Reader Request Week 2011 #6: Sociopathic Corporations

Arrow Quivershaft asks:

How can we justify treating multinational corporations as people, despite the fact that most of them act like clinical sociopaths in general action?

Well, the FCC v. AT&T ruling suggests that in fact there’s a very long way to go before we do in fact treat them as people, so I’m not in agreement with the assertion that we do. That corporate “personhood” exists is non-controversial, but their “personhood” is not of a manner that tracks precisely with being a real, human person. This being the case I don’t think it’s accurate or useful to describe their behavior with reference to the behavior of real live individual humans.

In particular, I disagree with the notion that most of them act like clinical sociopaths. Rather, I think the majority corporations act logically and rationally and in a manner consistent with the general reason for their existence. And the reason most corporations exist — and most large multinational corporations in particular — is simple: To maximize shareholder value. There is also a general need to do so on a regular schedule; the one that is most familiar is a quarterly one, consistent with the SEC requirement that publicly-held corporations must file 10-Q forms. There may be other goals or aspirations a publicly-held corporation might have, but when it comes down to it, those are the two that count.

If you acknowledge that in the final analysis the purpose of a corporation is to maximize value to the shareholders, and make sure that each quarterly report shows such value maximization as its trend line, then their actions make perfect, reasonable sense — and might even if you employed them on a human scale. Why do corporations avoid paying corporate taxes whenever possible? Because that maximizes shareholder value — and don’t you take every possible tax deduction you can? Why do corporations lay off workers in the US and hire them in cheaper countries? Because that maximizes shareholder value — and might not you switch from a more expensive name brand to a store brand to save a little money? Why do corporations lobby governments for tax breaks and credits — and bail-outs, when it comes to that? Because that maximizes shareholder value — and don’t you vote your self-interest and ask the government for help when you’re in trouble? And so on.

But, you may say, there’s a difference between when I buy a store brand, and when a corporation lays off thousands of workers. Well, yes. Corporations aren’t people. As I was saying earlier. But just as your buying a store brand is not evidence of sociopathic behavior, neither is a corporation laying off thousands and hiring cheaper labor elsewhere. You’re both staying consistent to ground level economic imperatives, but your ground level economic imperatives are different, because you are fundamentally different entities.

But! You say! Like Soylent Green, corporations are made of people! If they are made of people, should they not then at least keep the interests of people at heart? Well, you tell me: When you pay a CEO $80 million (or whatever) and tell him his single job is to maximize shareholder value, where do his interests lie? People, bless our black little hearts, are selfish and self-justifying primates, and we can excuse — nay, justify — nay, celebrate! — a lot of behavior in ourselves if the compensation is high enough. If a CEO needs to cut $80 million from his company to increase shareholder value, he’s going to figure it’ll be more useful to slice off a thousand workers than to fire himself. He may not even be wrong, since the next CEO they hire will cost just as much, whereas the work those 1,000 workers did can be dumped on their colleagues who were happy to have survived the axe.

Here’s the deal: In order to change corporate behavior, you have to change the underlying goals of the corporation. If for example the reason for the existence of the corporation was not to maximize shareholder value but instead to offer steady, well-compensated employment to its workers here in the US, would that have a significant impact on how the corporation acted? It might, although from the outside it might be difficult to see (it would still likely try to avoid taxes, lobby governments, etc). But in a general sense, if you change why the corporation exists, it’s possible you’ll see a change in what it defines as logical and rational behavior.

Short of that you have to make sure that corporations are subject to laws and limits on their behavior — and of course they’ll fight that every step of the way because it impedes their goal of maximizing shareholder value. But the magic of corporations, if you want to call it that, is that regardless of the economic or social milieu you put them in, they will do what they do — maximize shareholder value! — as well as they can possibly do it. US corporations did fine in eras where their taxes were higher than they are now, so the various hand-wringing about the onus those taxes place on corporations doesn’t particularly move me, I have to say.

I don’t think you have to change the fundamental nature of corporations, personally, even if I think they’re stupid to think in quarterly terms rather than focus on longer-term strategy. What I do think you need to do is let their single-minded focus on maximizing shareholder value work for the overall benefit of the country. How you do this is of course a matter of some debate, and where I am fairly sure I fall out with conservatives on strategy, since among other things I wouldn’t be at all opposed to hiking (or closing loopholes in) both corporate and capital gains taxes in a manner that protected the rather meager middle-class investment in both. I understand these days that a belief in the value of a progressive taxation schedule makes me a dirty communist fit only to be set on fire, but you know what, you go ahead and bring that gasoline. Speaking of sociopaths.

138 thoughts on “Reader Request Week 2011 #6: Sociopathic Corporations

  1. As this is a topic involving both economic themes and taxes, this will be a cue for some of you to fire up your favorite Not At All Likely Wholesale Change in US Taxation Structure and merrily derail the discussion into talking about why it needs to happen.

    Please don’t. Let’s try to keep the discussion at least somewhat focused on the real world. I know you love your Fair Tax (or whatever), but this isn’t the place to dribble on about it. I thank you in advance for your co-operation, and make you aware of the presence of the Mallet of Loving Correction in case you feel like not co-operating.

  2. “In particular, I disagree with the notion that most of them act like clinical sociopaths.”
    With respect, I disagree with this disagreement (if that even makes sense).

    Searching on the web, Sociopathy can be defined as “a personality disorder characterized by an abnormal lack of empathy combined with abnormally immoral conduct despite an ability to appear normal.”

    I think this definition is consistent with your characterization of an entity whose goal is to maximize shareholder value to the exclusion of all else (morality, a sense civic duty, etc…).

  3. Ben:

    You’re still equating corporations with real live humans, however. Corporations don’t have personalities in any sense that relates to how humans have them, for one. There’s also the matter that morality, civic duty, etc aren’t built into the ground rules for what it means to be a corporation.

  4. This… is not the sort of thing I expected to see on this blog. Well said, well argued, well played.

    The only thing I can add is that the expectation that all businesses – including corporations – will focus on maximizing profits is the reason that there’s many differences between being pro-business and being pro-free market. (Businesses hate competition while free markets thrive on it. Businesses love government regulation because it allows them to rent-seek – to make profits that come without doing anything productive – while free markets work best with minimal regulations. And so on…)

    Plus, you just got linked by Prof. Bainbridge, who calls your ideas “interesting.” And this is the guy who literally wrote the book on corporate law…

  5. I took some finance classes in college and we discussed what is called the Agency problem. One part of that deals with corporations. The owners of the corporations (the shareholders) are not the managers of the company. The CEO and board generally own a small fraction of the stock. So lets say they together own 15% of the stock. The shareholders still own 85% of the stock. So if the CEO decides to buy a corporate jet for himself, he is only really paying for 15% of the jet. So there is incentive for the CEO to do things that are in alignment with shareholder needs. This is seperate from a private business. If Donald Trump buys a corporate jet, he is paying for 100% of the jet. So it is all his money. Or if Mark Zuckerburg decides to build himself a shiny new office it is his money and a small number of investors money.

    This leads to issues with CEO pay. Their often rewarded for short term gains. These short term gains can often enrich the board of directors and long term hurt the company (see the mortgage mess on Wall Street). Also the golden parachutes that CEOs get for failure do not benefit the shareholders at all.

    I think alot of this is due to how the board of directors is elected and the CEO is hired. The board of director elections are often Saddam Hussein style elections. There is 1 candidate, vote yes or no. There is typically insufficient notice given to shareholders on the vote. Also the CEO has incentive to name directors who will support him.

    I listened to Hank Paulson’s autobiography(treasury secretary during the financial meltdown and CEO of Goldman Sachs). He thinks the financial regulatory system should be changed to force companies to bring executive compensation more in alignment with shareholder needs.

    Also keep in mind that shareholders do not have access to all of the financial documents of the company. They only have access to 10-Q which is a summary and can be misleading. One of the reasons my financial companies collapsed and we did not see the mortgage mess coming is that they were able to hide their bad assets under subsidiary companies that are not visible in the 10-Q.

  6. The problem as I see it with trying to change the US tax laws, etc. to make it more difficult to maximize shareholder value and make it more favorable to US employment is that the companies will simply move overseas to tax havens. “Tis a puzzlement, indeed.

    As far as for corporations being “clinical sociopaths,” consider that a sociopath by definition has no moral compunctions or conscience to prevent the attainment of goals. A corporation, being a legal instrument on paper, also has no inherent morals or consciene unless imposed from within or without.

  7. Right, corporations as they exist aren’t immoral, they are amoral and there is no way to change this in a structural fashion because they aren’t people. Which also means that treating them as if they are “trustworthy” and thus capable of self-regulation is a massive mistake.

  8. One thing to remember, Mr. President: corporations cut their own throats (so to speak) when they throw thousands of workers who are also their customers, and customers of their customers out of work for the sake of short-term profits.
    Golden goose, and all that. Long term, it pays better to have a healthy middle class.

  9. Fair enough. So a personality disorder is probably not a great descriptor to apply to a corporation, but if someone twisted my arm on it, I would probably agree with Arrow *ahem* Quivershaft and say “Sociopathy” isn’t bad.

    “There’s also the matter that morality, civic duty, etc aren’t built into the ground rules for what it means to be a corporation.”

    That’s an interesting point insofar as the IRS does actually demand that you demonstrate profit-motive in order to be considered a corporation for tax purposes. Otherwise you could simply declare your favorite, expensive hobby as a “business” and write off all the cool toys you buy. Maybe we should add some further requirements to that like “demonstrate a business model that is not actively and obviously detrimental to United States, or any significant portion thereof” or some such.

  10. Let us not forget that if the rules for corporations are changed to give them some goal other than maximising shareholder value, then they will find it more difficult to attract the investment they need in order to expand (and employ more people), since the people who invest the money will be making a lower return. The share prices of existing corporations, and thus many people’s retirement funds and savings, will also fall.

    (If you’re going to suggest that corporations that behave more ethically will make a higher return in the long run, and that therefore these bad effects will not happen, then you’re arguing for corporations to do a better job of maximising shareholder value, not for them to cease to do so.)

  11. And then there’s the fact that the worker bees on the ground at many corporations (or at least at the one I work at) know full well that the drive to constantly maximize shareholder value is not beneficial to the long-term health of the company. Or the company allocates you the capital you need to do much needed work but doesn’t allocate you funds to pay people to actually do the work so you can’t spend your capital so your budget gets cut the next year and all the while, your plant continues to deteriorate because that’s what manufacturing facilities *do*.

  12. Argh, and I forgot my last sentence–and if you can’t maintain your facilities and your plants shut down (or whatever it is you need to invest capital in), then you can’t make stuff to sell to people and you have no value at all to shareholders.

  13. Wow, *that* was an interesting post! Aside from the fact that I’d tend to agree with your argument, it was impressively structured — thanks!

  14. If corporations have “freedom of speech” and enjoy legal “personhood”, then they ought to have the right and freedom to vote in political elections. That means that not only do the people who own stock in, say, McDonalds, get their vote, but McDonalds Incorporated itself ought to be able to cast a vote for president, senators, governors, too.

    If the idea of McDonalds Incorporated casting a vote in a presidential election sounds absurd (and it bloody well should),then the idea of McDonalds having freedom of speech should be equally absurd.

    There is one ammendment in the US constitution defending freedom of speech to persons. There are four ammendments defending voting rights to persons. And to quote Forest Gump, person is as person does.

  15. #5 Guess alluded to what I was going to say. The out-of-control executive compensation does not maximize shareholder value in either the short or long run. There are very few corporations, if any, where one person is worth $80 million dollars in compensation – much better to hire a competent manager for $8 million and plow the rest into salaries, benefits, physical plant, R & D, etc, and even dividends for shareholders. There are many individuals who are on the boards of directors of many corporations, and this good ole boy network has given these compensation packages to their friends and associates at the expense not only of shareholder value, but also the long term health of the corporations and the employees of the corporations.
    The same is true of executives spending corporate money on stuff that is not to the benefit of shareholder value. GM executives spent tons of money on perks, contributing to financial problems of the corporation. These corporate problems affected not only the shareholders, but the employees, and all the companies with which GM did business. That is just one example.
    This type of behavior by those charged with maximizing shareholder value is not only unethical, but is, in my mind, criminal. So, although the “corporation” is not human, some it its behavior can be attributed to real humans acting as sociopaths, leading one to conclude that the corporation is a sociopath.
    I’m not lying awake at night sweating in fear that the evil corporation is going to come through my window and chop me to pieces with an axe. I do believe that maximizing shareholder value includes seeing to the long term health of the corporation. I understand maintaining long term health can be difficult in a rapidly changing environment (ask the makers of buggy whips or slide rules), which makes it more important to curb executive compensation and management perks, instead reinvesting in the corporation. I believe that corporations have a secondary duty to the community in which they operate, because without that community (regardless of size) the corporation would cease to exist and all shareholder value would be lost. I believe that this duty includes not only the long term viability of the corporation, but also treating employees and suppliers fairly.
    Whew, I do go on. Enough for now.

