesting itself in extreme antisocial attitudes and behavior and a lack of conscience.
As someone who is old enough to remember when Corporations treated their employees as assets instead of liabilities I believe the above definition has become a prerequisite for recruiting senior management.
Add a compensation structure that rewards selfishness, a system that insists that share holder value is the one and only corporate objective and what do you get?
Grotesque income inequality and the "gig" economy that benefits the 1 percent and leaves the 99 percent out of the picture leading to insecurity and the general social disorder.
CEO's who seem to have no problem being rich in a poor country and the 2008 financial crisis that destroyed as much wealth as the new "Gospel of Corporate Prosperity ever created.
Sad. Except for the 1 percent.
6
I would love to see these kinds of ethical rules applied to private sector, for profit health insurance companies. I can't think of anything more "sociopathic" than a bunch of executives at Aetna, Blue Cross Blue Shield & Co. denying a much-needed lengthy hospital stay to a policyholder on the basis of needing to save money and therefore satisfy shareholders.
I am not poor or destitute, and I have health insurance. But in the United States nothing, absolutely nothing, terrifies me more than becoming seriously ill and having life-and-death decisions dictated to me and my doctors by health insurance executives and the major shareholders of health insurance companies who are sociopathic enough to view a premium-paying policyholder like me as nothing more than a source of revenue extraction. Anybody who doesn't realize that health care in the U.S. is already rationed for the non-wealthy is willfully blind or in denial. All the fear-mongering about government-led "rationed health care" during the ACA debates a decade ago was pure gaslighting and deflection.
Americans need to wake up. They need to ask themselves why their country does such a terrible job of reining in the sociopathic, megalomaniacal, god complex afflicted tendencies of the very wealthy. Residents of other advanced industrialized capitalist democracies don't live their lives in fear of being steamrolled while sick by a bunch of faceless boardroom billionaires and the corporate executives they control.
9
I am still baffled by this notion of "corporate person-hood" and see through the lens of Citizens United where we have two very different kinds of person-citizens.
One kind of person citizen who bleeds, when cut, cries when in anguish and physically serves the country in the Armed services and go to jail when she/he commits a crime.
And another kind of person who does none of the above things and at the same time, effectively shields its owners and manager from jail time while giving them an unduly large influence in the formation of our laws and in the election of our public officials.
American elections are now manipulated, if not controlled by the Corporate persons in our midst who have all of the rights of citizenship without any of the responsibilities that American citizen must shoulder.
At their core, Corporate Persons are anti-democratic!
14
@CountryBoy
So right. I would add that one of the two parties is actually dictated if not controlled by corporations. And so is the Judiciary! Evidence? Citizens United. Tax relief, no, bonus for the rich. Global warming denial, and further erosion of environmental policies.
2
This concept is even more important for industries like healthcare, where the social expectations for ethical behavior are even higher than, say, consumer products. Yet when it comes to prioritizing profits over other stakeholder interests, healthcare corporations tend to behave pretty much like corporations in other sectors.
6
I’ve been employed by numerous large companies and all had ethical training and expectations but above middle managers I never saw or heard of anyone actually paying attention because even if it became obvious they cheated it had to be a bigger number than was accepted to get them to seek new prospects and were all wished well in their new endeavors with a usually large severance. And as it turns out it was normally a fellow executive that dropped the dime to enable their own advancement
6
This already exists in the form of benefit corporations. Not sure why this is being treated as new.
1
@MefromSF
How many out of the total of American corporations are benefits corporations? A tiny slice of the pie, while encouraging, isn’t going to solve the overall problem.
3
Watch the documentary "The Corporation" for a trenchant insight into the psychological profile of the modern corporation. It shows, in great detail, that corporations function EXACTLY like psychopaths.
5
I, like many other commenters, am a little cynical in regard to the timing of this epiphany. I’m sure he made plenty of money in his time as a corporate lawyer. Obviously, enough to retire and live comfortably for almost ten years. It’s easy to criticize the corporate policies you helped formulate and defend from the comfort of your mansion or second home.
Why doesn’t he do pro bono work on behalf of poor people or the environment to atone for his prior employment?
9
We already have such a law, if corporations register to be incorporated as "B Corporations" with triple bottom line accountability (people, planet profits). You can check labels of your favorite brands (Patagonia, Seventh Generation) for the designation. I can't believe there's not a reference to this existing system in the article.
10
@Ryan Clapp
There is no such thing as a "B corporation." It is not a type of corporation that a corporation can register as. Rather, this is a voluntary sort of "certification" process, somewhat like a Good Housekeeping seal of approval.
3
@Ryan Clapp Yes, B corps exist, but they account for a small fraction of corporations. The idea is that corporate ethics shouldn't be a marginalized, special case, but rather, the norm.
3
@GMooG, you're confusing B-Lab certified companies with the legal structure of a benefit corporation. You can incorporate as a benefit corporation in 35 states and DC. A C-corp can become a B-corp by stating so on its bylaws, which is exactly what is suggested in this article.
If corporations are free to influence politicians through unlimited contributions, they should be expected to manage their companies for the good of the public at large.
13
It's great to see Jamie Gamble (and Elizabeth Warren) moving this important conversation forward.
My fellow environmentalists often rail against "greedy corporations," as though choosing to put corporate profits ahead of the public interest was a moral failing, instead of a legally-mandated requirement of all publicly-held corporations.
No, the regulations that Gamble and Warren are proposing won't solve every problem, but either one would go a long way toward changing the framework in which (increasingly powerful) corporations make decisions.
11
Currently our laws allow corporations to externalize costs that they should bear. I could envision a regulatory apparatus that requires companies to bear the full cost of their actions to the environment, human health, etc. Do that and I bet you they'll figure out how to be profitable without doing so much harm. Currently we are bearing those costs. In fairness, they should.
15
My father, a traveling salesman, always drew distinction between a good and bad businessman—a good salesman would never sell someone something that he or she didn’t need. A bad salesman would do bad business by doing just that. The distinction comes down to identifying human need—in both the abstract and in ordinary life—and until corporate America comes to terms with that, they’re going to be stuck with “the system’s” dictation of “operational objectives.”
