The Corporation - Ethical Analysis

Traits associated to a psychopath include irresponsibility, manipulation, grandioseness, lack of empathy, asocial tendencies, inability to feel remorse, refusal to take responsibility for one's actions and superficial relations with others. Modern day corporations display every one of the previously listed characteristics. Is it right that an institution, whose power now rivals that of the State that once created it to seek the better welfare of its citizens, display the psychological traits of a dangerous personality disorder? Many say no: there is a rising discomfort with the corporation and its pervasion into every sphere of human life and it is this uneasiness that has prompted many academics to further study the corporation and its self-interested pursuits. Joel Bakan, a Canadian law professor teaching and living in British Columbia, is one of these academics and he has, in a well written, thought provoking book, attempted to demystify the contemporary corporation. The Corporation: The Pathological Pursuit of Profit and Power was written in conjunction with the filming of the documentary of the same name and in consequence, the book is filled with interesting quotes from interviews with the world's leading CEOs, anti-corporate spokespeople, economists and authors, presenting all sides of the debate on the corporation. Supported by concrete examples, Bakan delves into the world of profits at any cost, limited liability, corporate social responsibility, externalities, deregulation, privatization and the result is an eye-opening text that will make even the biggest believers in capitalism question the legitimacy of the corporation's corrupt character.

When corporations were first created in the 18th century, they were incorporated to serve public purposes like building bridges or railways. Corporate charters gave them their right to exist and set out limits on their size and the scope of their activities. These charters also limited the life span of the corporation, requiring it to be reviewed every few years to have its charter reinstated. This was a time where the State still had control on its creation. Throughout the 19th and 20th century, the corporation's power was extended through a series of legislation changes pushed by anxious businessmen. The concept of "limited liability" was introduced in the mid-19th century when the railway industry was booming. The creation of railways required more capital than previous projects and stocks began being sold to the general public and not just the wealthy to which they had previously been constrained. Poor labourers who invested small amounts in stocks were however now being held liable for the massive undertaking of a railroad and risked losing all of their belongings in the occasion of failure. Limited liability legislation was introduced to attract investment into high risk projects, such as the railways. It protected shareholders by holding them liable only to the amount which they had invested, making these risky investments more appealing to the non-wealthy. The introduction of limited liability was questioned by some, however, because "... it allowed investors to escape unscathed from their companies' failures" and therefore it was believed that "... it would undermine personal moral responsibility, a value that had governed the commercial world for centuries" (Bakan, 2005, p.12). An English parliamentary noted, when the concept was introduced, that limited liability "enabled persons to embark in trade with a limited chance of loss, but an unlimited chance of gain" (Bakan, 2005, p.13). From the moment limited liability was entrenched in corporate law, the character of the US market changed. Previously, it had consisted of numerous small, self-owned companies but it then became a market where a small number of large corporations reigned.

The next step on the corporation's path from its humble beginnings towards its terrifying present was the personification of the corporation. As Bakan explains,

"by the end of the nineteenth century, through a bizarre legal alchemy, courts had fully transformed the corporation into a "person" with its own identity, separate from the flesh-and-blood people who were its owners and managers and empowered, like a real person, to conduct business in its own name, acquire assets, employ workers, pay taxes, and go to court to assert its rights and defend its actions" (Bakan, 2005, p.16).

The problem with the personification of the corporation was the kind of person it would become. The "best interest of the corporation" concept which is now enshrined in most countries' corporate law pushes the mantra that executives' only goal is to maximize shareholders' profits. This has given the corporation a self-interested, uncompassionate personality that promotes its limitless pursuit of profit and power.

Corporate social responsibility has been one the key business buzz words of the 21st century. Consumers' discontent with the corporation has forced it to try and rectify its negative image by associating its name with good deeds. Social responsibility has become one of the corporation's most pressing issues, each company striving to outdo the next with its philanthropic image. People feel that the corporation has done great harm to both the environment and to society and that with all of its wealth and power, it should be leading the fight to save the Earth, to combat poverty and illness and etc. "Corporations are now expected to deliver the good, not just the goods; to pursue values, not just value; and to help make the world a better place" (Bakan, 2005, p.31). But how can an institution, whose legal mandate is to serve its own interests and to maximize shareholder profits at all costs, justify spending its money on social causes? According to Milton Friedman, renowned economist and Nobel Prize laureate, it cannot. He believes the only responsibility executives have is to make as much money for their shareholders as possible. To squander that money on other causes, he says, is actually illegal and immoral. "Executives who choose social and environmental goals over profits-who try to act morally-are, in fact, immoral" (Bakan, 2005, p.34), is how he puts it. He does say, however, that corporate social responsibility is acceptable in one, and only one circumstance: if it is insincere. He claims that it is only moral for executives to pursue social responsibility if it is actually a ploy to enhance profits. Shameful as it may sound, it is the common practice of today's executives. John Browne, CEO of BP has been praised, even honoured by the United Nations, for his company's corporate social responsibility. When questioned about it, however,