  16. John – How is it logical and rational for a corporation to act in the short-term interest of shareholder goals when it imperils the long-term health of the structures enabling the corporation to exist? I would think the most logical and rational approach would be to map out and enact a strategy that does not trade one for the other.

  17. Todd Stull:

    An excellent question, and you should ask it of corporations.

    For my part, the short answer is that inasmuch as shareholders can sell at any time, they have an interest in gains now rather than corporate health later (i.e., when they may not be holding the stock).

  18. Tom Barclay @8

    One thing to remember, Mr. President: corporations cut their own throats (so to speak) when they throw thousands of workers who are also their customers, and customers of their customers out of work for the sake of short-term profits.

    Perhaps some poorly run companies. But with most companies the laying off of people has the effect of saving the jobs of those that remain. I mean really, a company has to earn more money than the return on a savings account or why not just cash out and put the proceeds in a CD? And who would have jobs then?

    Real people have to lay off real people and that’s not easy and it is traumatic to the people who remain as well as the terminated, and productivity goes down for a while as a result. So companies don’t usually like to do it unless they have to.

    But the other side of that coin is that companies like to try to inspire loyalty from their workers. And sometimes people don’t want to change jobs because of this instilled loyalty. But it’s bullshit. People need to do what’s best for them and their family. Because when it comes down to it, a company will lay you off in a heartbeat if they have to so that’s about as far as loyalty goes.

    Ultimately its a financial transaction: I work for you, you pay me the agreed to salary and benefits. If at any time either of us becomes dissatisfied with the terms, either of us can terminate the relationship without prejudice.

    Its just business.

  19. Well done, John. I especially agree emphatically with your entire last paragraph.

    It’s also worth noting that most and perhaps all very profitable corporations in the US succeed in part by externalizing major costs (like pollution) whenever they can and by taking advantage of government welfare in ways that would make Uncle Ronnie’s mythical welfare queen blush. In addition, there are far too many situations were the cost of breaking then law is less than the cost of obeying it, especially as “cutting fat” at regulatory agencies generally involves cracking bones and sucking out the marrow.

    Of course, it doesn’t help that bribing congresscritters — er, supporting them with millions of dollars worth of “free speech” — tends to be a great investment.

  20. Todd, you’ve fallen into the trap shared by many corporate managers. Maximizing shareholder value is not at all the same as short-term return to shareholders. Corporations frequently share the human characteristic of being short sighted, failing to plan for the future, etc.

    The best summary of goals that maximize shareholder value that I’ve heard was:
    1. Make products that you can sell at a profit.
    2. Have a workplace that is rewarding to the employees (financially, socially, etc.)
    3. Have your presence be of value to the communities where you are located.
    4. Have products that your customers consider to be of greater value than their price.

    If you do that, you provide short term returns and sustainable long term value for the stockholders. It’s not easy.
    Failing at any of these four threatens long term viability, short term viability, or both.

  21. #16 Todd – Mr. Spock agrees with you, after a fashion:
    Spock: To hunt a species to extinction is not logical.
    Gillian: Whoever said the human race was logical?

  22. “As this is a topic involving both economic themes and taxes, …”

    You left out a big area where some people feel corporations wield their power unfairly: political speech and lobbying. Could you expand your discussion to include whether corporations (and as a result, unions, non-profits and others) should be excluded from certain classes of expression that are available to individuals? In other words, if corporations are not people but are granted rights similar to those of people under the law, how much of the Bill of Rights should actually apply to them? Speech? The right to bear arms?

    One example of the type of problem I have is that current law says law enforcement can restrict protesters to “free speech zones” near political events, which in essence restricts peoples’ right of assembly and marginalizes their speech, but on the other hand, corporate speech cannot be restricted because it restricts peoples’ right of assembly. I find it terribly conveeeenient that while a rational explanation (security for the political event being protested) is provided for this discrepancy, the inequity in rights happens to favor the power structure and the status quo.

  23. The question didn’t say that corporations ARE sociopaths, it said they act LIKE sociopaths. Acting single-mindedly towards one’s own self-interest without considering the effect on other people is what sociopaths do. They often wind up defeating their own self-interest in the end, and the same’s true of corporations. Pretty close parallel, and parallel is what it is, not a clinical diagnosis.

  24. Scalzi: I disagree with the notion that most of them act like clinical sociopaths. Rather, I think the majority corporations act logically and rationally … To maximize shareholder value.

    Sociopaths are driven by some internal goal and generally do not consider the costs their goals will put on people around them in their decision making process to achieve their goals.

    That corporations have the specific goal of “profit” doesn’t make them sociopaths or not sociopaths. What makes them sociopaths is whether they pursue profit regardless of what it will cost the rest of the world. In that respect, some corporations deserve the definition. Some dont’. But certainly some do. Tobacco companies selling product knowing it addicts their customers until it kill them, is sociopathy. Corporations that dump wastes knowing they are toxic, knowing they can end up in the water supply, knowing people will get sick and/or die, is sociopathy.

    Sociopaths can function in public. They can generally follow the protocols of day to day interactions and transactions. But they do so more because it lets them get through their day and achieve what they want, rather than because it is the right or moral thing to do.

    But that does not mean they are not or cannot be dangerous. You do not want to go down a dark alley, alone, with a sociopath. You might not come back out of that alley. If they think they can get away with doing somethign to you that they want to do, they may very will try to do it. Likewise, you do not want to put yourself in a position where the only thing keeping a corporation from doing what makes it money at the expense of you dying is the corporation’s good intentions.

    I think arguing that corporations don’t fit the defintion of sociopath because they’re not an individual is a overly limited interpretation of the term. They may be a different species than individual human, but the term describes the behavior.

    I also think arguing that corporations aren’t sociopaths because they’re logical in their drive for profit is naive. There have been some murderers and serial killers who have been extremely logical in their drive to murder. Some have never been caught. Some have been able to get away with it for years, killing many many people, before getting caught. Because they are extremely intelligent.

    But intelligence and logic and smart is completely unrelated to empathy.

    Sociopathy is lack of empathy. Sociopaths can be extremely intelligent and have zero empathy and they are absolutely dangerous people.

    You might be thinking of psychopaths instead of sociopaths. Psychopaths might not have empathy but they also don’t have enough control to remain functional in the world to achieve whatever goals they have. A psychopath might talk to voices he hears in his head, out in public, and get himself noticed, and get put in a padded room. Because he can’t help himself.

    Sociopaths can maintain enough of the protocols of daily interactions that they can pass for any normal person you might run into. They can access their intelligence. They know how to camoflage themselves. They are intelligent. But they have no empathy. This is what makes them dangerous.

    And in that regard, corporations are fully capable of being sociopathic actors.

    People, bless our black little hearts, are selfish and self-justifying primates, and we can excuse — nay, justify — nay, celebrate! — a lot of behavior in ourselves if the compensation is high enough.

    This is suggesting a false equivalence that people are corporations.

    The difference is that corporations is an invented idea, humans aren’t. The idea of corporations was to allow people to invest in a company and limit their financial obligation to the company to what they paid for their stock. If the company went bankrupt, lenders couldn’t go after your house just because you owned stock in the company.

    liability limitation is a way to incentivize investiment in business and stimulate the economy. But we don’t have to do it. We can redesign how corporations are treated, how we limit their behavior, how people associated with a corproation are held responsible for the corporation.

    Corporation is an artificial entity invented to stimulate commerce. We can still stimulate commerce but change what a corporation can do to attempt to restrict and limit the otherwise sociopathic drive for corporate profit at the expense of teh public good.

    Individual humans have human rights. This includes the right to engage in commerce. But as the Constitution says, Congress shall have the right to regulate commerce. So congress can regulate individuals in their commercial transactions, and Congress can regulate corporations. But individuals also have teh right to free speech, to vote, to religion, and others. Corporations are commerce and exist solely because Congress allows them to exist, and can be regulated as much as congress wants to regulate them. Congress can’t legislate whatever it wants for individual citizens. Individual rights prohibit that (or at least should).

  25. The claim, as the Supreme Court of the United States ruled in Citizens United, that corporations have free speech is based on the First Amendment which proclaims that Congress shall make no law abridging the freedom of speech.
    This is not based on any notion of “person-hood,” rather it protects speech whatever the source.
    I think this is a good thing however one feels about evil corporations.

  26. As others have mentioned…

    Yes, the goal of a corporation is to maximize shareholder value, but as currently practiced, many large corps are actually doing the opposite, because they’re focused only on short-term gains, and not long-term stability of both the company and the economy as a whole.

    To use your analogy, it’s like someone buying a cheaper brand of gas to maximize savings without realizing that the gas in question is so full of impurities that it’s going to eventually ruin their engine, costing them a heck of a lot more down the road. (Or, insert your own favorite cheap consumer goods comparison.)

    What I wish more investors realized is that, when a company does drastic layoffs, cuts benefits or ships jobs to countries with fewer pesky labor laws, it’s a sign that something is actually seriously wrong with that company, and they should run away, fast.

    Looking at it again from the consumer perspective, if you know a guy who suddenly switches from champagne to cheap beer and trades in his Beemer for a 10-year-old Civic, you’d probably be quite suspicious that the guy either just lost his job or knows he’s about to. Now, would you give a loan to that guy, knowing that he’s probably not going to be good for it? Hell, no. And yet this is what investors do, every single day, when they feed money to corporations that are thisclose to going under, yet somehow manage to hide it on the bottom line of the books by making drastic cuts.

    This is, of course, the big lie of supply-side economics in general. The engine of any economy is not the ownership class but the consumer class. If you bankrupt them, you’re screwing yourself out of demand, and therefore out of profits. Trying to stem those losses by cutting even more jobs and benefits only makes the problem worse, long-term.

    But–and this is where the sociopath part comes in (or at least nihilist)–the people making these decisions don’t care about the long term. As far as they’re concerned, it doesn’t matter if that particular company eventually runs itself into the ground (and takes the rest of the economy with it) because in the 10 years it’ll take for that to happen, they, personally, will have made enough money to retire to the Caymans and not have to give a single crap what happens to the rest of the world after that.

    If the rest of us are ever going to have a fighting chance for long-term survival, we have to recognize what these guys are actually doing in their short-term self-interest, and act (via the citizen group known as government) to keep them from doing that kind of harm. We can start by changing investment regulations to keep people from dropping so much cash on companies that are circling the drain but hiding it well, and also change tax policy to put more money in the hands of consumers, which therefore grows industry profits naturally, instead of with the artificial cost-cutting methods they’re using now.

  27. JOHN,
    Glad to see someone else is seeing the big picture and not just the postcard from hell…

  28. One of the problems is the use of stock price as a proxy for shareholder value. It used to be that a company became valuable by producing widgets that people wanted. Now companies become valuable by convincing the financial markets that they are valuable, whether they produce anything of use, amusement, innovation, or not. Capital should serve industry, not the other way round. In pursuing short-term stock price above all else as a measure for shareholder value, the current US regulatory system massively distorts the incentives that companies should, for both shareholder and public benefit, be pursuing.

  29. Rather than focus on corporations, it may be better to focus on investors. Investors reward corporations for focusing on short-term goals. Investors reward corporations for laying off workers. Investors reward corporations for insane mergers. A corporation may be performing well but miss its target by 5% and the share price will drop like a rock. A corporation may have inferior products and declining sales, but a massive layoff will boost the share price if costs decline faster than revenue. Investors are sociopaths, not corporations.