More power to Mr. Gamble (and his ilk) to state the problem clearly and factually. It’s a good start—and thanks to Mr. Sorkin for bringing it to our attention.
6
The Swedish model requires significant employee representation on boards of directors. Most employees are union members and virtually everyone earns a living wage. Unions as a group and employers as a group periodically negotiate national agreements regarding working conditions. Their system is not perfect but it sure beats our present mess.
Senior executives are very well compensated although income tax and the rough equivalent of our FICA are taxed at progressive rates to the extent that past a certain point getting paid more makes no sense. [That is why the richest tend to decamp to Switzerland or the UK.]
8
A look at Mark Achbar's Canadian documentary film The Corporation has explored this concept with great depth and irony. This is not a new trope
5
A corporation can't exist without a charter granted by the state. Most corporate law statutes allow governments to revoke charters. One way to curb corporate sociopathic behavior would be to adopt rechartering standards and initiate regular public charter review procedures.
6
Through most of human history, individual behavior determined the quality of society. That’s why societies had to develop ethics to rein people in, and these later became laws. Over the past century corporations have eclipsed individuals in power, yet ethical norms for corporations (and thus laws) have lagged way behind those for individuals. It’s time to bring corporations into the human sphere.
17
@Brian Bravo. Well said.
To make corporations behave more humanely will require tempering its purpose "to act in the best interests of the corporation and its shareholders."
That can be achieved by adding to the duty of directors, to act in such best interests, with 28 words:
"but not at the expense of the environment, human rights, public health and safety, dignity of employees or welfare of the communities in which the corporation operates."
I think you'll find this idea is at the foundation of both B Corporation and Senator Warren's Corporate Accountability Act.
14
I suppose I should be shedding cheers of joy that a woke corporate lawyer has not only seen the sociopathic behavior of executives, but now proposes a five point code of ethics enforced by shareholder diligence as a enlightened solution. I won’t hold my breath to see this happen, happen because corporations have long mastered “good citizenship” as a propaganda ploy.
Corporations have long been described as having the nature of a shark, endlessly swimming the sea killing and consuming anything it can. The sea the corporation swims in is Capitalism and that system is by its very essence is exploitive, justified by Social Darwinism and Free Market ideologies as an excuse for being sociopathic.
The only way that we can escape this nature is to creat co-ops of these enterprises. No more board of directors making the calls on what to do and how to distribute profits. Each and every worker gets to vote on decisions proposed by a management also elected by the employees.
In short the only way to escape the criminal sociopathic behavior of corporations is to make them truly Democratic. There are places in the world where this is done and it functions well for consumers who get great products and services and for the workers who get fair wages and human dignity.
12
Mr. Gamble's proposal stands or falls on the dubious assumption that current law, not greed, is responsible for the bad behavior of those who run the country's rapacious corporations. But if in fact it is greed and not the legal obligation to maximize shareholder value that explains why corporations are so often bad neighbors and bad citizens, then his proposal will change nothing. And that's why Senator Warren's approach is the better one. Make the law require corporations to take the interests of all stakeholders into account. Fear of the law is undoubtedly a better safeguard for the public than an appeal to conscience when dealing with people who give us every reason to believe that they embrace Gordon Gecko's motto: "greed is good."
16
When I worked at Northwestern Bell Telephone, a part of the former Bell System which provided local and long distance telephone service throughout the country, its publicly announced policy was that it had three equally important constituants: customers, shareholders, and employees. That was the credo of the Bell System,which, with a million employees, was composed mainly of a big telephone utility, a big manufacturing business, and a large scientific research arm.
That credo served the company, it's three constituants and the country well. Since satisfied employees and customers would seem essential to achieving long term business profits, i the business judgment rule should lead management to policies which would be favorable to both. Beyond that, corporate policies and government policies that have led to society treating executives like princes and employees like serfs, or which create that public perception, will, carried much further, lead to social instability, revolution, and destruction of our social and governmental systems.
6
@Al S
The word "should" has no meaning.
"I should lose weight." Does that mean, "I want to lose weight?" "I intend to lose weight?" "My doctor thinks I am too fat, but I'm sticking with 9 Buds a day?"
A corporate credo is a slogan. Scientist Leonard Rutman advises that the primary goal of every organization is: "Keep the organization going."
This goal is UNSTATED, but all other goals are secondary, including written goals, mission statements (Heaven help us,1) slogans, and advertising.
For CEO jobs, corporations headhunt psychopaths. They hire psychologists to administer PCL-R assessments on potentials. Scoring high on criminal psychopathy is preferred by corporate boards.
As for ethics and Bell, let's recall their credo as stated by Ernestine the Operator: "We don't care. We don't have to. We're the Phone Company."
I think what we're really talking about is long term thinking versus short term thinking. Unfortunately, our economic and corporate structure is set up to reward short term thinking and immediate profit, but a healthy community will eventually also be a benefit for any company in the long term.
13
@Philip Tymon "long term" is how it used to be. When we review the history of storied corporations, that is exactly how they operated, with a view to the long term (dividends, pensions, growth of market share).
The need for immediate gratification (shareholders and all the businesses that reap commission revenue pushing such investments) has done a tremendous disservice to everyone except a chosen few. We now pay the price (a very high one) is the discrepancies between the haves and the have nots.
6
Ah, an epiphany. How admirable. After a lifetime of robbing banks and saving and investing the money, the bank robber forms a support group for robbers, where they work on reforming themselves, donating a portion of their proceeds to improving bank security. Sure. Bound to work. Because the motivation to do this is so strong, what with the public's awful perception of bank robbers. Good one, Mr. Gamble. I hear OJ is working at a women's shelter now.
11
This is not new, it's essentially gettying back to the 1970s basics of the 3 corp. stakeholders: customers, employees, shareholders, but w the adder or environment.
And Keep in mind that nothing changes without appropriate mgmnt incentives.
