Business Ethics Based on The Corporation

The Corporation is a documentary based on the book written by Joel Bakan entitled The Corporation: The Pathological Pursuit of Profit and Power. It explores the nature and the rise of the corporations – considered the most dominant institution at present. The documentary has been given 26 International Awards, 10 International Audience Choice Awards including the award from the Sundance Film Festival and the Best Documentary in the Genie Awards. It is directed by Mark Achbar and Jennifer Abbott (Achbar, par 2).

The documentary features 40 interviews with Chief Executive Officers, top-level executives and people who are the trendsetters in their field of expertise. The interviewees include:

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1. Ray Anderson, Chief Executive Officer of Interface, world's largest carpet manufacturer
2. Noam Chomsky, Institute Professor at the Massachusetts Institute of Technology
3. Milton Friedman, a Nobel Prize-winning economist
4. Sam Gibara, current Chairman, former Chief Executive Officer Goodyear Tire
5. Robert Keyes, President and Chief Executive Officer, Canadian Council for International Business (Achbar, pars.1,2,9,14,15,22)

The film features the sides of different corporations and views of different people. However, the corporation is focused mainly on the corporation as a liability rather than an asset to the society. Statements from the interviewees suggest so. Some examples are the following: • "It is never easy choosing the 10 Worst Corporations of the Year - there are always more deserving nominees than we can possibly recognize. " - Robert Weissman, Editor, Multinational Monitor

1. "Fascism rose in Europe with the help of enormous corporations. " – Howard Zinn, Historian
2. "The corporation is the prototypical psychopath. "- Dr. Robert Hare
3. "You can manipulate consumers into wanting, and therefore buying, your products. It's a game. " - Lucy Hughes, VP, Initiative Media (Achbar, pars 5,12,20,40) The basic premise of the documentary is that corporations are people. The corporations were recognized by law as legal “persons” but unfortunately, these “people” developed a “personality” of self-interest. In fact, these people may be considered psychopaths. Psychopaths hurt other people and have certain characteristics which are not good for the society.

That is what the documentary points out – corporations have now become harmful to the communities. The documentary starts by showing that the first corporations were created in Europe circa 17th century. These corporations were non-profit entities assigned to build institutions, such as universities, for the common good. They had laws and constitutions that describe, in detail, their duties and responsibilities and were administered by the government. Corporations that broke their constitution were punishable by law (Brown 23). Eventually, the concept of corporations reached America.

Similar to the original corporations in Europe, these were chartered to serve the common public. They also had laws and rules and were overseen by the government. But this changed in 1886. A United States Court recognized the corporation as a “person” under law. The 14th amendment to the Constitution – ‘no state shall deprive any person of life, liberty or property’ – became applicable to corporations. Hence, the context of corporations changed vastly and in the succeeding years, the corporations became one of the most dominant institutions in the world.

This change was pointed out early in the documentary (Henn and Alexander 14). Since corporations are “people” who have developed a “personality” of self-interest, the corporations created unprecedented wealth. As pointed out in the documentary, it is, in a way, bound by law to put its interest first, no matter what. And sadly, that interest is to create as much profit as possible. In the documentary, the “personality” of corporations was assessed by using the diagnostic criteria of psychiatrists and psychologists and that of the World Health Organization as a checklist.

One of the criteria considered in the personality assessment in the documentary was callous unconcern for the feelings of others. Are the corporations unsympathetic towards others? Yes. This was exemplified by the sweatshop in Honduras and the lousy pay being given by apparel brands such as Liz Claiborne and Nike. The workers are paid barely enough and their pays do not even amount to about a tenth of the selling price of the clothes. As was said in the film, these brands and corporations engage in the science of exploitation.

The workers know that they are being exploited but they cannot do anything about it. Worse, the corporations continue on using them. This definitely shows that corporations do not show callous unconcern for the feelings of others. Another criterion for the personality assessment of corporations was its capacity to maintain enduring relationships. However, corporations apparently cannot maintain standing relationships. This was given by the continuous change in the venue of their labors. It was implied that corporations employ people who are desperate enough to work given lousy pay.

Eventually, the level of living of these people and their wages increase and they won’t be as desperate for work or for pay as they were in the beginning. This would result to a loss in the profit of the corporation. So for the corporation, this means that they have to move to a place where the people would be desperate enough to work even with a lousy pay. The corporation interacts in a vicious cycle of moving wherever there are workers who would agree to work given low pays (The Corporation). Another criterion is the regard for safety of others.

The documentary showed that corporations have disregarded the safety of the public. Such corporations are those that synthesize and use chemicals to produce several products such as gas, oil, fertilizers and pesticides. Initially, the corporations showed the benefits of their products and warning labels for side effects went unnoticed. But eventually, some body of data accumulated and showed that the products had some harmful effect on the environment and on humans. It caused pollutions, illnesses such as cancer and birth defects.

