Corporations and Morality –

by

We humans have created the very interesting entity known as the corporation. Among the marks of the business corporation are:

  1. Transferable shares (think stock market)
  2. Perpetual succession (just because the president dies, the corporation does not)
  3. Limited liability

The corporation has several characteristics that legal types like to talk about, among them are the ability:

  1. To sue and be sued
  2. To hold assets in its own name
  3. To hire agents
  4. To sign contracts
  5. Make its own internal laws to govern itself

The corporation provides “limited liability” for the owners of the stock. Basically this is supposed to mean that a stockholder cannot be held liable for more than the value of the stock owned.

Now another characteristic or two that seem to be overlooked in discussion are the fact that no matter what the intentions of the founder(s), the only purpose for existence of the modern business corporation is to make money. This not necessarily a bad thing. Without the modern corporation we would not be able to have the production and economy that we do. Corporations provide a living and retirement for millions. This is a good thing.

However, the second characteristic is a result of the first. Employees can distance themselves emotionally from the consequences of other corporate employees. Like this: a company make a potentially useful product that may have unforeseen long-term consequences. Years later the consequences emerge. The people directly responsible are gone, dead or retired or just move on. The current crop of employees had nothing to do with the development of the original product and feel no need to accept responsibility. Now the lawyers get rich, and frequently the injured parties do not have the resources to fight lengthy and complex court battles. This is a bad thing. The corporation gets by with no penalty for the consequences of the past actions. Individual people may be moral. Groups of people are amoral. I might also point out that the corporation, particularly chemical, may have put out a decent product and that people down the line misapplied it. If we humans have an opportunity to screw up, we will.

Now, as I said, corporations are necessary to the modern world, but they sure have drawbacks. Congress tends to try band aids for problems that frequently make things worse. After the scandals of the 90s, and early 2000s, Congress tried a band aid in the form of the 2002 Sarbanes-Oxley Act. Now SOX, as it is known, is one horribly complex set of regulations which boil down to making corporate executives personally responsible for the accuracy of financial statements. Now this sounds like a really good thing. However, there are unseen consequences. First major hitch: never again will a technical person ever head a major corporation, or even be in the upper tier of management. Sounds OK until you realize that no financial type ever created or inspired or approved a major technological innovation. OOPS! We will have increasing profits by job cutting, corner cutting, whatever makes a quarterly short term profit. There will be no investment in long term returns, and strong technical people will have less and less say in the future direction of the corporation. More and more jobs will go overseas. The labor is cheaper even if not as good. And the stockholders will fiddle while Rome burns, as long as there is a dividend. Thanks, SOX!

Obviously, the above is a rather quick and dirty description of a tremendously complex problem. Several things are readily evident:

  1. We must have corporations unless the population of the world goes back to pre-industrial agrarian support levels and people work long hours just to eat.
  2. We have to figure out how to make corporations responsible for the consequences of their actions.
  3. We must protect the investors.

These are some tough questions. They will require tough answers that have been thoroughly thought through. We already have bad legislation that is stifling American industry. We don’t need more. We need some far-sighted long-term legislation for a change. And we definitely need to properly regulate corporations because – the title is misleading. Corporations are amoral.

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One Response to “Corporations and Morality –”

  1. turtlemom3 Says:

    Herself Sez: Yes, corporations have problems. However, the users of products have problems, also. Misuse of a product should void any liability of the company, and bring requirement for the person misusing it to simply bear the consequences.
    For pharmaceutical companies, drug development and approval are an incredibly expensive process. But we know that a particular drug will have different effects on different people. When the clinical trials are over, the company has a long list of side-effects and complications as well as a percentage estimate of how well the product works on a large number of people. There is a point at which a product is considered ready for market. However, once a larger population is exposed to the drug, new side-effects may be identified. Also, once a population has been taking the drug for a longer time than the test population, newer, long-term side effects are discovered. Some of these may be dangerous.
    At that point, the corporation has a couple of options: take the drug off the market OR “black box” the dangers in the literature given to the prescribing physicians and to pharmacists who dispense the drug. These dangers and other side-effects should be – MUST be – communicated to the person taking the drug. The pharmacy has been made the last line of defense, as it were. But most of the time, there is simply an imposing piece of literature given with no explanation. The physicians expect the pharmacists to give counsel about the drug, but the pharmacists expect the physicians (or their office nurses) give the counsel.
    As a nursing professional, I believe it is the responsibility of the physician’s office to ensure that all patients understand the possible side effects and dangers of every drug they are prescribed.
    There is NO drug without side effects. And this is why drugs must be PRESCRIBED by physicians. Because the physician is the one who can determine exactly which drug in a class of drugs is most likely to work for a particular person. The physician is the one most likely to identify and address side effects in a patient.
    But patients have a responsibility to report side effects, and to know what the potential dangers are and to report signs of them.
    This is a complex situation. But I am convinced that better understanding of the dangers and side effects of the drugs they take is critical to solving part of the crisis in lawsuits against pharmaceutical companies. Another critical part in preventing lawsuits is honesty on the part of the pharmaceutical companies – notifying physicians of new drug effects as they are reported to the company. Covering up is not an option when dealing with people’s lives.

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