8
This "epiphany" that there should be multiple classes of corporate "stakeholders" has been floating around for decades. Its proponents, like Warren, purport to be pro-capitalism, they just can't stand capitalists.
1
I have worked for and advised many Fortune 500 companies. Ethical concerns are never any more than a rhetorical fig leaf. The pursuit of profit is the only corporate value.
17
Specific comments:
■ Their “relationships with employees.”
This is too narrow a starting point. Much of the damage done to American workers in the last twenty years has been through contracting out labor and services to third parties. The definition of employees should be required to include all contractors and many types of service providers.
■ Their “relationships with the communities in which they produce and sell.”
This is too broad a starting point. The corporation must have accountability for a contractor or suppliers' treatment of its labor force, in addition to accountability for the impact on the communities in which those contractors and suppliers are located.
Should Amazon be selling the products of slave labor? Should AT&T sell Samsung phones, if Samsung knows families are choosing to send their teens to its contractors' factories, rather than to school?
This has been a significant challenge for corporates producing overseas. It has gotten an admirable amount of attention, but there is still very far to go.
8
I wish Mr. Gamble good luck on his novel. Now that he has made his money and retired and has nothing at stake, the idea of voluntary corporate reform is just as much fiction as is his novel.
6
I worked in corporate America all my life. Now, every time I read an announcement of a company going public, my first reaction is "how sad."
6
Thank you Mr.Gamble. You said it perfect. These behaviours of big corporations is defaming capitalism and giving fuel to socialism.
People walk the streets to earn their living, not the corporations who banks from stock market directly bypassing the people of street.
Attorneys are the weapon of rich people.
5
If consumers actively boycott companies that engage in unethical practices, corporations will see ethical conduct as a profitable enterprise, even within the existing legal framework. Unfortunately, consumers too often are driven by their own financial interests at the retail level, seeking to reduce price and maximize quality, and ignoring the ethics of the practices that resulted in the product / service in question. Our addiction to fossil fuels, and our reticence to transition to more expensive yet ethical energy alternatives, is one of many examples.
5
Corporations have always enjoyed the protection of the general population in the form of trade laws, patent laws, trademark laws, contract laws with little, if any reciprocal obligations to the citizenry. Our country's trade policies are enforced by tax payer funded custom agents and in an indirect way the commerce department. It's a refreshing departure to hear a discussion of how corporations have an obligation to those very same citizens to contribute to their well being. As other posters have expressed their cynicism, I find it unbelievable to expect this change to come within the boardrooms, it has to come from the enlightened citizenry. With a very few corporations controlling the mass media, I am not hopeful that there an organization can create a movement for this change.
8
I find myself thinking about Toys-R-Us, that recently filed for bankruptcy while reportedly showing high profits. It was taken over by a hedge fund, a process I only passingly understand, and sold off for parts. Think of the ethics in that process. One of the most important companies to the toy industry, which is now scrambling to find places to sell their toys. And thousands of people out of work across the nation, with not a lot of options as retail is shrinking everywhere. Somebody, or some company, made a huge amount of money at the expense of everyone else. That is a totally crazy system that allows this kind of thing to happen and yet it has been the norm for years. Decades. But it wasn't always that way. I suspect Mr. Gamble is trying to find a way to have corporations behave ethically on their own, knowing that at some point, if they don't, a new administration in Washington will put into law regulations they won't like being imposed by the government.
10
@Ellen Blanchette all things considered, Toys-or-Us didn't matter to the toy industry. The manufacturers can simply sell to other retailers, like Amazon. Toys-or-Us failed to evolve; it wasn't a nefarious process.
The same happened with Sears in Canada. The controls were given to a hedge fund guru who chopped up the company into segments and sold them to ... himself. Then he tanked the company and stiffed long-time employees for their pensions.
And this is all legal and laudable in capitalist country.
Good luck with those ethical reforms.
10
"When I noted that companies could just enact ambiguous ethics polices to deter lawsuits, he dismissed the notion that shareholders, and even board members, would create rules just for show."
I appreciate that this guy had an epiphany, but I feel like he's got at least one more waiting in the wings.
16
If we are serious in having the corporation represent "stakeholder", not just shareholder interests, you have to put them on the board of directors. Every corporation of a certain size should have representatives of labor and the environment on the board with full voting rights. Mr. Gamble's scheme would just be a bonanza for lawyers, in just the way strike suits have become, with the nominal plaintiffs winning peanuts while the lawyers take home the real dough.
11
These guidelines applied to every member of society would serve our planet well, if they were enforceable.
2
@TG"enforceable" being the operative word here as it is with so many good regulations on the books, but have no teeth in reality.
As much as I am encouraged by Mr. Gamble's proposal, the idea that those with power and tremendous financial resources would allow such a change is more fantastical than not.
We would need to elect public officials who are dedicated to a decades' long effort to rewrite laws that would bring such change. We would need to make this case to every American in ways that each could relate to her/his own situation.
Is there a leader in this country - okay, let's limit it to the Democratic Presidential candidates - that can see this clearly and could help educate the voting population?
Perhaps we should be starting this with school, teaching a new view of what economics could be.
Alas, since the power rests with those who would, ultimately, have the most to lose with this change, I am not hopeful.
3
I seem to remember another former Wall Street lawyer (from Skadden, Arps) who authored a book entitled "Time to Change Corporations: Closing the Citizenship Gap."
His idea was to change the corporate law to add 28 words to the duty of directors to act in the best interests of shareholders. Those words would be mandatory for all corporations.
They are, "but not at the expense of the environment, human rights, public health and safety, dignity of employees or the welfare of the communities in which the corporation operates."
This idea, which has been written about for over 20 years, is an idea whose time has come.
25
@Robert C. Hinkley That's also incredibly vague, as a brand new lawyer- I can think of several ways to get around those suggestions. Business entities are a product of state law; California has S-Corps, which purport to do some of the things you want business entities to do. Bottom-line: if you want change in corporate law, it has to come from state legislatures and not from retired corporate attorneys who made their fortune as the soldiers of today's companies.
5
@MC
Agree that you must change the corporate law. "Time to Change Corporations" suggests just that.
