Corporations are for profit, not politics

Harvard Business Review Editorial Director Justin Fox.

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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