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Corporations are for profit, not politics
Harvard Business Review Editorial Director Justin Fox.
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TEXT OF COMMENTARY
Kai Ryssdal: There was a rare bit of judicial branch emotion on display during the State of the Union last night. As the president criticized the Supreme Court's recent ruling on corporations and campaign finance, television cameras picked up Justice Samuel Alito shaking his head in disagreement. Alito sided with the majority on the 5-4 ruling.
Commentator Justin Fox offers this dissent.
JUSTIN FOX: Economist Milton Friedman once wrote that an individual has lots of responsibilities: responsibilities to family, to conscience, to charity, to church, to country. A business, he said, was different. It's one and only responsibility was "to engage in activities designed to increase its profits, so long as it stays within the rules of the game."
Friedman's point was that CEOs should not go around imposing their notions of social responsibility on corporations owned by many shareholders. Since the only interest that could possibly unite all those shareholders was making a profit, that was what executives should focus on during their working hours.
Think about this in the context of the Supreme Court's decision last week. In a landmark ruling, the court struck down long-standing restrictions on political spending by corporations.
The ideal corporation Friedman described is out to do nothing but make as much money as it can, "within the rules of the game." It is supposed to behave in a supremely selfish and single-minded fashion. An individual who acted like that would be considered really unpleasant, maybe even psychopathic. The Supreme Court's decision frees corporations to play a potentially decisive role in shaping the "rules of the game," rules that they have to obey. It's a little like putting inmates in control of the asylum.
It's true, corporations are made up of individuals. That makes it hard to draw a line between what corporations do and what their individual employees do. It is even harder to draw a line between free speech and outright political activity. The Supreme Court majority cited this as the main justification for its decision.
But equating corporate rights with individual rights, as the Court did, just doesn't smell right. If corporations are individuals, they are individuals with some pretty serious mental and emotional problems. You'd think any self-respecting judge would want to declare them incompetent.
RYSSDAL: Justin Fox is the editorial director for the Harvard Business Review Group. We had him on the show last year talking about his book, it's called "The Myth of the Rational Market."
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What Justice Alito was disagreeing with, by reports I've heard, was Obama's charge that the Court had overturned a century of precedent. And Alito was right. If the law in question had been upheld, according to the government lawyers, the FEC could censor any movie or book that supported or opposed any political candidate. Once that was admitted in open court, this case should have been a unanimous, uncontroversial decision.
Justin Fox says that corporations should not be allowed to donate to political candidates because if a person acted like an ideal corporation, he would be considered a "psychopath." We already let any person regardless of his mental state or values donate to a political candidate. As long as we have transparency in the process, let the voters judge contributions based on the persons and corporations involved.
I wholly subscribe to Mr. Fox's well argued position. For anecdotal evidence from our Founding Fathers & Mothers, one need only note that the word "corporation" does not appear in the constitution.
The Supreme Court paves the way for the 'right' for a corporation to cast a vote. By Wall Street standards, it'll be a Class A vote that outvotes Class B votes (allocated to individuals) by 100000 to 1. (After all, if the interests of corporations aren't taken care of, we'll all be "out of a job"!)
There are those who would argue that if you don't like a corporation for some reason, one can merely sell the stock and not purchase the product. "So there".
This disingenuous position neatly elides a characteristic of human individuals, to wit, an inclination to advance oneself on the backs of others -particularly- if it can be done secretly!
Suppose I, a non-smoker, take exception to Big Tobacco for their dangerous product and disarming lies about it, and even let us assume I'm actually allergic to tobacco smoke.
But as an investor with money burning a hole in my pocket, I note that Big Tobacco is -wildly profitable-, giving me the potential for handsome returns at the expense of their customers and my neighbors.
I can buy the stock for myself, and if nobody asks, I can carry my non-smoking self 'upwind' of the smokers in public with precious little hint of internal cognitive dissonance. After all, the returns on my investment give me a Good Feeling that counteracts any gnawing feeling about getting my gain at the expense of those around me.
I would love to hear Dan Ariely declaim on this sort of economic emotional incoherence in individuals when faced with the opportunity of secret financial gain (a corporation providing excellent means to anonymity) versus maintaining 'ones ideals' without two-faced secrecy.
Emily Woodburne, thanks for the plug (was that from you, or your corporation?). And, Robert Fischer, you don't think Exxon already has a private army?
Hopefully the jig is up, and Americans realize that neither the best nor the brightest minds ever make it to the Supreme Court. And why should they? These people are political appointees, after all, which necessarily means that you end up with a panel of sycophants that are tied to their benefactors long after their appointment. The level of intellectual dishonesty and hypocrisy in the the Supreme Court is simply exemplified by this latest ruling. I wonder what the Founding Fathers really thought about fictitious entities rights to free speech, Justice Antonin "The Originalist" Scalia?
If indeed corporations are now considered individuals they should be treated as such by all branches of the government. Let the IRS start taxing them at the individual rate not the corporate rate. I will now start treating corporations as individuals, like my friends and neighbors. I think I'll ask Exxon or Microsoft to borrow a cup of sugar or watch my dog for an hour or so.
I'm happy to hear these comments as well, but it strikes me a bit odd that the only reference Fox makes is to Friedman completely ignoring Joel Bakan's 2005 book THE CORPORATION: The Pathological Pursuit of Profit and Power, which makes this exact argument. The book and it's associated 2004 feature documentary by Mark Achbar & Jennifer Abbot examine the implications of allowing corporations to function legally as 'individuals.' In full disclosure, I worked on the release of the film. Hugely influential (or so we thought at the time) and something that Mr. Fox should make himself aware of (if he is not); and should reference if he is.
Finally, we hear someone in a public forum question the unquestionable -- why should corporations be accorded the rights of individuals? The cancer that cripples our political system started here. Now, what can be done by citizens to correct this absurd and anti-democratic interpretation of the Constitution?
According to psychoanalyst C. G. Jung (1875-1961):
"Any large company composed of wholly admirable persons has the morality of an unwieldy, stupid, and violent animal. The bigger the organization, the more unavoidable is its immorality and blind stupidity. Society, by automatically stressing all the collective qualities in its individual representatives, puts a premium on mediocrity, on everything that settles down to vegetate in an easy, irresponsible way. individuality will inevitably be driven to the wall. . . . This process begins in school, continues at the university, and rules all departments in which the State has a hand. . . . Without freedom there can be no morality."
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