The fact that the 28 words, sometimes referred to as the Code for Corporate Citizenship, should not be denigrated because it was originated by a former corporate attorney.
Indeed, it takes a corporate attorney to be able to identify existing law as the source of the problem. It also takes an experienced corporate attorney to know how to change it in a manner that will get the desired result and not "kill the baby" with the cure.
@MC Spoken like a brand new lawyer. There's a whole book behind it. I'd recommend you read it. I know the author well. Sometimes experienced lawyers are wiser than you think. :-)
1
The concept of corporations being set up by our economic management laws to be sociopaths was originated by Joel Bakan's excellent book and documentary, The Corporation, circa 2004.
Yes, enterprises will mostly do what we set them up to do, just like baseball players will do what the rules of baseball set them up to do. The "B Corp" movement (certifications, and incorporation laws) is, thankfully, a serious attempt to change some of the rules towards sustainability (environmental and social performance, and accountability/transparency).
More voices like Mr. Bakan and Mr. Gamble, please!
8
I wonder: what does Sweden do? They are very capitalistic and favoring of entrepreneurship, yet seem socially and environmentally conscious. Do their laws help that happen? Maybe this wheel has already been invented?
13
How is this proposal different from Benefit Corporations?
@DD, To me the implication is that it would not be optional. Which is why it would be very difficult to pull off.
6
“The corporate entity is obligated to care only about itself and to define what is good as what makes it more money,” [mr. gamble] writes in the essay.
yes but, who is paying that money? someone must like low-cost, low-priced goods and services, as well as high returns on their investments:
c.f.:
“The corporate entity is obligated to care only about [shareholder value and returns] and to define what is good as what [allows it to provide popular goods and services more efficiently and with fewer resources, creating a benefit for its owners. employees and customers],” [a commenter paraphrases in his comment].
another commenter mentioned purportedly greedy and immoral tobacco companies, but i often wonder who is buying the tobacco and why? n.b. tobacco is already a strictly taxed and regulated market in the US, and banning tobacco would likely cause violence and other illegal activities.
capitalism uses a two-sided market, which is already regulated in most cases. the US also has a progressive income tax code, although perhaps it could be made more progressive. (if you think so, you can make your preferences known in elections.)
1
I am retired now, but the Corp I worked for had a code of conduct for all employees we were required to sign off on every year. But it became very clear that code of conduct only applied to employees not in the Executive class because Executive behavior routinely violated the code of conduct. Any attempt to report such was refuted by the HR department because they reported directly to the Executive staff.
30
@Astralnut but I’m sure they had a “ no reprisal “ policy as well. It applied only if you reported a low or mid level person. Even that could be enough for your life to become miserable unless you had perfect documentation
I recently graduated from USC with a Masters of Studies in Law. We spent a lot of time discussing the responsibilities that corporations have to their stakeholders, not just their shareholders. Maybe someday that will actually translate to the real world. But I’m not holding my breath.
6
Change by legislation is faster than change by prosecution or by hoping corporations will grow a conscience. Change the law to require a cap on the ratio of executive pay vs lowest employee pay. Cap on percentage of contractors vs employees; require equivalent benefits for contractors as employees of the same company. Require all hospitals, pharma companies, health insurance companies, private schools and colleges, privately run prisons, etc. to be non-profits. Any market that relies on inelastic demand (i.e. providing what individuals or society can't function without) should not be a for-profit industry because that _always_ leads to abuses. It is beyond immoral to make a profit out of people's or society's ills.
A Democratic Congress and President working in concert could knock off these changes in 4 years.
21
@UA Thanks for verbalizing something I've long thought: Private Sector + Public Good rarely works out well for the public.
I wish I could Recommend what you wrote 1,000 times.
6
"...The only interference by government would be to require that the shareholders *explicitly state what kind of person* they want their corporation to be.”
Considering the Citizens United decision allows for corporations to be considered people, this seems like a reasonable request.
7
But what will incentivize shareholders to bring up a lawsuit should their company violate its ethical bylaws? Aren’t shareholders, too, motivated by profit, not ethics?
4
The company that has the most lax set of ethical rules will have a competitive advantage since any resources spent on the public good will hurt them. While ethical bylaws might provide some good PR, a bit of advertising would probably be much more effective. If we want companies to behave well the government must regulate them and tax them appropriately.
8
The corporate entity is already a finely tuned creature that plays the innovation and competitive game very well. Changing and enforcing the rules of the game, aka sound regulation and taxation, are the way to get them to play nice with customers, employees and the world in general.
Do you ask each team to manage and limit the use of performance enhancing drugs by it’s players or do you get the league to do it? The latter can work, the former never will.
3
i'm glad the NY Times is actually taking a look at boards of directors, even obliquely through this ethics proposal. it's a start.
systems are funny things, sometimes a small change in their operation can amplify into enormous and unexpected consequences. let's implement mr. gamble's suggestion and see what happens.
anyone who has actually met the people who sit on boards of directors, and who knows how the boards work, has to welcome daylight on their functioning. don't stop here.
14
What about law firms? How well does Simpson Thatcher treat its associates and support staff? How many billable hours does it require? How many times did he make arguments he knew were losers? How many times did he defend his clients with too-expensive litigation to force the other side to settle?
8
@jfdenver - Good start here. How about asking all law firms to sign a pledge that they will no longer represent companies unless they have adopted these principles. Companies would have a very difficult time if few to no law firms would represent them.
And for those firms that refused to sign such a pledge, they should be dealt with by their bar associations and shamed publicly.
Why should it be ok for law firms to continue to hide behind the cloak of amorality with the lame excuse that they are just "representing the best interests of their clients?" Why not put more responsibility on them to steer behaviors toward a sustainable life on this planet instead of supporting the myth of shareholder primacy?
4
@Lisa K yeah, and after that you can run the public defenders out of town for representing a disproportionate number of criminals. If you want to fix corporate greed, educate yourself and learn to influence your state legislature. Corporate law is entirely a product of state law. Apparently, America's citizens have no idea that this is the case.