One concrete example is the Du Pont Company’s fungicide that led to a boy being born without eyes. And what is worse about it is that they have known about the side effects yet they attempt to trivialize the hazardous effects of their products (The Corporation). Deceitfulness, repeated lying and conning was another criteria for the personality assessment of the corporations. This, again, was an evident trait of corporations. The Monsanto Company deceived the Food and Drug Administration (FDA) by claiming that it has no harmful effects on cows and humans.

Since it was FDA approved, the public assumed that the product is indeed safe for consumption. But data showed that it had chronic effects on the heart, lungs and even on the reproductive system. As said in the documentary, the Monsanto Company lied through their teeth. The capacity to feel guilty was another criterion for the assessment. Corporations show no signs of guilt regarding its actions. The Monsanto Company exemplified this character. Another Monsanto product, because it was deemed safe and feasible to use, was sprayed on Vietnam land.

This caused over 50,000 birth defects and hundreds of thousands of cancer in the people residing in the area. It settled out of court but it never admitted that their product was the cause of the damage to the environment and illnesses to the people (The Corporation). Corporations have also been found not conforming to social norms with respect to lawful behaviours. Conforming to social norms was another criterion for the personality assessment of corporations. Plenty of corporations have degraded the environment and did not follow the laws regarding environmental principles.

Some corporations have violated the anti-trust laws. The following are examples of the said corporations and the fines that they paid:

1. Exxon paid $125 million due criminal fines
2. General Electric was found guilty of defrauding the federal government and paid $9. 5 million dollars
3. Chevron paid $6. 5 million due to environmental violations
4. IBM was found guilty of illegally exporting products and paid $8. 5 million Using these criteria and case histories, the corporations were identified as self-interested, devious and insensitive “people”.

They seem to show several human qualities such as selflessness and empathy when needed, yet these “people” do not suffer guilt. It also winds its way through the legal and social standards and tries to find loopholes to obtain its goal and to get its own way. The corporations were also recognized as having a highly anti-social “personality”. In fact, it was shown in the documentary that the diagnosis from the said assessment shows that the corporations are psychopaths. This was stated by Dr. Robert Hare, consultant to the FBI on psychopaths (The Corporation).

This is very unfortunate since corporations show to be as selfish as any human being can get. At the very heart of the documentary is corporate social responsibility (CSR). Basically, the documentary is suggesting that corporations should know their social responsibility and that the corporations should act based on that responsibility. The documentary implies that there is a growing public opinion that organizations have a responsibility to assess the impact of their decisions on different subsets of the society involved and minimize, or at the very least, compensate for the harm they may cause on the society.

But what truly is corporate social responsibility? What are the guidelines for CSR? The CSR is not a concept that can instantly be grasped or understood. Furthermore, it is hard to define. There are plenty of definitions for it but all the definitions differ and the resulting definitions are frequently debatable. In fact, the use of the term CSR is brilliant. No one can fully describe what it is. It suggests something, but it does not always mean the same thing; it depends on the circumstance in which it is used. It may express the idea of legal responsibility or liability.

It could also mean being socially responsible, based from an ethical point of view. It can also imply simply being responsible for an action done, whether it is good or bad (Mallin 253). Theoretically, CSR should be good for the society. Frequently, corporations have the capacity to be so, given their size and reach, to act as agents of social progress. If corporations are socially responsible, they would know that they owe the society. They would act for the betterment of the society. If companies practiced CSR, the companies would care more about sustainable development other than profits.

Given that organizations frequently have more resources than governments, CSR implies that they should return something to the society and allocate part of their resources to carry out beneficial projects and help the less fortunate members of the society. To practice CSR, initially, a corporation will identify a societal need, whether it be related to their practice or not. This includes areas such as education, infrastructure, healthcare, housing, etc that may require certain amounts of funding, which cannot be provided by the government or the private sector.

Instead, the corporations would be the ones to provide or at least enable the institutions that continue providing goods or services available (Kahn 97). For example, consider a corporation that uses the waterways such as rivers as a means for their transport and to dilute some toxic liquid wastes. If this corporation knows that they should be socially responsible, the corporation would conduct water treatment projects. They would also help in preventing the water from being polluted and being considered as biologically dead.

This is good, considering that the corporation would shell out money to give back something to the society, or more importantly, to return to the society what is rightfully theirs. There are organizations that incorporate social and environmental considerations into their decision-making, policies and practices. A socially responsible corporation would put the interests of shareholders on equal footing with that of parties concerned with the social, community and environmental interests of the society. These companies aim at economic, social and environmental performance that will enable them to attain their overall goal of development. (Mansley 87).