    We can change how investors behave. Change the tax laws to place more value on long-term investments. Require greater transparency in institutional investing – is your pension fund voting for excessive executive pay?

    We also need to get a better handle on the agency issue. It is clear that the people running banks in recent decades were risking shareholder money for personal profit. That also show up in executive pay. Executives need to be more accountable to shareholders, and shareholders need to be more accountable to society.

  30. While it’s (mostly) true that shareholders can sell at any time — and customers can refuse to buy — the efficacy of that in terms of curbing corporate abuse is limited by the information available to them and by the amount of attention they can spare for it. The comparison of this to voters and the political process is obvious, as are the corresponding dynamics in terms of institutionalized secrecy, dishonesty, double-talk, etc. If you control the flow of information, you can strongly influence the decisions that people make.

    It’s not a coincidence that the major souces of information in the US regarding both business and politics are corporate-owned.

  31. Just want to point out a typo in the last paragraph because it’s annoying me. “other ‘thigns’ I wouldn’t be”

  32. The problem is that executives and employees are shielded from liability under the umbrella of a corporation and remedies are limited to civil court. Suing a corporation is painful and always puts the human being involved in a David vs Goliath situation. Corporations typically put unenforceable (and illegal to enforce) provisions in employee handbooks such as provisions limiting discussion of my salary. Corporations handling of union organizing are rife with illegal actions, firing of known organizers, threatening to close offices if the site goes union, etc. The limits on liability mean that the decision makers are protected and the fines if sued are so low that it is cheaper to bust the union illegally than allow one to start at a site.

    So we have an example where there are regulations, protections and corporations almost universally break the rules. The same occurs with fines related to the EPA, refuse to pay, refuse to address remunerations for those affected and continuously lobby how the rules are too restricted. Corporations also violate laws regarding tax shelters as a matter of course. Again the combination of a liability shield and restriction to civil remedies weakens any attempt to rein them in.

  33. Simon S:

    “The question didn’t say that corporations ARE sociopaths, it said they act LIKE sociopaths.”

    And I said I don’t think they act like sociopaths, either. More specifically, I don’t think they act like sociopaths any more than I think my cat acts like a sociopath when it brings gutted rodents to my door. The baseline is so far removed from the expectations of human interaction that it’s not relevant.

    Greg:

    Your comment is 800 words and I have limited time to read every comment. Brevity is your friend.

    Justin:

    Fixed.

  34. Scalzi – isn’t the question essentially asking “If we give corporations ‘rights’, like freedom of speech, shouldn’t they also be obliged to act in a way other than amoral, destructive, short-term profit maximisers”. That’s what I took from the use of the term “justified”, anyway.

    Or to put it another way, isn’t the corollary of being given rights a duty to act like a person in some respects? Your cats don’t have a legal right to express themselves by bringing in dead rodents. Or sue for defamation. Yet corporations have those rights, and we don’t ask them to have any more social responsibility than an animal. Isn’t that a bit screwy?

  35. Walt: Congress shall make no law abridging the freedom of speech.
    … This is not based on any notion of “person-hood,” rather it protects speech whatever the source. I think this is a good thing however one feels about evil corporations.

    That’s exactly the thinking that got us Citizens United v. Federal Election Commission

    “In a 5-4 decision, the court’s conservative bloc said corporations have the same 1st Amendment rights as individuals and, for that reason, the government may not stop corporations from spending freely to influence the outcome of federal elections.”

    It’s got to be one of the more assinine court decisions and more damaging decisions we’ve had in a long while.

    The Koch brother dumping millions of dollars into the tea party across the nation and union busting in Wisconsin specifically, and billionaires like them send you their thanks.

  36. The world in general and the US in particular spent the first 70-80 years of the 20th century creating a large affluent middle class. A self-sustaining profit-generating consumer class.

    In the name of profit corporations have spent the last 30-40 years sucking the life out of that middle class.

    What do you call raising a child so you can barbecue her on her 21st birthday?

  37. Eddie C:

    “isn’t the corollary of being given rights a duty to act like a person in some respects?”

    No.

    If you want corporations to act in a certain way, you’d better encode it into law.

  38. John: Brevity is your friend.

    Logic and intelligence, or its lack, does not define sociopathy. Empathy, or its lack, does. Serial killers can be extremely intelligent, but have no empathy.

    That corporations are acting entirely “logical” and intelligent in achieving their goal of shareholder profit is entirely missing the point of what makes someone or something sociopathic.

    They are sociopathic if they pursue their goal of profit with no regard to the cost it puts on the rest of the world. Tobacco companies knowing their product causes cancer but covering it up and selling it anyway would be a near perfect example of corporate sociopathy. They don’t care about anything but profit. But they were extremely intelligent about making money selling it.

  39. Greg,
    We disagree; I like the Citizens decision. I wish it went further and freed so called commercial speech.
    If the Koch brothers want to send cash in leiu of thanks I’ll be happy to provide my address.
    If it helps keep this on topic I’ll add that corporations are on balance much more beneficial than toxic.

  40. Greg:

    I think corporations are in fact quite empathetic to the needs of their shareholders.

    And once again: Comparing humans and corporations — not as useful as one might think.

  41. and just for technical accuracy, I don’t think there is such as thing as “clinical diagnosis” of “sociopathy” anymore. I think it was removed from the DSM back in 1980. They changed the name to “anti-social-personality-disorder” but also changed the definition of what it meant. Sociopathy is a lay term meaning ‘lack of empathy’.

  42. Awesome post! My first job out of college was an internship, and one of the very first things our director hammered into us was that the first, foremost and (essentially) only goal of any company (including ours) was to maximize shareholder value. The corporate world makes so much more sense when you look at it this way.

    Mike Scott @10: Shareholder value is not the same thing as corporate profits. Shareholder value these days is typically based on share price, and the share price of a publicly traded company is determined by the desirability of its stock. Currently, in the US, desirability of stock is associated quite strongly with quarterly earnings statements. Companies that exceed their expected earnings are rewarded with higher stock prices. Those that don’t find their share price dropping. Now, if the market chose to reward different types of behavior (e.g. environmental stewardship or ethical behavior or hiring more Americans or whatever) then the stock price of those companies could rise regardless of earnings statements. For this, I am mostly thinking of “growth” stocks (that don’t give dividends). For stocks that do provided dividends there is more correlation between profits and return.

  43. “That corporate “personhood” exists is non-controversial” – could you clarify this statement? In my experience there is a great deal of controversy around whether corporate personhood exists in the sense that it was something a court clerk included in a ruling which was actually expressly against the intentions of the judges so the codification of the concept in our system is invalid. But that may not match what you mean by that statement.

  44. Scalzi: I think corporations are in fact quite empathetic to the needs of their shareholders.

    You’ve collapsed systemic and individual. Shareholders, boardmembers, CEO’s are all individulas. The corporation is a system made up of those individuals. That the system of individual shareholders is “empathetic” to itself is meaningless.

    When someone says a corporation is sociopathic, they’re talking about the sytem, the corporate entity, and how they interact with individuals who are not shareholders, individuals outside the corporation.

    And once again: Comparing humans and corporations — not as useful as one might think.

    I guess it depends on how you’re defining “useful”.

    The “invisible hand of capitalism” is a completely load of crap. But some might find it “useful”.

  45. Greg:

    “That the system of individual shareholders is ‘empathetic’ to itself is meaningless.”

    Yeah, not really. I disagree with the assertion that the shareholders and the corporation are equivalent in this case, probably because it’s not an accurate assessment of the corporate structure or how corporations function, in particular as regards public corporations.

  46. I don’t understand why making a collective statement about something that is designed to be a collective (a team, a gang, a corporation) is somehow inaccurate just because it isn’t true about some of the members of the collective, or isn’t true about any member of the collective as long as it is about how they relate to other members of the collective.

    Just because the members of a gang support and help other members of their own gang, doesn’t mean I can’t say that the net effect of the collective gang as a whole is that it is violent and dangerous and deadly.

  47. Scalzi: I disagree with the assertion that the shareholders and the corporation are equivalent in this case

    They are as different as worker bees versus queen bees in the same hive. Or warriors and chiefs of the same tribe. There is individual level differences. And then there is the effect of the group as a whole on the rest of the world.

    Corporations as a collective, as a unit working together, can act as a sociopath, without regard to what damage they inflict on anyone who is not a member of the collective unit.

    They don’t have to work that way. Some don’t. Some corporations do a lot of good in the world. Sociopathy isn’t inherent in the corporate design. But some do. And the design of the system allows for sociopathic behavior, or at the very least, doesn’t do enough to discourage it more. But some corporations really do act as a sociopathic entity, with no regard to anyone outside the corporation.

    Saying I can’t talk about a corporation as a single entity just because it is made up of individuals is some kind of weird language thing I can’t even wrap my head around.

  48. But shareholders aren’t part of the corporation. The corporation as an entity is the board of directors, the management and to a lesser extent the actual workers. The workers in a corporation are the worker bees or gang members or warriors in your analogies, not the shareholders.

  49. So I’m a servant of a corporation, and that corporation, we’re saying, has in itself no moral obligations. Do I have moral obligations while acting in the service of the corporation? At the peril of Godwin’s law, I’ll quote a business academic I knew who described a Swedish company that sold arms to the Nazis and said that its executives were obliged to treat the two sides in the war equally regardless of their own moral views.

  50. Greg:

    “They are as different as worker bees versus queen bees in the same hive. Or warriors and chiefs of the same tribe.”

    I find these to be spectacularly bad analogies for the corporation/shareholder relationship, actually, and your overall argument about the collective nature of the corporations and the shareholders likewise not particularly having much relationship to how these things function in the real world.

    I have to admit I’m finding your arguments in this thread rather opaque.

  51. Greg @ 50

    I’m not sure where the disagreement with John’s statement is in your comment.

    I think it is very important to avoid conflating individual behavior with behavior that is demonstrated by groups of individuals. Individual behavior can be simultaneously empathetic to some individuals AND, at the same time, if not “sociopathic”, downright destructive, selfish, and contrary to the good of group outcomes.

    One example of this is that an individual parent will pursue the maximum amount of health care services possible for their child. Unfortunately, this can and does lead to medical tests and even prescriptions (especially antibiotics) that are, in retrospect, ineffective. When interviewed, doctors will say they prescribed such tests and drugs to satisfy an individual parent, even though parents are not necessarily well-informed on medical matters. On a group level, this drives up medical costs for everyone and causes some children to be unable to access needed medical services. This is part of the reason I have heard argued why countries that ration medical care can have better group medical outcomes for less money per person than the United States.

    I suspect if we thought about it more, we each could come up with a corollary individual vs. corporate example.

  52. Cherry: But shareholders aren’t part of the corporation. The corporation as an entity is the board of directors, … The workers in a corporation are the worker bees or gang members or warriors in your analogies,

    Sorry, the specific job titles in the metaphor wasn’t my point. Scalzi said corporations are in fact quite empathetic to the needs of their shareholders. And my point was that empathy between individuals within the group doesn’t mean that the group as a whole must act with empathy towards people outside the group.

    An individual corporation, as a single entity, can act as a sociopath, even if it is demonstrating “empathy” between its members.

  53. The corporations themselves are neither good or bad but reflect the actions of the people running them.

    Starting from the 1980s, there has been a competition among CEO, CFOs on who can wring out the most pay and compensation from a company. You can have someone who basically runs a company to the ground but has an iron clad contract to receive a huge payout regardless of performance. A good example ar the Wall St financiers who received bonuses from TARP despite the fact there companies had to be bailed out. never mind welfare or social security these are the entitlements to cut

  54. Greg:

    “An individual corporation, as a single entity, can act as a sociopath, even if it is demonstrating ‘empathy’between its members.”

    However, as has been noted to you several times in this thread, shareholders aren’t members of the corporation (unless they happen to be employees). You appear determined to elide this in order to make your point.

  55. OK, this is nitpicky, I spose, but…

    If corporations as entities cannot be sociopathic, then can we at least agree that many of the executives at these corporations and shareholders qualify?

    Think of it as a weapon sort of thing. No, a gun can’t be sociopathic because a gun’s entire point of existence is to blow holes in things. But a sociopath who wants to blow holes in things quickly and efficiently will use that gun to further his own ends.