Corrections to our economic system should have been applied fifty years ago. We ignored the climatologist’s warnings & it’s 109 degrees F. In Paris & the Arctic is on fire. It’s too late to reform.
4
I think it's very cure that Andrew Ross Sorkin treats Mr. Gamble's discovery as some kind of revelation; since the time the concept was created the corporation has been defined as an entity with one purpose--the maximization of shareholder value--with no obligations of any sort to anyone else, including workers or customers.
It doesn't take a genius to determine that enshrining this legally basically puts those who run corporations into the category of being legally sanctioned sociopaths (not that such people, with their ruthless greed and ambition, don't often have a head start on that, anyway).
Whatever Mr. Gamble's suggestions about corporations defining more altruistic goals in their charter by-laws, the effect on corporate behavior will be minimal if the legal responsibilities of the corporation are not broadened; most companies will only change their selfish behavior if there are legal penalties for not doing so.
14
I can't believe this man had to have an epiphany to come to these conclusions. Any average American has already witnessed corporate greed firsthand -- we struggle with the weight of our flawed healthcare system, worry about data collection and sales, are frustrated by our subsidized dependence on oil, and are outraged by tax giveaways for behemoth companies like Amazon. Obviously corporations do not care about anything other than profits -- egregiously outsized, untaxed profits.
37
@Anne N. Yes! When I read about this guy's epiphany, my reaction was "Well, duh." Shareholder capitalism is sociopathic organizations run by sociopaths. In related news, water is wet.
1
I agree with DickeyFuller. It IS naive to think anything is going to change, now or ever.
Corporations are legal fictions, creations of the states which grant their charters. They are thus endowed with legal existence and, most importantly, limited liability - and hence the ability to amass vast sums of capital - ostensibly for public convenience. States could and should require corporations they create (and those wishing to do business in the state) to adhere to a code of conduct and provide a public benefit. All states have laws that would allow attorneys general to revoke corporate charters, and we should elect AG's who will revoke charters of corporations that violate the public trust.
17
This article misstates the business judgement rule. In fact, the rule is almost precisely the opposite of what this article claims.
The business judgement rule (in Delaware, at least, which is the where a large proportion of major companies are incorporated) does NOT require that a corporate director "show that whatever decisions they have made are geared toward maximizing value in the long term". That's simply false. All a director must show to gain the protection of the business judgement rule is that he or she acted in good faith, on an informed basis, and in the honest belief that the action taken was in the best interests of the company.
This misstatement of the law is material to that article's conclusion. The article should be corrected.
20
Mr. Gamble's epiphany is a direct consequence of Citizens United, which conferred personhood on US corporations. When corporations did not have the same constitutional rights as individuals, we had no need to define their self-interest as "sociopathic." It would have sounded incongruous to talk about a corporation's relationship to other corporations or to individuals. But now, since corporations have first amendment rights equivalent to an individual, and resources vastly exceeding any individual in America, we urgently need to engage in the Sisyphean task of creating and updating a corporate ethical framework which is compatible with our own, heterodox ethical code for humans. Wouldn't it be more efficient if corporations could be re-defined again as businesses, and the bill of rights could be reserved for humans?
23
I got my MBA in the mid 90's, and it strikes me now how little we talked about corporate responsibility in those two years, how everything was focused on maximizing shareholder value. We are long overdue for changes in corporate governance, to make our companies less sociopathic and instead responsible members of thriving communities. I believe our very existence, in the face of climate change and inequality, requires it.
33
Businesses exist to make money for stockholders. Achieve social goals through the political system. Ayn Rand was prescient in Atlas Shrugged - an America that denigrated the very people that make it prosperous.
1
@Kent Kraus
Businesses don't have to exist for that reason: it is not a law of physics. They can exist for other reasons. We get to decide.
23
@Kent Kraus
We're living in a post Citizens United America. Corporations are people now, no longer things, fully protected by the Bill of Rights if you can imagine. Your prescient Ayn would have seen the dangers of these waters to her sacred individuals! Time to catch up to the moment and realize that good old common sense can no longer apply here, especially in your generalisation. This time it's a whole lot more than same-old-story.
5
@Roger Reynolds
It's a nice thought, but false. First responsibility of business is to make money. Because, if it doesn't, it will run out of money. If it has no money, it can't pay its employees, and they necessarily become either indentured servants, or they go on the dole. I don't know ANYBODY who would willing go to work to not get paid.
1
The key point of all of this is the article’s last sentence: “[t]o require that the shareholders explicitly state what kind of person they want their corporation to be.” Brilliant
6
It is utterly naive to think that -anything- is going to change.
Now more than ever.
1
I had that epiphany when I was 17 years old.
18
Naturally, this has been an issue for a very long time. A good discussion of the legal developments since the mid-19th century is in:
Adam Winkler, "We the Corporations: How American Businesses Won their Civil Rights", 2018.
I tend to use Milton Friedman as the poster-boy for this trend, though others are certainly also responsible. See:
Milton Friedman, "The social responsibility of business is to increase its profits", The New York Times Magazine, 13 September 1970.
A very compelling graphic showing the impact of this on income inequality, starting approximately 1980, see:
David Leonhardt, "How the upper middle class is really doing", Op-Ed, New York Times, 24 February 2019.
https://www.nytimes.com/2019/02/24/opinion/income-inequality-upper-middle-class.htm
As the economic impact of this has become increasingly clear (mostly since about 1980), what do you suppose has been the political impact?
8
@Benjamin Kuipers the blurring of the lines between the boardroom and the halls of Congress.
5
@Benjamin Kuipers
Here's a corrected link to your useful Leonhart reference (You left off the final "l".):
https://www.nytimes.com/2019/02/24/opinion/income-inequality-upper-middle-class.html
Guy Carden
Pullman, WA
All of these replies add much needed suggestions to go along with the author's proposal. We have to start somewhere to cut into the corporate greed and lack of ethics and responsibility if we expect capitalism to remain as part of our democracy.
7
@Jeanette Powell Or if we expect democracy to remain as part of our capitalism.