If corporations were to practice CSR and they would opt to operate for sustainable development, corporations would be greatly beneficial to the society. They would be providing jobs to the community. They will be bringing economic growth and development to the area. They will also be helping the environment and the social aspect of the individuals residing in the vicinity of the corporation, either directly or indirectly (Berle 1365). Corporate social responsibility, being at the heart of the documentary, is the reason why the documentary also highlighted externalities.

As defined by Milton Friedman in the documentary, externalities are unintended consequences of a transaction between two policies on a third body. These externalities have resulted to countless abuse such as cases of poverty, pollution, exploitation and illness. Externalities are one of the dangers of corporations. Corporate transactions may not include the deal’s effect on the environment. The project between the corporate and its transaction partner may inadvertently harm the people in the community. There should be people liable to the externalities that arise from corporation activities.

Since externalities are unintended consequences, who should shoulder these penalties? Is the corporation, as a whole, or the individuals within it are responsible for the consequences of the corporations’ actions? These are questions presented in the documentary. If corporations are socially responsible, the externalities resulting from their practices would be dealt with by the corporation themselves. Corporate social responsibility would make the corporations accountable for what they do, whether it was a result of only one man’s action, a man who represents the corporation or made the decision for them.

Another question is posed by Mark Kingwell, a cultural critic and author, with his question - "The primary question is: how do we make corporations democratically accountable? " Unfortunately, the answer seems to be none of the two. Milton Friedman, a Nobel Prize-winning economist is of the same opinion. This can be inferred by his statement - "Asking a corporation to be socially responsible makes no more sense than asking a building to be. ” There seems to be too many individuals in the company and they may point out that they are simply doing their job.

The people who work for corporations may be basically good people. They may even be outstanding citizens. But once they enter the corporation, their views and outlooks change and their act to differently than they normally would, just for the corporation. This is pointed out in the documentary by Sam Gibara, former Chairman and CEO of Goodyear Tire through his statement, “If you really had a free hand, if you really did what you wanted to do that suited your personal thoughts and your personal priorities, you’d act differently. ” And the corporate is considered as the “person” who does the action.

However, the corporations seem to point out that the resulting consequences are unintended and it is only done so as to achieve the corporation’s purpose – that is to gain profit. It is reasoned out that their reactions are inevitable (Shonfield 231). The society also had no choice once the corporations enact on their decision. Corporations rarely change their decisions, even if the people encourage, even demand, them to (Riahi-Belkaoui 81). But the problem is that corporations, as said in the documentary, are profit driven. Would corporations want to spend their profit? Of course not.

Corporations would prefer to invest on something that would spell out more profit for them. This is the very unfortunate thing with corporations. They are not bound to give back something to the society nor are they programmed to help society. Sadly, as pointed out in the documentary, corporations are psychopaths that are bound to act just to get more and more money from people, without necessarily thinking about giving back to those people nor considering their surroundings (The Corporation). Also, corporate social responsibility also acts as a smokescreen for corporations.

This should not be the case but this what some corporations do. Although theoretically, it should be for the good of the society, sometimes it ends up as a mere propaganda. This happens would the corporation openly shows how they good they are to the society. This is the case when they show their efforts to their target market, using their efforts and their so-called social responsibility-related practices. They use this as a marketing strategy, something for profit gain. This is what is done by some gasoline companies.

These corporations distract their audience by showing them that they are helping the people living in the areas where they drill for oil. They set up scholarship funds for those who are in need. But the problem is that this does not take away the fact they are drilling for non-renewable resources and that they are destroying the environment in one way or the other. The supposedly CSR related efforts that they are providing provide a facade for them. And since their audience sees that they are a “good corporation”, they will be more entertained and valued by their market, which could in turn lead to more profits.

As said in the documentary over and over again, the corporation’s goal is to get as much profit as possible. This underlying principle of profit gain has produced externalities. Yes, business is intended to generate money for the owner/s and corporations do tend to do business (Ballantine 151). But profit generation should not be done on the expense of the people who are directly or indirectly involved. It can be implied from the documentary that the things that make the corporations psychopaths are exactly the same things that should be changed or removed from companies.

Several of the criteria that were used to assess the “personality” of corporations should be the same criteria to be used to guide a corporation if they are doing good business or not. If a certain corporation do not fit the criteria, they are not doing good business at all. The corporation has and still is an overpowering psychopath in the society. Corporations should not be insensitive of the feelings of others. Corporations should monitor their employees, whether their employees may be in one company or in several different ones.

