The corporation as a legal entity and an economic institution is a big chunk of what’s wrong with the world. There are a lot of statements that could be made in support of that, a lot of arguments to be offered, but right now I’m just going to focus on one in particular: the problem of corporate responsibility.
In a sole proprietorship, the owner of the company is the ultimate sole determinant of company policy. He or she can make any decision about how the business should deal with matters of internal policy, marketing, product and service development, and conscientious coexistence with the rest of the world. The sole proprietor is the final arbiter of matters of conscience, and he or she must live with the decisions he or she makes. Period.
When a corporation is created, it becomes a legal entity in its own right. The “owners” become “shareholders”, with stakes in the company’s success. An executive is appointed the task of making the sorts of decisions that a sole proprietor would likely have made, and the shareholders do not simply sit around making such decisions themselves. Their decision-making power is mostly related to purchasing and sale of stock, and appointment of a Chief Executive Officer.
The CEO’s job — his or her responsibility — is primarily to the success of the corporation as an investment of the shareholders’ resources. He is legally beholden to such success. He has an ethical mandate to serve that end, and anything that stands in the way of that end is secondary at best. Period.
Shareholders are thus insulated from responsibility for the consequences of the corporation’s policies, both personally and legally. They not only don’t have a hand in the day to day decisions that might keep a sole proprietor up at night worrying about issues of right and wrong, but they shouldn’t know — that’s much of the point of having a corporation in the first place. They also have no direct legal worries about responsibility for the corporation’s policies as defined and enacted by the CEO.
A common statement in online discussion in the last few years, in my experience, is that a CEO has a fiduciary responsibility to the shareholders. One of the more common formulations of that is “The corporation has a responsibility to the shareholders.” This kind of statement is often immediately followed by a reminder that the law actually enforces this responsibility, and if a corporation’s officers act in a manner inconsistent with trying to provide the greatest return on investment legally possible (even to the point of pushing the envelope of legality), they can be held accountable.
This sort of thing is usually brought up in defense of corporate policies in pursuit of market domination, such as the ruthless manner in which Microsoft seeks to shut others out of markets, crush potential competition through dirty tricks, and double-deal with its own customers. Bring up the way Steve Ballmer makes specious threats about software patents violated by software that existed before Microsoft did, and some chucklehead will point out the man’s fiduciary responsibility to “protect the intellectual property of Microsoft in the interests of its shareholders”. Never mind the obviously underhanded scare tactics and strongarm bullying. When faced with a situation like that, your choices are:
Abide by the responsibilities you accepted when taking the job of CEO, but act in an otherwise unethical manner, because that unethical behavior isn’t as legally actionable as failure in your fiduciary responsibility to your shareholders.
Act in an otherwise ethical manner, but forsake your fiduciary responsibilities, which is not only unethical to some extent itself but also a great way to open yourself up to legal action.
Take the high road, and resign, thus violating no ethical limits on your behavior at all.
Notice Ballmer is still CEO of Microsoft.
It’s corporate law that creates this problem — and “corporate responsibility”, for all its scapegoating value as an excuse, is the problem. It not only creates conflicts of interest and ethics, but also makes sure nobody really has to believe that he or she is to blame for any of the bad things that are done in a corporation’s name. As long as they do what they’re supposed to do as shareholders and/or officers of a corporation, they are doing “the right thing” by some measure; if the wrong thing ultimately gets done, it’s not their fault. Really.
Even worse, that’s true a lot of the time. It’s entirely possible that everybody involved does the right thing, within the limited framework of their own role to play, but that it will all add up to some very wrong things being done. It’s the sort of paradoxical case of both nobody and everybody being to blame that can only exist when elaborate mechanisms for separation of individuals from personal responsibility for their part in greater actions are put in place. In other words, it’s the sort of situation where everyone being diligent and ethical to the best of their ability can lead to evil ends only because of the existence of that fictional entity, the “corporation”.
Corporate responsibility applies to far more than just CEOs, of course. Every officer, every functionary, every low-level intern labors under the yoke of corporate responsibility, and contributes as cogs in the cold, juggernaut clockwork of the amoral corporation. All of this adds up to a tremendous, pervasive wrongness in the socioeconomic system within which we live — but is just one drop in the bucket of what’s wrong with corporate law, and of how corporate economies interfere with the workings of a free market, an ethical criminal justice system, a political system of checks and balances, and myriad other influences on our way of life.