3
So corporate lawyers are discovering Milton Friedman in 2019? That seems disconcertingly clueless on the part of American law schools, or a case of selective memory on the part of well-paid corporate lawyers.
7
I handled investigative vetting of executives, board candidates, lateral hire partners and principals that posed a possible risk to reputations at a 'top ten' international AmLaw law firm and its clients. I helped keep out people that could sully a key asset - reputations, as well as cause financial loss.
Another responsibility was to research and analyze corporations that had imbalances in their appreciation of and duty to diverse constituencies. If shareholders and the C-Suite were valued more than say employees, customers or regulators, it had an elevated likelihood of litigation from a slighted group of stakeholders. That meant new demand for outside legal services at $800/hour.
Take Boeing. Profits over people. Imbalances of constituencies. The welfare of customers, employees and passengers were neglected.
17
When a corporate CEO is maxing profit, she is also maximizing her own pay. The fact that CEO’s and other corporate executives are often paid much more than 10 times the salary of the lowest paid employees explains corporate greed in a nutshell. I like the idea of the B-corporation if it explicitly reins in executive pay.
8
Nice try but as long as the pay of top executives is based on how much money they make SHORT TERM for their stockholders, nothing will change. Since they are only motivated by money then it is the access to money thet will force change. The way to make a lasting change to to increase the minmum time a investor can sell an investment and get a tax break break and capping their returns in the early years. This will force them to look at long term business strategies as opposed to cut costs, strip assets and bankrupt that has helped fuel the unemeployment issue in this country.
26
The sixth paragraph in your piece is the perfect explanation why the Citizens United decision by the SCOTUS makes all of us into second class citizens and, as such, is crazy. However, it's not surprising given that many, maybe even most, justices, were corporate lawyers and really don't mix with or understand the rest of us. A perfect example was Lewis Powell who was known as the justice "from Phillip Morris", his longtime client in the tobacco industry.
11
Just hire more women to executive positions.
12
@Tania Vargas This doesn't really solve the problem, unfortunately. And, it's a rather broad generalization, not to mention faulty logic. Women can and often do display sociopathic tendencies and behaviours. As a woman, and also speaking from personal experience there are usually extra politics to navigate with many (not all) women in the workplace. Sometimes it's ego, sometimes low-level meannesses, other times, condescending attitudes, superiority complexes, sneakiness. Men aren't above this, but for me have usually been more plain spoken and honest. It takes all types, no matter what the gender.
3
@Tania Vargas
Because women are automatically more socially responsible?
@Tania Vargas Do you really think women executives are any less likely to be sociopaths than men?
I’m not sure this is anything especially novel. Professor Christopher Stone (yes, the son of I. F. Stone) advocated ideas like this in 1975 in his book “Where the Law Ends: Social Control of Corporate Behavior.”
10
Adoption of Code of Ethics bylaws is a great idea, particularly with respect to conduct involving sexual harassment, bribery, and public safety related issues. See e.g, Petrobras, Signet Jewelry, Such bylaws though would echo what is reflected in Codes of Conduct that many corporations have already adopted. The problem has been that some courts consider such Codes as meaningful to investors, whereas other consider them as window dressing “puffery”. It’s time for the courts to consistently recognize the importance of such Codes
Marc Gross (senior partner Pomerantz LLP)
3
Whether or not the law compels corporate executives to act like sociopaths, it's probably safe to say that most of them were already sociopaths when they arrived in the boardroom. It's the nature of the beast. The lust for power attracts those kinds of people.
38
@Tony Long
I've seen lots of reasonable, ethical people in corporate America. But they get eaten alive before they make it out of middle management BECAUSE they are not sociopaths. Only those without a conscience rise to the top. It might take a generation, but I think strong ethics rules would eventually change the boardroom for the better.
29
In the general population the incidence of anti-social personality disorder is about three percent. If we look at Wall Street it is upwards of 10%. If congress is viewed there are many more sociopaths/ psychopaths in government. Starting with the president, Moscow Mitch and Ted Cruz there are surprising number of prominent republicans who have personality disorders, although democrats are not immune, think Clintons.
Compounding all is the president's personality disorder and moderate cognitive decline. Maybe we should demand business and political leaders take a MMPI and the CPI. We ask this of so many people but not the one person who controls nuclear weapons.The Goldwater rule is bad medicine and bad for the country.
27
I have been on corporate boards and advise corporations - and occasionally talk to journalists, and I constantly make the point Mr. Gamble makes (sometimes I had to make it to the boards I was on vis-à-vis other corporations (especially investment banks and bankers.)) Corporations are, at least in most countries, required to be amoral, conscienceless profit and shareholder value maximisers - they exist solely for that purpose, they aren't people too. (An absence of conscience is pretty well the definition of a psychopath.)
Yet again and again I see journalists and commentators fall for corporate spin which presents a company as if it has feelings and a conscience - but it doesn't, it cannot, that's the law of corporate governance.
An example I often use is the illegally parked delivery truck in a major city, UPS, FedEx, etc. with its windscreen showing multiple parking tickets. Some cities simply have accounts for the larger companies that they just debit for the tickets - it's breaking the law, it's inconveniencing other people (and who knows who could be obstructed or what emergency?) but to a delivery company the tickets are a cost of doing business, rolled into their pricing. No one asks the moral question, is this wrong? The only question is whether the fines are less than the gains? Now extend that to say tobacco companies, or pharma companies peddling opiates...
But what I really wish is that journalists and commentators would cease falling for this spin.
62
Brilliant analogy.
1
@MacK - I'm a psychopath, and I don't endorse companies profiting at the expense of others (especially when I am one of those others) or even breaking the law (alright, just a little is ok).
Seriously, how hard is it to make the pain of sinning greater than not sinning? They seem to do it just nicely when it comes to prison sentences or fines for people of average or below average means. Robbing a bank of a few thousand gets you 20 years, swindling your customers or employees of ten times that gets you a limp wristed slap on the ... well, wrist.
Seems a straightforward fix to me.