    Likewise, people whose sociopathic self-interest (I do what I want without regard for the needs of others) rests in amassing huge sums of money will, if they can, seek to become heads of industry or large-scale shareholders in a capitalist economy, as that’s the quickest and most efficient way in which to do so.

    The key to defining this is single-minded pursuit of a personal goal without regard for the consequences to other people. The pursuit of short-term profit without regard to the short-term effects on workers and consumers, and the long-term effects on company and economic health would certainly qualify on that count, no?

    To go back to the gun analogy, I think it’s time we realized the incredible power wielded by the upper 1% of wealth holders, and consider that a weapon of sorts. And, as a civilized society tries to prevent misuse of deadly weapons by people with mental issues, perhaps we ought to find better ways to regulate access to that kind of power, too.

    In the wrong hands, a massive concentration of economic power is every bit a weapon of mass destruction as a large-scale bomb. People can and do suffer and die in large numbers when disproportionate economic power is wielded by people who are disinterested in the welfare of others. Surely it’s not asking too much to have a little more regulation in exactly who has access to that kind of power and what they can do with it if they have it.

  56. No, no, no. I understand your point. I just disagree with it.

    My point was simply that shareholders are not part of the “group” of a corporation. Thus, a corporation working to increase sharholder value is not showing empathy to itself. If there are worker bees within the entity of a corporation, it is the actual workers of the corporation. Certainly, in my experience neither shareholders nor “corporations” view shareholders as part of the corporate entity.

  57. Scalzi: I have to admit I’m finding your arguments in this thread rather opaque.

    OK. As briefly as possible:

    in the original post, you said “I disagree with the notion that most of them act like clinical sociopaths. Rather, I think the majority corporations act logically and rationally”

    I replied @25 and 41, that inteligence, logic, and rationality, do not define sociopathy. The lack of empathy defines whether one is a sociopath or not. Whether most of them are sociopaths or not wasn’t my point.

    you replied @43 “I think corporations are in fact quite empathetic to the needs of their shareholders.”

    What I was trying to say @50 is that demonstrating empathy within a group of some kind, does not determine whether that group as a unit will demonstrate empathy to anyone outside of that unit.

    Saying “such and such Corporation is acting like a sociopath” can be valid even if they’re acting intelligently to make money for their shareholders, and even if they are demonstrating empathy within the organization.

    From the outside, the corporation appears to everyone else as a single entity. And sometimes such an entity can act without regard to what harmful effects it is pushing off onto everyone else. Big Tobacco, for example.

    Whether most corporations are sociopaths or most are positive influences on the world wasn’t part of my argument. Just that some corporations, acting as a single corporate entity, can demonstrate sociopathic behavior in how it relates to the rest of the world.

    (250 words, meh…)

  58. Also, correct me if I’m wrong, John, but it sounds a lot like the argument you’re making is that corporations can’t be held responsible for only doing what their shareholders want them to do–making the shareholders the sole bad guys in this.

    Which… doesn’t hold water. Without greedy, short-sighted management who are willing to do the shareholders’ bidding no matter the long-term consequences, they wouldn’t be able to do the harm they do. (Likewise, there’s the third and fourth components of this racket, which are the politicians who operate in service of these goals, and the willfully ignorant voters who keep putting them back in office.)

    If, as I think you’re implying, the Mighty Shareholder is the real bad guy we should all be angry with, surely it would be impossible for corporations to choose to do things that might minimize short-term profits in favor of long-term stability and growth. And yet there are plenty of corporations that do exactly that.

    Yes, investors need to take a lot of blame here, and we need regulations to keep them from making things worse. But that doesn’t mean we shouldn’t also be holding corporate management responsible for their part in the crime.

  59. Or, to put it more succinctly: Just because a pair of serial killers are empathetic with each other doesn’t mean they’re not both serial killers, and it doesn’t mean they’re not both responsible for the damage they do.

    If you have Bob the Knife taking orders from Joe the Mastermind, Bob isn’t any less culpable for his stabby actions just because he worships Joe and therefore does what he’s told. At some point, Bob had a choice to make about whether to follow Joe’s orders, and making the choice to do so makes him just as responsible for the resulting murders.

    (And this is what I get for mainlining Criminal Minds DVDs lately…)

  60. Scalzi @ 40:

    I tend to agree (see post at 29). I just think it’s a bit rich for lawyers representing corporations to argue for the full rights of persons when acting in a way that if a corporation WAS in fact a person, would be sociopathic. Yes, they’re just doing what they’re designed to do, and we can’t blame them for that. A legal constructions doesn’t have agency. However, I think we can call BS on corporate executives piously declaiming that they must pursue the best interests of their shareholders while also arguing that for most legal purposes corporations aren’t mere legal constructions, but the legal equivalent of people. That’s what annoys me about the idea of corporate personhood – they want all the benefits the law gives a real person without any of the social or legal responsibility.

  61. Scalzi: However, as has been noted to you several times in this thread, shareholders aren’t members of the corporation (unless they happen to be employees). You appear determined to elide this in order to make your point.

    Cherry: neither shareholders nor “corporations” view shareholders as part of the corporate entity.

    First of all, it doesn’t matter how you define the group or what title you give the individual members. There is some subset of all people that contains the corporate directors, teh shareholders, the employees, and such. To distinguish it from legal terms, I’ll call it the “collective”.

    Second of all, if the only “empathy” demonstrated by the corporate entity is “empathy” towards its shareholders, then that isn’t empathy, its functional behavior. Sociopaths can appear normal in day to day interactions because they learn the cues that are expected so as get through their day and get what they want. They are functional, they respond to demands so far as those demands will get in their way if they don’t respond. Responding so as to keep the shareholders happy enough that they don’t call for you to be kicked out of office is not empathy, its functional behavior. It is more a demonstration of calculated intelligence.

    Third, even if you want to say that such behavior is empathy, it is empathy within the “collective”. And outside the collective, the corporation has no requirement to demonstrate empathy. I said they can be sociopath. The counterargument is that since they demonstrate empathy to shareholders, they cant be sociopaths. But what I’m trying to point out here is that if they only demonstrate empathy within their “collective”, then outside of that collective, the collective as a single entity can still appear to be without empathy and still appear to act as a sociopath.

  62. Tal@63: If you have Bob the Knife taking orders from Joe the Mastermind,

    yes. That. Empathy within some group. Sociopath outside the group.

    I’d rename one character to be Mac the Knife, ;) but otherwise, that’s what I was trying to say.

  63. “even if I think they’re stupid to think in quarterly terms rather than focus on longer-term strategy.”

    The flaw in your argument is that the long-term is far from easy to identify; if we could do that by merely wishing for it (and yes, even supposedly radical governments soon show that their long range vision is remarkably shallow) the world would indeed be a much better place. The truth is that trends and ideas and influences change rapidly, sometimes for good and sometimes for ill. Those quarterly terms may seem selfish or narrow in ambition but they are manageable in terms of doing something to get a result.

    I accept you may not like the result of the short-term but it may be that such corporations really can’t go much further. I have been part of groups that had ‘five year plans’ and they were reviewed and changed every year. Nothing was as useless as what you thought would happen twelve months before.

    You can regulate all you want but even those tend to turn out to be short-term fixes and subject to review and reworking.

  64. Tal:

    “it sounds a lot like the argument you’re making is that corporations can’t be held responsible for only doing what their shareholders want them to do”

    That’s not my argument, although I agree one should not be surprised when that’s what they do. That’s why you make laws.

    Greg:

    “First of all, it doesn’t matter how you define the group or what title you give the individual members.”

    Well, no, it does, starting with attempting to group together separate entities that are in fact separate.

    Greg your argument boils down to “If you agree to my terms, then you see how I’m right.” I don’t agree to your terms, and you’re not right on this one.

  65. “I wouldn’t be at all opposed to hiking (or closing loopholes in) both corporate and capital gains taxes”

    You know how they say lotterys are taxes on people bad at math…

    Well, Corporate taxes are taxes on people bad at logic.

    Corporations dont pay taxes, they simply filter them, in the end consumers are the ones paying the “corporate” taxes…

    Why go through the middle man, why not simply raise taxes on the consumers?

  66. TW:

    “Corporations dont pay taxes, they simply filter them”

    (rolls eyes)

    Come back when you have a taxation argument that’s not printed on cue cards, TW. There’s a lad.

  67. A fact that sems to be lost on some people is that corporations are an imaginary construct. They exist entirely as a way for people (ie humans) to coordinate their activities.
    Every decision made by ‘corporations’ is made by humans, for human motivations. Every dollar made in profit by a corporation is of no use at all until the profit leaves the corpration and is given to a human, either as wage or return on investment.
    Sometimes I think people imagine coporations to be these HAL-like entities residing in office buildings somewhere, nefarious futuristic creatures with their own volition and intent. They’re not.

  68. DA Munroe – that’s the point.

    The reason that corporations were granted the legal fiction of personhood, way back when the concept was dreamed up, was to enable contracting and dealing by a business enterprise in an efficient manner. Some bright corporate executives and lawyers have recently been trying to push the metaphor further than I think it can really hold – i.e. free speech rights (successfully) and privacy rights for ‘personal’ information (unscuccessfully) for a corporation in its own name is incoherent – a legal construct can’t have views or personal information. The CEO, staff, board, shareholders of the corporation can do so, but that is not what has recently been argued in court. If you’re making the argument that a legal construct can’t be expected to have motivations, behave responsibly, etc, I think there is also a reasonable argument that it’s incoherent for such a construct to have personal rights beyond those necessary to enter into business transactions.

  69. DA @71: No, corporations exist to shield their owners from liability. Any group of people can get together to coordinate their activities, but if those activities are done by the corporation, it – not the owners – is to blame, except in an extremely limited set of circumstances.

  70. Apologies for the multiple postings, but I should also say I don’t think the argument you’re making is as iron clad as you make out, Scalzi.

    At the very least an awful lot of these topics are up for debate (and are debated). See for example the course currently offered at U of T law (by a phenomenally smart prof):

    http://www.law.utoronto.ca/students_content.asp?docNo=1896&itemPath=2/16/0/0/0&cType=coursespg

    (Also, your reading of the AT&T case doesn’t square with mine. As far as I could tell from a quick read, the case doesn’t actually address the issue of corporations’ personhood. Rather, it says that the undefined term “personal information” in the relevant statute doesn’t include the defined term “person”. “Person” specifically includes legal persons (i.e. corporations), so if it was incorporated into the meaning of “personal”, corporations’ information could be protected from FOIA disclosure. So the case concerned the difference between “person” and “personal”, not whether a corporation is a person or not).

  71. Corporations should absolutely have ‘free speech’ because again, the corporation is just a construct, and the speech in all cases is being done by a person. To deny corporations free speech means denying groups of people free speech.

    If you don’t agree, please find an example of a corporation “saying” something via anything other than a human being speaking (or writing).

    There’s no coherent case against them having free speech. That’s why the courts understand that it’s a no-brainer.

  72. No, corporations exist to shield their owners from liability.

    Um, no the rationale is not to dodge pesky lawsuits.
    They’re a convenient vehicle for raising and managing capital.

  73. DA Munroe @ 75: Then the person can do it in their own name. “I, Bob, CEO of X Corp believe that….” rather than a press release being put out saying “X Corp itself believes that…”

    (Note that I realise this argument is not mainstream and I’m not totally committed to it. I just don’t think it’s completely coherent to argue that a corporation has no responsibilities because it is merely a legal construct, but that it can exercise rights in its own name even though it is just a legal construct)

    (also I think you forgot to close your italic tag)

  74. Scalzi: Greg your argument boils down to “If you agree to my terms, then you see how I’m right.”

    The only “term” i made up was a bunch of terms to label the subset of people that contains ( the corporation and the shareholders ) . Terms like tribe, hive, collective, etc. I needed such a term because you said that corporations show empathy to the shareholders and i needed to label that subset so I could talk about everyone outside that subset.

    The psychological term would be some sort of “identity”. Cultural identity or social identity or some kind of variation thereof. The reason its important is because if you graph empathy for anyone, it usually starts high with anyone within a group they strongly identify with, and tapers off the further away you get from their self identity. Most people are highly empathetic towards their family, less so with their immediate friends, then less so with their groups, and so on.

    Some people have a threshold where they have no empathy for people outside of their cultural identity. Someone who thinks of himself as white, identifies as white, might have no empathy for people of color.