Several corporations are callous of the feelings of their employees in sweatshops. The corporations give workers lousy pay and place them in rough working conditions. This has been the reported case of Disney. A group of Hong Kong students and scholars claimed that factory workers in Dongguan, Zhongshan and Shenzhen were being abused by their employees. Disney responded by saying that they are taking the report seriously and they did not know that this was happening in the factories (Leung, pars. 2-3). It is very unlikely that no person knows about the harsh working conditions in the factories.

Corporations ought to change being callous towards employees for the employees are necessary to gain much profit. Regard for the safety of others is necessary in a corporation. The safety of the corporation’s employees should be guaranteed and noted. Workers should not be placed in unnecessary danger. If it is necessary that workers are to be placed in dangerous situations, safety precautions must be done. The safety of the consumers and the public must also be in mind when producing goods and providing services. The consumers would not want a product that is defective.

The defect may risk the health, or even the life of a person. If for example a car was released by the corporation and the air bags were defective, the defect in the air bag may ultimately result to a loss of life (The Corporation). Truthfulness should be a criterion for a corporation’s practice. The corporation should be obliged to tell the truth about their products and/or services. Deceit would result to a loss of public trust. It would also result to endangering the consumers. In the documentary, deceit led to threats and illnesses to the general public.

A corporation should be obligated to the public to produce valuable and quality services and products. Corporations must also follow legal procedures and law, much like a regular person. Corporations ought to follow environmental and trust laws. They must also follow federal rules. And corporations should be responsible and take the consequences of their action. They ought to not look for loopholes in the legal system just so they can get away with their profit-generation schemes. But if corporations follow those criterions, it could possibly mean that they would have to spend to conform to those criteria.

They would probably be losing money in the process. For example, if they were truthful about their products, corporations would have to admit that their product is not that good, given that there are some defects in the product. The corporations would want the general public to think that their product is as good as it gets. The result would be more profit due to the good response from the consumers and sales would increase. If corporations are to be sensitive to the feelings of their workers, there would be no lay offs. The corporations would not be able to let go of incompetent laborers.

They would also be losing money if they cannot let go of unnecessary workers. The corporations would not be earning as much because the workers in the sweatshops would be paid enough and money would have to be spent to improve their working conditions. If corporations followed all the rules about trust and environment and federal laws, it may mean that they would have to spend more just to follow the laws. Ultimately, if the corporations followed the criteria that would make them not harmful to the society, it would mean less profit.

This opposes their ultimate goal of excessive profit gain. In this manner, the documentary outdid itself. It presented ways to “correct” the corporations. It suggested a vague manner of renovating and doing a compete overhaul of the corporations. More importantly, it showed that corporation should be socially responsible. The documentary showed the corporations’ “personality traits” that should be changed. But the shown ways conflict with the goal of the corporations. To change a corporation’s structure to do good business would not mean doing business at all (Henn and Alexander 38).

The society can only hope that the corporations would consider externalities, environmental concerns and laws in the same level as money-making. (Olsen 155). Bottomline is that corporations ought to practice CSR but they ought to do it honestly and not for anything else. As suggested in the documentary, corporations would be beneficial to the society, if only they would serve the society and practice for the betterment.

References

1. Achbar, Mark. The Corporation Film: About the Film. Big Picture Media Corporation. 14 April 2008. http://www. thecorporation. com/index. cfm?page_id=2
2. Achbar, Mark. The Corporation Film: Who’s Who. Big Picture Media Corporation. 14 April 2008. http://www. thecorporation. com/index. cfm? page_id=3
3. The Corporation. Dir. Jennifer Abbott and Mark Achbar. 2004.
4. Video. Independent Documentary. 2004 Ballantine, Henry. Ballantine on Corporations. rev. ed. New York: Callahan & Company, 1946. 151
5. Bakan, Joel. The Corporation: The Pathological Pursuit of Profit and Power. New York: Free Press, 2004.
6. Berle, A. Corporate powers as powers in trust. 1931. Harvard, 1049 Brown, Bruce. The History of the Corporation. Vol. 1.
7. Washington: BF Communications Inc, 2003. 23-25 Gower, L. Principles of Modern Company Law. 4th ed. London: Sweet & Maxwell, 1979 at 20-26
8. Henn, Harry and Alexander, John. Hornbook on Laws of Corporations and Other Business Enterprises” St. Paul: West Publishing, 1983 . 13-14, 38.
9. Howard, John. “The concept of the corporation. ” The Advocate. 1 January 2002. http://www. encyclopedia. com/doc/1G1-82612447. html
10. Kaysen, Karl. The Corporation: How Much Power? What Scope? in E. Mason (ed. ), The Corporation in Modern Society. Cambridge, Mass. : Harvard University Press, 1966. 85, 103.

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