Nor do I endorse those ruining the future for the here and now. We're not pack animals, after all.
In the early 80’s, though a total underling, I had the privilege of knowing the CEO of the parent company of my small division. A real gentleman, well compensated, with a beautiful home, as you would expect for the CEO of a Fortune 500 company, but nothing like the obscene compensation of today’s CEO’s. Things have changed a lot since the 80’s. The influence of Wall Street and short-term performance on publicly traded companies has eroded not only the morals of the corporate world, but the good business sense. I also worked in a privately-held company that was bought by a publicly-held one and watched how everything changed. Long-term strategic planning went right out the window and we spent more time manipulating shipments and cash flow for our monthly and quarterly reports than actually doing our jobs. The funny thing is, most companies my friends and I worked for did have ethical guidelines (past tense—we’re mostly recently retired). I can pretty much guarantee that any such ethics rules proposed by Gamble will not be binding and will be easily undone if they in any way affect the quarterly numbers. What is needed is a “paradigm shift” (inside joke for any corporate folks who had to listen to such psycho-babble in the 90’s). But seriously—there has to be a way to truly change this culture. One start, cynical as this sounds, is to tie management compensation and bonuses to the performance of ethical goals. You might see some movement then.
46
@Kally
"eroded not only the morals of the corporate world, but the good business sense" No kidding. I worked for a temp agency and saw the inside of many, many companies. Could not believe how short sighted they were. Grab a dime and lose a dollar. The stupidity was explained to me as "the next guy will have to deal with it"
2
The focus on shareholders being the gatekeepers of corporate ethics is itself problematic. When a car company breaks faith with unions and local governments in suddenly announcing a plant closure, stock values often increase. Shareholders have often applauded moving manufacturing offshore to save costs and drive up dividends, regardless of the ethics of doing so. How can we expect those same shareholders to launch lawsuits when these ethics violations occur?
20
It is nice a corporate insider is able to write something like this,anyone who ever took a management course before about 20 years ago would recognize what is being talked about, which is stakeholder versus stockholder management. In stakeholder management, stockholders are only part of those with a stake, it involves employees, locations, countries, the environment, etc of where corporations operate. Since that time, thanks in part to Harvard Business School/Wharton/et al the sociopaths they breed, it is 19th century stockholder management. The sad truth is those most hurt by it, the Fox News/Trump nation types, bleat the loudest that stockholder maangement benefits 'all of us', then cry about the consequences of it, like outsourcing and the like.
While I appreciate what this guy is talking about, I don't think it would help, too easy to tie up in the courts, and more importantly, there is too much incentive for those running companies and those who most benefit for this to work. The real answer is de-incentivizing stock in terms of taxes, make stock based compensation totally taxable and limit the amount of compensation executives can get with stock, and force them to hold it long term, rather than incentivize CEO's to boost stock price short term. Get rid of the loophole that lets hedge fund managers pay 15% on 10's of millions in earnings, make it so the focus is long term health of a company, not short term stock price all the time.
101
At Stanford Bus School in the early 1960s the students were taught that management, and directors, should consider four groups of stakeholders: in addition to stockholders, they should feel responsible to employees, customers, and the public at large. As a doctoral candidate, one of the three comprehensive tests I had to take had the following question -- stated here in its entirety, as far as I can remember: "Discuss the criterion problem." Nobody had heard that particular phrase before but some of us figured out that it was about satisfying these different groups, with their often conflicting goals.
Pretty fuzzy, of course, but top management is supposed to be able to analyze and juggle conflicting goals. Changing zero-sum games to positive-sum games is what makes great leaders. (See Donald Trump for the opposite.) Hard to see how to put this in a workable law, though.
10
@joel bergsman
Darwin's model of natural selection, based on ideas from economists, e.g., Adam Smith and Thomas Robert Malthus, is founded on the principle that the environment is the strongest determiner of the direction of change. Gamble points out that the environment of business is structured for "sociopathic" behaviors. It follows that the most successful CEOs will actually be sociopaths. My guess is that we've all worked for sociopaths at one time or another. In the same issue of the NYTimes, the article about Amazon and groceries has the following quote:
"Amazon corporate principles say good leaders 'do not compromise for the sake of social cohesion'.”
5
Gamble's correct that companies act like sociopaths, but a code of ethics approved by the stockholders won't change anything because stockholders themselves (as a group) also act like sociopaths and only want to maximize their return on capital. That is particularly the case when private equity companies are the controlling shareholders. What would need to change is for shareholders to have less control over companies. Warren's proposal would do that, Gamble's wouldn't.
33
I recommend you check out UPS.
UPS was a manager/employee owned business for 90 years before it went public.
One of the hardest concepts to deal with after it went public was what we had to do to meet Wall Street’s expectations EACH QUARTER.
All of America seems to understand greed, especially Wall Street. The long term planning, work, investments in communities, employees, and sustainability required to create an ever-evolving company are rarely rewarded, and even questioned as bad for the bottom line.
UPS is still a great corporate citizen, as well as a thriving 112 year old company. But it is despite Wall Street, not because of it.
I wonder what Jim Casey, the 19 year old kid who founded UPS and the Annie E. Casey Foundation—one of the largest anti-poverty foundations in the US—would think of Amazon, Facebook, Uber. The companies who enrich themselves and Wall Street, but not their employees.
104
@Anna Camenisch
One of the major in the reasons for the continuance of UPS as a "great corporate citizen" is the fact that of all the major delivery carriers, it remained highly unionized.
All the other carriers (FedEx, DHL and Amazon) have fought unionization tooth and claw to maximize profits at the expense of their workers.
5
@Anna Camenisch, What you did not mention is that UPS is unionized. Per the Teamsters union webste UPS is the largest emploer of Teamsters.
3
One Key Factor Should Be PERSONAL Legal Responsibility.
Today, corporate action against the public interest is punished only by fines levied against the corporation, id est the stockholders. This needs to be changed.
Any time a corporation violates the Law, both civil & criminal responsibility must devolve upon the executives who made the decision for illegal actions.