    There is a corporate identity that would be some set of people from the corporation and its shareholders. Empathy may or may not taper off once you get outside the corporate identity. If the only empathy the corporation demonstrates is empathy to its shareholders, then outside the corporate identity, the company might appear to act sociopathic. If the corporation demonstrates empathy beyond its corporate identity, then you get more well behaved companies.

    In the end, all I’m saying is that I should be able to say something like “Phillip Morris knew for decades that cigarettes kill, but they hid that information and downplayed it to make money. And that makes them a sociopathic corporation”.

    It may not be psychologically accurate, but I don’t see it as an unreasonable use of the word.

    Do you?

  75. sigh – my question got buried by Greg’s opacity – I’m going to sic my 16 lb asthmatic cat on him

  76. Eddie, I don’t think it has no responsibilities; but to respond to your point, an analogy might be a local football club or Parents Association making a press release. THey have a lot less power than many corporations, true, but banning them from doing so amounts to the same thing.

    But lest I be seen as the Evil Apologist For Corporations, can I just say that, yes, corporations do behave badly and shortsightedly, and lose track of long term goals. You would hope that in the fullness of time, such behavior will catch up with them.

    Well, the fullness of time arrived in 2008/09 but, for better or for worse (with bipartisan support) all those dysfunctional decision making processes were rewarded by bailouts. A cleaning out might have been painful, but it would have caused a big reorientation in how corporations behave.

    Another bad thing they do: once they become dominant, they lobby government to increase barriers to entry. When governments indulge them, cementing them into place at the top, that’s “corporatism”, which is a bastardization of capitalist free enterprise. I hate corporatism.

    But finally, investing in countries with cheap labor is not all bad. Evidence for this can be found in all the dirt-poor peasants who flock to the doors of each new factory, and in the slow but inexorable rise in wealth in those countries, directly because of american corporate investment.

  77. DA: To deny corporations free speech means denying groups of people free speech.

    McDonalds Corporation does not have the right to vote(*).
    Yet every employee, board member, and shareholder still has the right to vote.

    Denying some right to a corporation does not deny it to the individuals that make up the corporation.

    (*)yet.

  78. @80 – Ah, now there’s banning, and there’s reasonable restrictions. I think we were talking at cross purposes slightly – the reason I was talking about free speech was the Citizens United case. I don’t think it’s unreasonable to say that there should be more stringent standards for the restriction of individual speech than for corporate speech.

    (and lest I’m thought a complete lefty pinko, part of the context in which I developed these views was 5 years of working for a corporate law firm, specifically in the field of regulatory lobbying on behalf of ebil corporations :) )

  79. DA @76: You don’t have to incorporate to raise capital. Nothing requires you to incorporate a shared enterprise. A corporation is a particular way of structuring a business enterprise, and one of its primary bonus features is that it protects the owners from liability. Not just from “pesky lawsuits”, but also from debts. Nolo has a good overview.

    The liability shield is one of the reasons that corporations are a convenient vehicle for raising and managing capital.

  80. Corporation as such is a fiction, it is a collection of individuals. To change the actions of a corporation, it is necessary to change the value structure of the key decision makers within it. As Nazi Germany demonstrated, this can be done quite easily be threatening to kill or imprison those decision makers, torture their families, etc etc. So, we can establish that it IS possible for a nations that to effectively influence corporations.

    The main issue with corporate misdeeds in the 21st century is that due to lobbing efforts and the general failure of our judicial system, the nation state has lost the ability to police the corporate decision makers. It’s as simple as that.

    We don’t need new laws, we simply need effective mechanisms for enforcing the laws we have. Possibly an extra-territorial hit team or two in case people try to flee jurisdiction. A few heads on pikes outside the supreme court building would goa long way toward bringing things back in line

  81. The liability shield is one of the reasons that corporations are a convenient vehicle for raising and managing capital.

    Fair enough. I stand corrected. Thanks.

  82. drmeow@79, sorry, believe me, I had no idea “corporations can act like a sociopath” was such a controversial statement. really.

    Spotlighting your question:

    “That corporate “personhood” exists is non-controversial” – could you clarify this statement?

    I think the emphasis is on “exists”. Meaning they are treated as pesons. Whether its right or wrong is a different matter. But then again, I’m not sure I even know what “is” means anymore.

  83. Greg @ 86: Not quite re corporate personhood being uncontroversial. For certain not unlimited purposes, various statutes in most Western countries state that a corporation is a legal person – i.e. is to be treated like a person for the purposes of bargaining and the application of (some) laws.

    As cases like Citizens United (re the ability of corporations to ‘speak’ in relation to elections via dumping huge piles of cash on their favourite candidates) and AT&T (trying unsuccessfully to argue that corporations can have ‘personal’ information) show, lawyers representing corporations have tried to stretch this analogy of personhood past the point where I think it was both intended to go by the drafters of the corporate law statutes in the US, and certainly past the point of public interest. It’s these assertions of rights not traditionally thought of as commercial that I think can meaningfully be said the be controversial.

  84. believe me, I had no idea “corporations can act like a sociopath” was such a controversial statement.

    They can’t; at least no more than football clubs can act like a sociopath. (“win! win! win!” that’s all they ever think about – don’t they think about giving other teams a break?)
    Corporations exist to do business, sell stuff, buy stuff, and make deals. That’s it.

  85. Eddie: It’s these assertions of rights not traditionally thought of as commercial that I think can meaningfully be said the be controversial.

    Original question: “That corporate “personhood” exists is non-controversial” – could you clarify this statement?”

    My answer: “I think the emphasis is on “exists”.”

    I didn’t say it was noncontroversial. I said it exists. i.e. we treat corporations as persons. Personally, I think it’s an abomination of a century or so of progress, but what the hell do I know….

  86. we treat corporations as persons

    In some ways.
    They don’t vote. They don’t have children. They can’t hold a driver’s licence.

  87. DA: Corporations exist to do business, sell stuff, buy stuff, and make deals. That’s it.

    I don’t think you understand what a sociopath is. Sociopaths don’t actually have to be driven to murder people. They just have to have a lack of empathy. That’s it. Sociopaths are functionally capable, meaning they can get through day to day transactions, which means, you can’t always tell if someone is a sociopath by looking at simple interactions.

    Hi. How are you? Oh fine. Nice weather we’re having, eh? Oh yes, much better than last week. I hear it’s supposed to rain. I heard that too. Hopefullly it misses us. Well, got to go to work. See you later. Bye.

    Both of those people might be sociopathic to various degrees, but you can’t tell because they’re demonstrating functional intelligence. They often know how to act and what to say to get through basic interactions.

    If all your corporation does is sell stuff, buy stuff, and make deals, that is orthogonal to whether or not they do so in a sociopathic way. i.e. it is insufficient information to determine sociopathy. We would need information about their actions that show whether they care about people or not.

    Phillip Morris selling tobacco knowing full well that it kills, hiding that information, downplaying it, burying it, whatever, because it cuts into their profit margin, and doing that for decades on end is sociopathic behavior. They want what they want, profit, and they don’t care how much everyone else has to pay.

    Corporations aren’t inherently sociopathic. You can buy stuff, sell stuff, enter into deals, and so on, and be universally empathic (as much as any human can be). Generic business transactions, described in generic pro-business vocabulary, does not give enough information to determine either way.

  88. Here’s the deal: In order to change corporate behavior, you have to change the underlying goals of the corporation.

    Or, you can change the underlying incentives for the corporation’s behavior. By making ‘sociopathic’ behavior less likely to lead to maximizing shareholder value, you discourage that behavior. (In other words, financial incentives to do the right thing, financial disincentives to do the wrong thing.) And you don’t have to re-invent the purpose of the corporation to do that.

    This is, after all, why many large corporations give away boatloads of money to charity. It’s not because they’re soft-hearted, but because they get financial incentives in the form of tax write-offs and increased customer goodwill for doing so.

  89. em>Phillip Morris selling tobacco knowing full well that it kills, hiding that information, downplaying it, burying it, whatever, because it cuts into their profit margin, and doing that for decades on end is sociopathic behavior.

    Yeah, that was evil, for sure.
    Union Carbide – equally evil.

    I have a quibble with the word “sociopathic” because that’s a word for humans- and although they have some rights as individuals, until you see a corporation taking its kid by the hand to the local playground, or strolling along the beach at sunset, they’re not people.

    Like I pointed out, if a football club had a personality, it too would be pathological and in need of serious counselling.

    But anyway, whatever. What you mean by ‘sociopathic’ is just a fancy way of saying ‘bad.’ And yep, sometimes they are. But while there are bad apples, this isn’t endemic in my view. You’ve got to separate genuinely evil behaviour (selling stuff that you know kills people) from the normal rough-and-tumble argy bargy of the business world (such as driving competitors out of business). One’s evil, the other isn’t.

  90. DA @93: But, again, “don’t be evil” is not part of a corporation’s goals – that’s precisely why Google adopted it as their mission statement, as a way of saying “Hey, we’re not like all those other, evil corporations out there.” (It’s total bullshit, obviously, but they didn’t just pull it out of a hat.) If being evil, e.g. killing people, maximizes shareholder profits, why not do it? From the viewpoint of the corporation, “because it is illegal and we will get in trouble” is a persuasive argument, as is “because we will get the living shit sued out of us and it will be cheaper not to kill people.” But “that’s evil” is not, although it may be persuasive to the individuals running the corporation – who would be putting their no-evil stance ahead of the shareholders’ wealth-maximizing.

    (Now, of course, shareholders, who are the owners, may decide to impose a no-evil policy on the corporation they own in preference to maximizing their own profits. But that’s a choice of the owners, not something inherent to corporations.)

  91. Like I pointed out, if a football club had a personality, it too would be pathological and in need of serious counselling.

    Pathological???? Counseling??? What???

    I have a quibble with the word “sociopathic” because that’s a word for humans

    OK.

    Union Carbide – equally evil.

    Wait.

    “Evil” is OK?

    “Sociopath” isn’t because it describes humans?

    Please allow me a minute to collect my lower jaw from the floor……

  92. That’s all true, but again, it’s also true for football clubs. If they don’t get caught, being evil will maximise their goals. everything from bribing referees (which occasionally happens) through to intimidating players through to murdering your best opponents. In fact it’s true for anyone.

    The reason google adopted “don’t be evil” as their slogan is that as naive young Californian students they’d bought into the exact same progressive trope bandied around here, that corporations are usually ‘evil.’

    But it’s not just theoretical; many of the things held up as examples of ‘evil corporations’ I would dispute are evil at all. Some are, of course. But a lot aren’t.

  93. “Evil” is OK?

    “Sociopath” isn’t because it describes humans?

    In my defense I said it was a just quibble about terms. Everyone seems to agree on the substantive issues here.

  94. DA they’d bought into the exact same progressive trope bandied around here, that corporations are usually ‘evil.’

    I’d call myself a progressive and that’s not one of my “tropes”. Maybe you bought into some right wing trope about what progressives think?

    Everyone seems to agree on the substantive issues here.

    Are you sure we’re reading the same thread?

  95. A slight derail, but what bothers me these days isn’t for-profit corporations acting like corporations. I kindof expect that, and unless you change the rules of their game they will continue to act like they do. The catch-22 is that they have the money, so unless you are able to find a way to change the rules that is not prone to being outspent, they will continue to make the playing field more favorable for themselves.

    What bothers me, though, is that we are beginning to treat everything like a corporation. I see non-profit groups, universities, and government organizations all being run like they were for-profit corporations at the expense of doing the things that they are designed to do.

    That Universities in particular are hiring CEO types and making decisions based on monetary value rather than academic value really ticks me off. We now have more administrators in US schools than we have teachers, and the administrators are universally being payed more. Its the same money grubbing short term gain model that the corporate leadership follows. I don’t think its all that different than the core reasons for the all out assault we have been seeing in Ohio and Wisconsin on their education systems. The ideal of short term monetary gain (usually used to pay for executive benefits and expensive status symbols) utterly outweighs the responsibility of an institution to do the things it was designed to do. Maybe its odd that that the spread of corporate models to education in particular pisses me off more than anything a for-profit corporation could do, but it seems to me that there is very little that could do more long term damage to the country.

