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.