In his inaugural speech President Bush urged individual Americans to
increase their commitment to civility, character, and compassion.
Instead of its people, these remarks should have been addressed to
America's most powerful citizens--its corporations.
Since a Supreme Court decision in 1886, corporations have enjoyed all the rights of citizens. However, because they are dedicated to the pursuit of self-interest, their behavior often reflects a disregard for the obligations of citizenship of which the president spoke.
He began with a call to civility. "America, at its best, matches a commitment to principle with a concern for civility." Civility involves respect for the public interest; sometimes even at the expense of one's own private interest. Corporations do not practice civility when they put profit ahead of the environment, human rights, public safety, the dignity of their employees or the welfare of the communities in which they operate. Their concern for civility extends only as far as the pursuit of profit allows it. Yet, the president had nothing to say about improving the civility of corporations.
The new president continued, "America, at its best, is a place where personal responsibility is valued and expected. Encouraging responsibility...is a call to conscience. And although it requires sacrifice, it brings deeper fulfillment. We find the fullness of life, not only in options, but in commitments. And we find that children and community are commitments that set us free."
The Bush administration is not likely to ask corporate America to examine their consciences, sacrifice, or make greater commitments to America's children and communities. But why not? Our most powerful citizens should not be able to claim all the rights of citizenship, but bear none of its responsibilities. Why was not one word spoken on inauguration day asking corporations to make a greater commitment to the public interest.
According to our new president, "America, at its best, is compassionate."
Compassionate conservatism is the new administration's slogan. Yet, the man who parlayed that slogan into the presidency had nothing to say about creating corporate compassion.
To be fair to him, this omission reflects something we all know to be true--that corporate compassion is an oxymoron. By law, the corporation is a system dedicated to the pursuit of profit for the benefit of stockholders, i.e. its own self-interest. Compassion is not a corporate trait. But should it be?
In a recent poll taken by one of America's leading business magazines, 95% of those polled said they thought there were times when a corporation should sacrifice its own interests for the interests of its workers and the communities in which it operates. If so many of us think this way, why doesn't our law reflect it?
Corporations exist only because laws have been enacted that provide for their creation and give them a license to operate. When these laws were enacted, no attempt was made to give corporations characteristics or traits that would make them good citizens. At that time, most corporations were small and their impact on society was insignificant. Then, it was not as important that they be socially responsible. This is no longer true.
The corporate law establishes a structure under which all corporations operate. The key element of this structure is the duty of directors to try to make money for shareholders. This duty of directors, in turn, becomes the primary directive for all of the corporationís officers, managers and other employees.
The consequence of this structure is that all corporate action is taken in the pursuit of profit. Literally hundreds of decisions are made every day by employees who have little incentive to promote corporate citizenship or social responsibility unless such promotion also can be shown to improve (short term) profitability. Nothing in this structure encourages (let alone requires) corporations to be socially responsible or to contribute, cooperate or sacrifice for the benefit of the public interest (i.e. be a good citizen).
To the extent there is any restraint on the pursuit of profit at the expense of the public interest, it comes in the form of government regulation. This presents corporate managers with a basic conflict of interest: how to comply with the regulation (which can increase their costs) while at the same time remaining primarily responsive to their duty to make money (which requires reduced costs). Too often corporate managers resolve this conflict by legal hairsplitting, lobbying against the public interest, or playing governments off against each other. W Edwards Deming, the late American management guru, was fond of saying that 94% of all business problems are systems problems and only 6% are people problems. This is because the lack of performance is usually not a problem caused by the people working within the system. It is caused by the system itself. Most of the time the people cannot overcome the system, no matter how well they are educated and no matter how many times they are admonished to do better..
Lack of corporate citizenship is not a people problem. It is a systems problem. It cannot be solved by the education or regulation of the people in the corporation. It can only be solved by changing the corporate structure.
Corporations will take on the obligations of citizenship spoke of by President Bush only when the duty to make money becomes balanced by something that protects the public interest. This can be achieved by changing our corporate laws by adding a 25 word Code of Corporate Citizenship to the existing duty of directors to make money:
"but not at the expense of the environment, human rights, public safety, the communities in which the corporation operates, or the dignity of its employees."
These boundaries are not unreasonable. Profit need not come at the expense of the public interest.
The corporate law was enacted so that corporations could serve mankind, not the other way around. Imposing these boundaries will make it clear that corporations have obligations to the public (which passed the law under which corporations are formed) that are just as important as the obligations to their investors. Once our president and corporations recognize this, then we may begin to see an America at its best.