  96. Maybe you bought into some right wing trope about what progressives think?

    You could be right. Although I have heard enough friends rail agains the evils of corporations and globalisation to think it’s not just a stereotype.

    What bothers me, though, is that we are beginning to treat everything like a corporation. I see non-profit groups, universities, and government organizations all being run like they were for-profit corporations at the expense of doing the things that they are designed to do.

    This.

  97. Hello. Long-time lurker, first-time participant.

    There’s an underlying idea that I think is implied at points in this discussion that I don’t see being expressly spelled out. Specifically, it’s that, as I understand it, many corporations are legally obligated to take actions that have the provable purpose of increasing shareholder value. If a corporation’s actions aren’t transparently profit-generating ones, corporate decisionmakers could potentially face legal action from the investors. At the same time, even provably financially sound decisions requiring short-term loss, but long-term gain, are more difficult to defend than ones that result in a bunch of money now, and might also result in action from vocal, if myopic, shareholders.

    I’m imagining Big Money Man at the head of the board table, about to order a salary cut to Malaysian child laborers, saying to himself, “Pah, if I didn’t do it, some other jerk would just come along and do worse, and he’d be doing his job. Any why not pay myself 80 million? Everyone else involved in this is out for nothing but money. Paying myself near nine digits is the best legal means I have of leeching power away from this soulless baby-eating monster of a company.”

    Okay, so it’s a stretch. But it does cartoonishly illustrate the need to modify the underlying definitions of incorporation.

    Curse you, Scalzi. I didn’t think it was possible for me to feel any degree of empathy with the Chairman of Moloch Inc.

  98. I have heard enough friends rail agains the evils of corporations

    I don’t think corporations are evil. I think they are, as John said, driven to maximize shareholder profit and that goal takes whatever path it finds to get there. Sometimes resulting in short term gains that everyone else has to pay for.

    Economic “bubbles” are a fairly common phenomenon. Corporations are driven towards short term gains. Something starts to get overvalued. The overvalue drives more peopel to invest. Which drives it even higher. When the crash comes, its the economy that pays for the cost of the “market correction”.

    You can’t just tell corporations “stop focusing on short term gains to the point of creating bubbles”. You’ve got to put in market restrictions that say “you can’t do this” and “You can’t do that”, where this and that are transactions that are endemic to a bubble.

    A simple example is/was the “short sale uptick rule”. Without it, piling on a stock can push it far below its “worth”. With the rule, you coudl short sale a stock, but the stock had to have one uptick before the sale would go through. Piling on would generally lock the price in at the initial “pile” price (cause it wont uptick from all the downpressure), rather than drive it into penny stock status.

    stock traders see short selling as just another way to make money. Piling is just another way to make money. So it becomes a question whether it is more important that Gordon Gecko make money pushing a good stock down, or whether a good stock should be protected from sociopathic assholes like Gordon Gecko at the expense of Gordon Gecko types being prohibited from cashing in on bankrupting a business that had minor troubles that would ahve otherwise nudged the stock down a bit.

    I’m not railing against corporations. I’m railing against gordon gecko types who want short term gains at teh expense of some corporation that doesn’t deserve to be driven into the ground to buy GG a yacht. And GG types can still trade stocks with the short sale uptick rule in place. Tey just can’t use market fears and piling and other tactics to drive a stock down far below its actual value to pad their pockets at the expense of fucking over an other wise good company.

    Now that woudl be a progressive approach to things. Corporations aren’t evil. But traders focuing on short term profit with short sales might crash the market. So the solution isn’t “come on Gordon, be nice, do the right thing here”, but rather put in market restrictions such as the “short sale uptick rule”, to try and prevent GG types from crashing the market.

    The progressive trope would say that profit driven corporations with zero regulations and zero restrictions would result in something like, oh, I don’t know, fictional characters you might find in fantasy novels. Character archtypes like “robber barrons” and such. I know we have no historical evidence to suppport such an archtype, but, we’d generally rather prevent robber barrons from comign into existence tahn having to deal with the assholes once they’re here.

    The question woudl be whether you would support something liek the short sale uptick rule or whether you’d say Gordon Gecko would just do the rigth thing out of some sense of moral obligation?

  99. I think progressives today generally overstate the extent to which our problems are caused by corporations acting evil, and correspondingly understate the extent to which they are caused by rich people acting evil. (This observation isn’t original to me, I’m heavily cribbing from Matthew Yglesias and others.)

    Some of the most counterproductive things corporations do actually don’t maximize shareholder value. Does it maximize shareholder value to pay the CEOs of unprofitable companies salaries in the many millions, while cutting the staff who actually produce the product? It doesn’t as far as I can tell–the company just tanks even faster–but corporations constantly do this anyway, because the CEO and the board of directors are members of the same class of rich executives and this seems normal to them. And it’s a large part of the reason the payoff from most economic growth in America goes to the richest of the rich.

  100. I liked this take, particularly the point of looking at the actions of corporations through the eyes of their goals. You mentioned how if we structured corporations to take care of their employees first, we’d have different results. I agree. If we really wanted to do this, we should look at Germany. German corporations have the same basic goal (increasing shareholder value), but they also are supposed to take care of their employees. During the recession, the government encouraged companies not to lay off workers, and this has worked out well for them. Not sure exactly how this was done, but perhaps our government could take a look at that.

  101. I’m railing against gordon gecko types who want short term gains at teh expense of some corporation that doesn’t deserve to be driven into the ground to buy GG a yacht.

    Me too. But luckily the day of reckoning came for the Gordon Gecko’s. Their short term-ism and greed and fantastical arcane financial games all caught up with them. Finally! Karma! hahahahaha!

    …..Then we bailed them all out.

  102. TW:

    “Corporations dont pay taxes, they simply filter them”

    (rolls eyes)

    Come back when you have a taxation argument that’s not printed on cue cards, TW. There’s a lad.

    I know it’s your forum but I’m going to call you on this response. It’s a logical fallacy to claim that a statement is wrong because a certain group believes it, just as it’s a fallacy to claim a statement is true because a large group believes it.

    If this argument (corporations pass taxes through) isn’t true, let’s see the explanation of where the corporate money goes when taxes are increased.

    I’ve certainly seen the minimum wage passed through to customers from when I was employed as a pizza driver years ago. The store manager was happy to talk to any of us. The food cost of a large pie was something like $4. The rest of the $10-$15 was wages, other store expenses and profits. Wages go up, pizza prices go up. How are taxes not the same as wages?

  103. Zan Lynx:

    “It’s a logical fallacy to claim that a statement is wrong because a certain group believes it”

    Such was not the implication. The assertion in itself was too stupid to respond to, in the same manner that arguing that the Earth is six thousand years old is too stupid to respond to. That was addressed by the eye roll. Independently, such assertions are in my experience typically made by people mouthing the words of others with an ax about taxation to grind. That was addressed with the snark about cue cards.

    If you’d like a primer on how taxes work, there are a number of places online you can go; I’m not inclined to do a tutorial myself at this point. I think it wanders off from the main thrust of the conversation in the thread.

  104. Zan, I just skimmed this whole thread.

    (rolls eyes)

    and I would have to agree that a curt, condescending dismissal does not make an argument make.

  105. DA: But luckily the day of reckoning came for the Gordon Gecko’s. … Then we bailed them all out.

    The validity of the bailout is independent of whether you would support something like a short sale uptick rule. And on some level, the day of reckoning in the case of the short sale uptick rule SSUTR wouldn’t come to Gordon Gecko types. It would come to the companies they pushed out of business by piling their stock down to zero. There would be no “reckoning” for Gordon on that one, not financial at least. (Maybe some shareholders of the company will visit him with baseball bats, a blowtorch, and pliers, but progressive types don’t generally like to rely on vigilantism for “corrections”.) THe only people who would suffer from no SSUTR would be the businesses that Gordon and his friends short into the toilet.

    That’s the point of market regulations. Sometimes, the market doesn’t have a “correction” for the source of the problem. Sometimes the market ends up eliminating the good (the good corporation that got shorted) and keeping the evil (Gordon Gecko who shorted it out of business).

    So, I’ll ask again, would you support a market regulation like the SSUTR?

  106. I have no opinion on that, Greg. It’s way out of my area of expertise. Regulations are needed, for sure, but how much is too much? That’s a rhetorical, unanswerable question.
    My main point was that if people think they’ll be plucked out of the water by the government chopper every time they start to drown, there’s no incentive to sail safely.

    Incidentally, my football team analogy was just meant to show that personality traits don’t work well in these contexts. The point – I probably should have explained it better – was that a football team has a single goal of winning. Nothing else. So if you were to describe it in personality terms, you’d see it as a hyper-competitive, possibly psychotically obsessed. I was trying to illustrate what I saw as the problem with describing organisations as “sociopathic.” Such personality traits don’t fit well onto non-humans.

  107. Ultimately all taxes are paid by real people, even when assessed on a corporation. There is a lot of debate as to where the real incidence of corporate taxes falls, and that debate is not as blindly partisan as our host’s dismissive reaction would suggest.

    It may depend on the circumstances and/or the industry in which individual corporations react. In some cases an industry will be competitive enough that its various corporate participants won’t be able to pass on the cost of the tax to the consumers, and as a result shareholders may just end up having to lose some value to taxation. But that won’t always be the case. Sometimes shareholders will bear the real burden of the tax, and sometimes consumers will. It really is going to depend on the industry in which the particular corporation operates, and may even vary from year to year.

    However, it seems to me that the employees of the corporation almost always benefit from corporate taxation, because the salaries, bonuses and benefits paid to employees are deductible from the corporation’s income for tax purposes. So for instance if your corporate tax rate is 35%, and a corporation can get an extra $7,000 of benefit out of the employee by paying that employee an extra $10,000, the corporation will probably do it, because keeping the $10,000 cash would only result in a $6,500 after-tax benefit to the corporation – less than the value of paying the employee extra.

    Obviously the exception would be if the corporate tax rate were set so high as to push a lot of corporations into bankruptcy. That obviously wouldn’t be good for employees, but that doesn’t seem to be likely if you’re talking about increasing, say, from 35% to 40% or something like that.

  108. According to http://www.cbpp.org/cms/?fa=view&id=784, the effective corporate tax rate in the US is 13.4%, which is lower than other developed countries. Raising the statutory rate above 35% seems unlikely, but cutting the number of ways it can be avoided may be possible. Then again, that may be wishful thinking given the way both parties pander to corporate interests. As long as I’m dreaming, how about raising fines and penalties enough to make law-breaking unprofitable.

    Others have pointed out that the behavior we are talking about doesn’t come from corporations as much as from a segment of the very wealthy. I’m wary of inherited wealth, as were the founding fathers. History has endless examples of aristocracy harming the very society which provided their privilege. I’m disturbed that the US has been drifting away from its former ideal of meritocracy and towards aristocracy.

  109. We will soon have and America with the Uber-Rich, with their Corporatist protection, powerful lobbyists, and a lower, slave-like class without even union protection ( see Wisconsin). America’s middle class struggles in light of competition from Chinese slave-like working class, as we speak. These conditions show an imbalance in the sharing of the wealth of the nation that is un-American, not in the spirit of the Constitution, and decidedly anti-democratic. The original immigrant sentiment that through hard work and sacrifice, through a building of the land, the common folk, the proletariat, the precariat, the patriot, could earn a modest share in the riches is a lie. The Dirty Thirties and the snatching of farmer’s lands through unfair mortgage laws proved that the government was decidedly Uber-Rich controlled, and they strong-armed the nation’s struggling common folk at that time, and have ever since.
    Canada’s example of a social democracy in action shows a sharing of riches, in the forms of a very effective universal medical care system and various other social safety nets for the proletariat, (they have no precariat for this reason), the peons, patriots, and even groups of separatists, bound and determined to break away from this ideal system’s influences, for more cultural freedoms.
    Capitalists, Corporatists are given huge tax breaks, almost bribes, to come to Canada, to establish businesses there, to invest there. Canada offers plentiful, clean water, cheap land, dependable, cheap, Hydro and Nuclear Electricity, a well educated, healthy, ambitious, hard working work-force, clean, clear, pollution free skies, an extremely successful, very stable economy, solid, honest, political background for enterprise, and plentiful natural resources, including natural gas, oil, forest products, grains, minerals, metals, all readily available, all reasonably priced, all ready to support industry.
    Politically Canada is very stable, with a Conservative government in minority power situation, over-seen by Liberals, the Bloc, a separatist party, and the NDP, a Socialist party. In Canada, democracy reigns, and unlike the U.S. the government is actually controlled by the votes of the people, the proletariat, the peons, the patriots, the citizens vote. coalition governments are often brought into play, and deal effectively in government affairs as well, Elections are called for even small issues, and any government that falls out of line with the wishes of the proletariat are soon tossed out of office, to be replaced by a better group. Canada has a lively and very well democracy and due to the split on the political maps of the country and always will. Governments are bi-lingual, effectively screening pin-heads, loudmouths, demagogues, and in general, ass-holes, from entering the political forum. For this reason at least, all Canadian politicians are of a high caliber, well educated, higher IQ individuals.
    Sweden has similar conditions, as does Norway. The American version of democracy, poisoned by Corporatists, Capitalists, is a dying deal, Witness the Chinese mix of communism in control of Capitalists, Corporatists, with much greater success than the American Corpocracy/Plutocracy.
    Sorrowfully we witness, in America, the slow death of the last, the greatest, Caucasian empire the world will ever know, through greed, corporate manipulations, and mal-treatment of its lower classes. Pity.