In other words, if a corporation violates civil law, the recompense must be sought not merely from the corporation, but from the personal assets of the decision-makers without limit and without bankruptcy protection. The executive must know that his entire personal estate down to his underwear is at risk. No more having houses and other assets protected by bankruptcy laws, as is now the case.
Similarly, when a corporation violates criminal law, those responsible must be placed in jeopardy of absolutely everything that they posses, not only property, but including their liberty and their lives. Felonious decisions that endanger the public safety and cause loss of life, must, under the "Felony Murder Statute", be considered First Degree Murder and the culprits punished accordingly.
65
@David F Mayer, Your propoal re personal financial responsibility is why before the advent of LLPs the family assets of partners in professional firms were solely owned by the partner's spouse.
Another problem with your proposal is the definition of "decision maker". The problems that culminated in 2008 were largely a result of C suite people not understanding the financial products their firms were selling. The germaine informed decisions were mostly made at several levels of management lower than that. That is why a number of banks where C suiters had been paying attention to risk came through OK. That is also why it would have been almost imposible to criminally prosecute the upper management of firms that caused the 2008 problems. You could not have proved that they intended to do so.
@carol goldstein Even in the absence of "intent", there is still civil liability. Furthermore, there is a concept of "criminal negligence" so that even the absence of "intent" does not necessarily protect the executive.
We need vigorous prosecution of these psychopaths and crooks in order to protect the Public Interest. Laws and judicial precedents must also be changed to support a more aggressive policy toward executives. The buck must stop at the executive suite and STAY THERE.
After a few executives have been bankrupted, jailed, and executed, the rest will be much more careful to consider the Public Interest at all times. Who determines if an act be contrary to Public Interest? Judges and juries.
2
Anyone who is interested in this concept need only listen to the speech made by the William Holden character in the 1952 (circa) movie "Executive Suite".
5
@NGK
The only difference between the time of that movie (a good one, I might add) and today is when that was written, the executives of those companies were paid in cash salaries and bonuses, while they answered to stockholders through the board of directors (at least in theory), they themselves were compensated in salary and a performance bonus...and it made a big difference. The cash compensation for most CEO's is in line with what they once made (about 30 times average salary) in the 1950's, the mega salaries you hear today at 95% stock, something unheard of in the 1950's unless the CEO founded the company and had significant stock. Tax policy favors stock compensation, because the company has the option (and most do) to not report that as a salary expense, while being able to deduct it as an expense. Make CEO stock compensation a tax liability like cash, and also put rules on when a CEO can cash in their stock and make sure they pay full taxes on it, not at the capital gains rate of 15% (long term), that will I guarantee change some of the focus. Tax policy should not be favoring stocks, they have gone from being a method to capitalize companies into being nothing more than an instrument of greed, stocks today live in a bubble, based on what stock analysts think, rather than being about solid governance and good behavior
14
I know a guy who worked for a large retail chain as a buyer and was terminated for no good reason. He said it all changed when the Personnel Department was changed to the Human Resources Department.
4
Gamble just identified for himself what a lot of people already recognize about corporations in general and have for many years. He must be trying to sell a book.
27
@NOTATE REDMOND
If he is, and that book helps the idea spread and gain more supporters, then kudos to him.
1
In the past many companies large and small felt a certain responsibility towards their employees and the community. That has virtually vanished. The absence of a corporate mechanism to redistribute wealth is one of the reasons we have such a large problem with economic and social inequities.
How about the chant 'lock em up' applying to corporate governors who have no hesitation in causing harm to their employees, the public or the country?
43
And will those lawsuits be opposed by the same corporation using its vast resources to justify what they are doing? And if the judge was appointed by Trump what are the chances of a ruling adverse to the corporation? Will the suit be forced into arbitration to be heard by someone owned by the corporation?
These rules would do nothing if they will be adjudicated in this manner.
11
State-granted corporate charters confer enormous privileges on businesses, even regarding them "persons" ("my friend"), when it comes to demanding their "rights". These grants can and should stipulate ethical conduct in return.
Do we allow doctors to practice with no obligations to patients, other than billing?
105
I echo the comment from @SSquared.
What the author describes already exists:
Benefit Corporations (B Corporations):
https://bcorporation.net/about-b-corps
"As B Corporations and leaders of this emerging economy, we believe:
"That we must be the change we seek in the world.
"That all business ought to be conducted as if people and place mattered.
"That, through their products, practices, and profits, businesses should aspire to do no harm and benefit all.
"To do so requires that we act with the understanding that we are each dependent upon another and thus responsible for each other and future generations."
Also, the Sustainable Accounting Standards Board (SASB), https://www.sasb.org/, and the concept of the Triple Bottom Line: Financial, environmental and social benefit.
59
@LHSechrist - B Corporations, which include companies like Patagonia, Kickstarter, Ben and Jerry's, Cabot Creamery and UncommonGoods, are voluntary participants in a certification process, which is different from the author's model of a mandatory legal structure.
B Corps are reliant on positive peer pressure and consumer choice to effect societal change, which may be more feasible than the author's suggestion.
5
@LHSechrist thank you for mentioning the B Corp movement, Benefit Corporations, and SASB -
I recommend you check out Certified B Corporations (bcorporation.net).
“Certified B Corporations are a new kind of business that balances purpose and profit. They are legally required to consider the impact of their decisions on their workers, customers, suppliers, community, and the environment. This is a community of leaders, driving a global movement of people using business as a force for good.”
Close to 3,000 businesses representing 150 industries have signed on. I try to go to them first any of my purchases.
166
@SSquared Could you provide a link to see the names of these corporations? Thank you
14
@ladybee
https://bcorporation.net/directory
It's a little depressing to see how few of these corporations are located in the US.
@ladybee
I work at a B Corporation and it's been one of the best decisions of my life. Like @SSquared, it was the first thing I thought of while reading this article.
Where other companies would take the lowest cost approach, we're actively looking at a few higher cost parts in certain areas because of our company ethos. It's led to amazing conversations and improved business decisions.
You can find a listing of all certified B Corps here:
https://bcorporation.net/directory