  110. Here’s the deal: In order to change corporate behavior, you have to change the underlying goals of the corporation.

    No, you don’t have to change the goals. You have to change the underlying mores, ethics, definition of “profit” of the class that runs the corporations and the class (the same one for all intents and purposes) which receives those profits. In addition, the corporations and its leadership need to be held directly accountable (yes, the corporate executive needs to feel the pain rather than have the corporation pay his fine from society) for the long-term costs to society, the environment, etc. associated with their choices. In addition, society as a whole has to stop allowing them not to be held accountable. In a sense, we have to stop worshiping them.

    They, corporate leadership, can still maximize profits but they must think beyond themselves and their own class or better yet agree to be treated exactly as they treat other individuals, communities and their environments. If they cannot be good world citizens then they should be disbanded. (how about a three strikes and you’re out rule just like we do for other legal “persons.” Yeah, we all laugh at that one. And yet, lately I’ve been thinking it wouldn’t be such a bad idea.)

    Eventually something’s got to give. Either we find a way to reach the elite in the world and get them to see beyond their addiction to the game or we watch as our society eventually falters and fails. It’s already faltering if the income disparity and the development of the permanent unemployed class is anything to go by in the US. Add in a few “natural” disasters and environmental catastrophes and well, we’re well on our way, aren’t we?

    All this talk about corporations being fictional entities and out to provide their shareholders with maximum short-term profits only excuses them for their actions (why do proper safety inspections when it’s cheaper to pay the fines or settle a lawsuit given the tort limitations that are in place in a many a state. so a few of the peons die. No biggie.) and allows them to not be responsible for anything beyond their own self-interest and the interests of their class.

    It’s actually very Roman of them really and it won’t stop until society holds them accountable and decides to stop paying their way. I often wonder how profitable these corporations would really be if not for the government handouts to them and I’m not just talking about corporate tax rates here but land giveaways, lower rates on utilities and infrastructure, payments for collecting taxes, preferred treatment which helps eliminate competitions, government assumption of environmental costs for cleanup, direct cash infusion/incentives to “create” jobs or locate a facility in a region, etc.

    After the crash and the so-called change in government leadership, and the subsequent nothingness that happened, I’m afraid the only way anything will change is if there’s a worldwide cataclysm and/or a worldwide revolution. I truly hope there’s another answer out there.

    So do I think corporations are guilty of sociopathic behavior toward society? Yep. Absolutely. Because for me, corporations are only extensions of the people who create/run them and they can’t be separated from them except perhaps on a purely theoretical level.

  111. I agree with the gist of what Our Host says, but I think the “corporations exist to maximize shareholder value” line should not be taken too seriously. If a corporate executive really wants something to happen, even if the business case for doing it is dicey, he or she will usually be able to concoct some excuse for why it enhances shareholder value. Shareholders can sue corporate managers for misusing the capital entrusted to them, but the law on this subject strongly favors managers, so unless the abuse is on the level of “sell the company headquarters to the CEO’s brother for one dollar”, the shareholders are unlikely to win.

    Now I have to go back to maximizing the value of my employer’s shareholders….

  112. DA: how much is too much? That’s a rhetorical, unanswerable question.

    No. Not really.

    My main point was that if people think they’ll be plucked out of the water by the government chopper every time they start to drown, there’s no incentive to sail safely.

    That metaphor fails to model the basic problem. Gordon Gecko doing a pile-on short sale on Pencils Incorporated will drive Pencils stock down to zero. Gordon cashes out and buys a helicopter. Pencils Incorporated has to reorganize or declare bankruptcy. Gordon repeats the process indefinitely. The only ones who end up “in the water” in this case would be Pencils Incorporated and any other corp that Gordon goes after.

    This is one of the fundamental problems I have with super-conservativism: its basic model of reality doesn’t remotely describe the problem. The invisible hand of capitalism will not stop Gordon Gecko from short saling stocks into the ground. Gordon will never end up “in the water”. Conservatives are unable to acknowledge this basic fact: The market has no correction for this kind of problem. None. Nada. Zip.

    market regulation in the form of something like the short sale uptick rule is the only way to remove the reward and remove the incentive from the Gordon Gecko types.

    But every time I bring this to a super conservative, they will continue to use metaphors and models that always contain some sort of corrective measure inherent in the system. The market will always straighten things out if you leave it alone.

    No. it won’t.

    And that’s what you’re doing now. When you ask “how much is too much?” and say “That’s a rhetorical, unanswerable question”, you’re relating to all regulation as interfering with some natural corrective aspect of the unregulated market. But if you grok that an unregulated market doesn’t have corrective systems built in for everything, then the “how much is too much?” becomes a plainly simple question to answer:

    Regulation is not too much when it is dealing with a part of the market that contains no natural corrective mechanism in the unregulated market.

    Regulation is too much when it regulates a part of the market that contains working, intrinsic corrective mechanisms in the unregulated market.

    If you hold that the unregulated market can always correct every problem, then any regulation si too much, any regulation suddenly gets slipperty sloped into fascism, socialism, communism. But the thing is the unregulated market can’t and doesn’t correct every problem. But that notion violates one of the principle religious dogmas of the super conservative crowd. The invisible hand of capitalism is some sort of all knowing, all wise, and benevolent god that oversees the market place, and it will always correct any problems if left alone.

    Once a person gives up believing in the infallible invisible hand, understanding where market regulations make sense and don’t make sense is pretty straightforward. Regulate where the market does not have any natural corrective measures.

  113. So serial killers aren’t sociopaths because they are maximizing their pleasure in torturing and killing people. That’s really Randian. Ayn wrote a whole series of mash notes to the murderer William Hickman in her salad days. I guess by certain lights the kind of person who would kill and dismember a 12 year old girl while taunting her family for ransom isn’t a sociopath, but a lot of people would disagree with you.

    Corporations are sociopathic. That’s why they need to be heavily regulated, and the shareholder argument doesn’t cut it. The shareholders have little or no control over the management which consists of individuals who seek to maximize their own profit, not that of the collective’s owners. Corporations were heavily regulated in the early 19th century. They were unleashed in the latter part of that century with horrific results. Then, they were brought under control in the 1930s, but released again starting in the 80s. Not surprisingly, the results have been horrific.

  114. I wish we hadn’t gotten hung up on the definition of what is a sociopath. John stated “In particular, I disagree with the notion that most of them act like clinical sociopaths. Rather, I think the majority corporations act logically and rationally and in a manner consistent with the general reason for their existence.” So even though there is a misunderstanding of sociopathy in that statement, he is still stating that there are some corporations that DO act in a sociopathic manner, without acknowledging the costs or benefits of their actions on others and how those others may react in consequence.

    If you compare the behaviors of say Intel and Google with say Union Carbide and Philip-Morris, you can definitely see a difference in the way the corporations are managed and administered in regard to “morality” or their long-term relationship with society. All our host is saying is a blog-filling article that “most corporations are not evil, just self-interested”. All we’re really doing here is quibbling about the proportions. Is it 80-20? 50/50? From my point of view, the level of sociopathy of a corporation (or any business, for that matter) is the extent to which they externalize their costs, such as pollution, safety hazards, financial risks and so on. If the corporation earns its profits at the expense of a massive health burden to be borne by consumers (or by insurers including the government), it is clearly sociopathic by this definition. If a corporation offshores many of its operations and arranges its finances to minimize its tax burden while still gaining the benefits of operating as a “US company”, does that qualify as sociopathic, or merely greedy?

  115. From my point of view, the level of sociopathy of a corporation (or any business, for that matter) is the extent to which they externalize their costs, such as pollution, safety hazards, financial risks and so on. If the corporation earns its profits at the expense of a massive health burden to be borne by consumers (or by insurers including the government), it is clearly sociopathic by this definition.

    To the extent that a corporation is able to externalize their expenses, they are increasing shareholder value (because shareholder value — that is share price — is currently determined almost entirely by profits). Increasing shareholder value is what corporations are supposed to do. I don’t see that sociopathy has much to do with it. If you want to change the behavior of corporations, you need to start charging them for externalities. That’s why regulation is so important.

  116. greg @ 86 – Thanks but my question was actually for Scalzi. I guess I need to sic my 16lb asthmatic cat on HIM instead but he’d probably just be defended by Ghlaghghee and my poor Zaphod would slink away in defeat to be tormented for the rest of his life by 9 lb Trillian.

  117. Cherry: Increasing shareholder value is what corporations are supposed to do. I don’t see that sociopathy has much to do with it.

    I keep trying to figure out why people keep coming back to this matter of “profitable” as if it has anything whatsoever to do with sociopathy.

    The only thing I can figure is people mistakenly think that sociopaths are stupid. And if they’re “profitable”, then they must not be “stupid”, and therefore they can’t be sociopathic.

    If you tell me the corporate headquarters are painted blue, that is about as useful in determining corporate sociopathy as telling me they are profitable, which is to say, not useful at all.

    Profitable, intelligent, functional, and blue paint, are irrelevent to fitting the definition of sociopathy.

    Being incorporated also doesn’t determine sociopathy. Having intelligence and driven to achieve goasl doesn’t determine sociopathy.

    What determines sociopathy is whether the subject exhibits empathy for others as it operates toward its own selfish goals. Having selfish goals, too, is not a determiner of sociopathy. We all have selfish goals. You want to put food on your table, a roof over your head, and some bad TV in your living room. That’s selfish. Not selfish as in bad, just that it’s all about you. which is morally neutral. Its only sociopathic if you try to pay for all that by mugging people at random, or robbing from your neighbors, or some other action that demonstrates a lack of empathy for others.

    Corporations can be profitable, can be selfish, while still maintaining some level of empathy for others. And corporations can be profitable, can be selfish, adn not give a damn about who they have to step on to get there.

    So, once again, being profitable has nothing to do with being sociopathic, anymore than what color their headquarters are painted.

  118. Actually, being profitable has a great deal to do with not being sociopathic because it is society that has determined that corporations are supposed to increase shareholder value, by and large by being profitable.

    Mass murderers, by contrast, are sociopathic even if they are intelligent and empathetic and etc. because having madmen going around killing people is not a behavior that society values or desires.

    The point is not about sociopathy. The point is this (from Scalzi’s original post):

    What I do think you need to do is let their single-minded focus on maximizing shareholder value work for the overall benefit of the country.

    I’ve proposed in previous posts two ways of doing this:

    1. Change what the market values, that is, buy the stock of companies that are doing things you consider good. If enough people decide* that hiring American workers is more important than the profits that can be acheived by outsourcing, then companies will do a lot less outsourcing.

    2. Create regulations that make corporations pay for the externalities that you care about (pollution, carbon, health effects, etc.). When “bad” or “sociopathic” behavior actually costs something, then corporations will stop doing it because they are trying to increase shareholder value.

    * And by “decide” I mean “buy the stock of publicly traded companies that do this and sell the stock of publicly traded companies that do not.” As an aside, I would actually have a lot more sympathy with the position that the stock market is sociopathic.

  119. You referred to that ruling and yet did not quote its last lines:

    The protection in FOIA against disclosure of law enforcement information on the ground that it would constitute an unwarranted invasion of personal privacy does not extend to corporations. We trust that AT&T will not take it personally.

    Chief Justice Roberts is a very droll guy. And when the Supreme Court tosses your case out 9-zip, it is a case of “and don’t darken our door with an argument like this ever again”.

    Corporations were a medieval creation (well, re-creation) of a Roman law concept. The word comes from ‘corpora’, Latin for body. Some of the first corporations were universities (which comes from ‘universitas’, Latin for corporation). The American Civil Liberties Union is a corporation. When you start seeing how widespread and varied corporations are, you get a sense of how useful a legal creation they are.

  120. The question of whether corporations are anthropomorphic enough to be sociopaths seems like a fun semantic game. For my part, I think the better metaphor is that they’re colonial organisms, and we all know what cool dudes they are. Corporations are made up of people, but they’re not made up of a fixed group of people. They’re made up of people selected to maximize shareholder value. The maximizers get promoted and the non-maximizers get deposited in the corporate colon.

    Which is ugly but perfectly natural. My real concern about them is efficiency, because maximizing shareholder value does not preclude minimizing non-shareholder value. The corporate structure is a net positive when laws are able to constrain corporate behavior by, in essence, making it less profitable to harm non-shareholders. This is an efficient outcome in the economic sense (specifically, Kaldor-Hicks efficient), because in these cases a corporation will only harm non-shareholders when, on net, shareholders are better off after the law requires them to compensate the people they’ve made worse off.

    But corporations have evolved beyond our controlling. They are rich, multinational and mobile. When corporations are able to manipulate, escape or ignore the laws that would otherwise constrain them, they cease producing efficient outcomes for society as a whole. And they do so on a massive scale. The biological equivalent here would be giant, flying man-o-wars that eat forests and excrete oil spills and radiation.

    Holy crap, I just got a great idea for a screenplay.

  121. The invisible hand of capitalism will not stop Gordon Gecko from short saling stocks into the ground. Gordon will never end up “in the water”.

    He did end up in the water, and the government bailed him out.
    I notice that you ignore that fact.

    But fundamentally, you’re wrong because wealth destruction is an unsustainable activity, and anyway corporations are mostly about wealth creation. Yes, wealth can be created and destroyed, not just passed from person to person. If there’s lots of business activity, then wealth is being created out of thin air.

  122. DA: He did end up in the water, and the government bailed him out.
    I notice that you ignore that fact.

    First of all, short sale stock traders didn’t end up in teh water and they didn’t end up getting bailed out. THe effect of short sale stock traders, if anything would put the corporation they’re shorting in the water and possibly get those corporations bailed out. You keep ignoring that fact, taking a specific example of bad behavior that the market has no correction for and replacing it with a completely different narrative.

    Try for a second to forget about the goddamn bailout.

    Short selling can pile on a stock and drive it far below its actual value. The stock traders make money. The corporation gets screwed. The market has no natural correction for it. The cause of the problem never ends up “in the water” and the government never “bails them out”. OK?

    The question at this point is whether you can acknowlege the existence of a market problem that has no natural correction for it. So far you have been unwilling or unable to do so. Apparently, you seem to think that every bad behavior on the market is ultimately rewarded with bankruptcy. That’s a parable that is one step away from an all mighty god rewarding teh good and punishing the bad, and this god being worshipped is teh invisible hand of capitalism. It is a myth. It is nothing more that a story. There is no market correction for every bad behavior. Without regulation bad people can get rich adn walk away laughing all the way to teh bank and the market doesn’t do anything about it. It doesn’t turn them into pillars of salt. It doesn’t force them into bankruptcy.

    It is in cases like this that market regulation is the only way to put some sort of correction in place to prevent bad behavior from being rewarded since tehre is no natural punishment for the particular bad behavior. The short sale uptick rule is an extermely simple example of this.

    Either you are saying that every form of bad behavior on the market has some natural bad consequence equal to or greater than the bad behavior (and therefore are preaching your religion of the Invisible Hand), OR you acknowledge that some bad behavior has no natural correction in the unregulated market and needs regulation to correct it.

    Which is it?

  123. Actually, being profitable has a great deal to do with not being sociopathic because it is society that has determined that corporations are supposed to increase shareholder value, by and large by being profitable.

    Say this out loud for me: Intelligence does not determine sociopathy. No. Seriously. Say it outloud. Intelligence has nothing to do with sociopathy.

    Now repeat after me: “profit is not a signifier for or against sociopathy”

    OK, one last one: say this out loud: “Profit is irrelevant to the presence of sociopathic behavior”.

    Mass murderers, by contrast, are sociopathic even if they are intelligent and empathetic and etc. because having madmen going around killing people is not a behavior that society values or desires.

    Society desires cancer causing cigarettes? Society desires the gulf of mexico filled with crude oil? Society desires exploding pintos? Society desires toxic waste dumped into teh water supply?

    Just because a sociopath has a 9 to 5 job, and just because “Society” wants people to contribute to the Gross Domestic Product, doesn’t mean the person isnt’ also a sociopath. the 9-5 job is, in fact, irrelevant to whether the person is a sociopath.

    Likewise, just because the corporation makes profit for its shareholdes doesn’t mean the corporation isn’t also acting like a sociopath. Making profit for shareholders is irrelevant to whether the corporation is behaving in a sociopathic manner.

    One more time: Profit has NOTHING TO DO with whether the corporation is acting in a sociopathic manner.

  124. First of all, short sale stock traders didn’t end up in teh water and they didn’t end up getting bailed out.

    Oh I get it. Short sellers are the new bogeyman. Wow. I think I’ll just back away slowly now.

  125. I think this discussion may get further along if we ditch the idea of “sociopath” and “sociopathic”. In my professional 9-5 job, where I spend some of my time diagnosing mental illness and more of my time helping clients identify behaviors that are destructive in their lives, I don’t use sociopath or sociopathic as labels.

    The reasons for this are many. First, social definitions of evil, bad, and undesirable fluctuate over time. For example, being homosexual was considered a mental illness in the past. Now, no longer (at least by ethical counselor-types). Second, the label of “sociopathic” required counselors to make best guesses on the “sociopaths'” feelings and such, rather than observing and noting behaviors. This is especially problematic if an essential feature of sociopaths is their ability to lie well. Third, there has been a shift by some counselors to view diagnoses on a continuum. In short, not all people with major depressive disorder experience “depression” at the same intensity and thus behavior can diverge wildly among all those diagnosed. Finally, diagnosticians often disagree when making inferences. This is related to my second point.

    In my experience, sociopathic isn’t used regularly by professional social workers, counselors, and others in the human behavior field. So, if “sociopathic” and its related terms are not even being used to describe individuals anymore, it would seem to be even more problematic a term to describe corporations since there is considerable debate over how person-like a corporation actually is.

    You could try replacing “sociopathic” with the diagnosis of Antisocial Personality Disorder, but you will run into problems again. In my work I try to sidestep the whole issue of labeling people because there is such a vast difference among people about what behaviors are “good” and “justified” and in what circumstances. Labeling and/or diagnosing is a heuristic that accumulates a lot of personal assumptions that are often just plain wrong.

    What I find more useful is to define what particular actions are considered “bad” by myself, the client, and others in the system of interest (family, school, work). I do this using cost-benefit analyses, talking about how experiences “feel”, and other strategies. So, why not engage over specific behaviors that specific corporations are engaged in, try to define what is “bad” about them, and propose changes? Discussing the meaning of sociopathic or related synonyms can be interesting, but I find that people more often agree on and can engage with specific observable behaviors.

  126. DA, if by boogeyman you mean a bad actor whose bad behavior goes uncorrected in an unregulated market then sure. if by boogeyman you are trying to cast my simple example into some kind of strawman so you dont have to acknowledge the unregulated market doesnt solve this particular problem, well, thats something you will have to sort out for yourself.

  127. Instead of talking about corporations as “Sociopaths”, why not talk about them as Paperclip Maximizers? The Corporation is all about Making More Money. That is its only goal, and it will run babies through a trash compactor if there’s where the money is and they’re sure the CEO won’t be jailed for it.

  128. You know what I find disturbing, in this discussion of the personhood (or not) of corporations? The lack of acknowledgement (or of knowledge?), either from a science fiction writer or from a professor of business association & corporate law, that an accurate and useful concept that could resolve that conundrum does exist, in fact. It’s “system”, and there are whole branches of science and philosophy devoted to it. Oh, I don’t know, maybe it’s so obvious that it’s hidden in plain light…

  129. Irene Delse:

    Alternately, it’s sufficiently removed from the actual discussion on hand so as not to be relevant.

    The next time you want to complain that we’re not all having the conversation you want us to have, make an argument that the conversation you want us to have is worth having. As a hint, flouncing in and proclaiming “YOU’RE ALL DOING IT WRONG” isn’t the way to do it.

  130. John,

    I must say you’re exactly wrong about the nature of a corporation. Shareholders *make up* a corporation, are responsible in fact if not as a matter of law for the actions it undertakes, because it is their votes which ultimately set those actions in motion. To the extent that they are invested in the corporation, they *are* the corporation because a corporation is nothing else, except as a legal fiction. Employees *work for* a corporation, they are *not* its members. Thus a corporation’s interest in its shareholders (as far as it extends,) is merely a matter of self-interest.

    Pointing out this limited concern as an example of empathy is exactly as absurd as using your care for your intestines as an example of your own upstanding moral character.

    Your cat is not a person, is granted none of the rights of a person and is, as such, not expected to in any way act like a person. A cat is a cat, but a corporation, legally speaking, is a *person*.

    As a person, it is deficient specifically in the quality of empathy, a deficiency that in humans is seen as a sort of derangement — often called moral insanity or sociopathy. A corporation (*any* corporation) fails to meet the DSM-IV definition of antisocial personality disorder only in the sense that it is not actually a human person, much as might an alien.

    Saying that we shouldn’t call corporations or aliens sociopaths when they function like them is just quibbling semantics. They have no capacity for emotion. Their relationships are light, transient, and exploitative in character. They lie constantly, and break the law when they think they can get away with it. They externalize risk and ruthlessly exploit other persons (including corporations) for profit because that is the very thing they exist to do.

    What we dislike about sociopaths isn’t that we call them that, it’s that they fail in their moral prerogatives as people. That said, so do sociopaths, and we only punish *them* when we catch them breaking the law.

  131. JediBear:

    “Shareholders *make up* a corporation, are responsible in fact if not as a matter of law for the actions it undertakes, because it is their votes which ultimately set those actions in motion.”

    Yeah, no, not actually at all. You appear to be under the impression that shareholders who are not themselves corporate directors vote directly on corporate policy, which in fact they almost never do, save for the somewhat unusual shareholder resolutions, almost all of which are non-binding and which the board of directors may then choose to reject (as they generally do). Shareholders have some power as to who sits on the board, but typically even that power is constrained in most modern large corporations. You’re also apparently entirely neglecting to account for the existence of non-voting stock, the holders of which have no influence at all on management or their decisions.

    Given your apparent lack of understanding of modern corporate structure as regards the power of shareholders, you’ll forgive me if I take your assertion that I’m wrong about the nature of a corporation with a grain or two of salt.

  132. The problem with the thesis is the contention that it is GOOD that corporations are by design sociopathic, when it manifestly is NOT good. Not good for the communities and lives corporations ruin via job displacement. Not good for the environments they pollute. Not good for those whom they injure, maim, and kill when they sell shoddy, defective or otherwise dangerous products.

    And all that in the service of “shareholders”, whose primary motivation in investing itself is ALSO sociopathic: to maximize their profit above all things. So we have individual sociopathy magnified by collective sociopathy to the detriment of the general welfare.

    It didn’t used to be like this. Prior to the “fictive person” precedent, corporations were carefully regulated and fully subject to the law, as were their officers. If, for example, a corporation ruined the town’s water supply, the officers PERSONALLY would be held to account, legally and financially.

    The modern day claim of moral immunity for corporate officials is “I was doing my fiscal duty to the corporation to ‘maximize shareholder value’…”

    So, Mr Corporate Officer…you were “just following orders”…where have we heard THAT one before?

This is the place where you leave the things you think

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s