Corporate values ignore the bottom line


With all the scandals swirling around U.S. corporations, public respect for CEOs has plunged and, as a lawyer, I can empathize. Stories about sleazy lawyers chasing after ambulances still bring color to my cheeks, so I understand what it’s like to work in a profession that is equated with sharks and bloodsuckers.

The fact is, though, that increasing scrutiny has likely only just begun to expose the true social costs of global corporate culture.

Of course, things have not always been so tough for CEOs. As Klaus Schwab, president of the World Economic Forum, noted almost wistfully in a recent Newsweek piece, in the old days, “a corporation existed to make money.”

Indeed, there was a time in the 1980s when it truly seemed that — as financial kingpin Gordon Gecko put it in the blockbuster movie “Wall Street” — “Greed is good.”

Today, greed continues to pay extremely well. In the same issue of Newsweek (May 5), Robert J. Samuelson, an economist, notes: “Including the value of long-term ‘incentives,’ median CEO pay tripled, from $2 million in 1993 to $6 million in 2002. Over the same period, compensation for all workers rose only a third.”

Greed, however, is not the only problem. Increasingly, environmentalists, human-rights advocates and political watchdogs are calling on governments to rein in corporations. Critics argue that corporations have for too long been given environmental and social carte blanche, leaving governments and citizens’ groups to clean up the messes left behind, while corporations bankroll their shareholders.

As Paul Hawken, author, business leader and activist, explains, corporations cannot become part of the solution as long as they are the problem. “You can’t get to sustainability from an economic model that strives first and foremost to increase the amount of money large corporations have,” Hawken writes in the May-June issue of Utne magazine. “You can’t get there if you’re destroying the world’s local economies. We cannot correct environmental problems if we don’t correct the assumptions that cause them. Most of the world’s economy and the behavior of the world’s governments are under the control of corporations. Corporations are striving to increase their control; at the same time, the world is increasingly out of control. There is a direct connection.”

It has long been recognized that as corporations acquire greater freedom to operate, they also gain increasing control over society. Almost 140 years ago, U.S. President Abraham Lincoln voiced fears that corporations posed a very real threat to American democracy. In a letter to a friend in 1864, he wrote: “Corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed.”

The Hightower Lowdown — a U.S. activist newsletter that printed this excerpt of Lincoln’s letter in its April issue — offers a closer look at why corporations “are inherently antidemocratic constructs” that threaten grassroots democracy.

“Not only are corporations far bigger, richer and more powerful than individuals, but they also can live forever, don’t need clean air and water to live, can’t be put in jail, have no moral restraints of their own and have no other goal but to keep profits flowing to their controlling shareholders.”

Of particular concern to Jim Hightower and Phillip Frazer, the authors of Lowdown, is that by forming a corporation, the controlling investors are able to “elevate their private good above the common good,” and avoid “responsibility for the damage done by their corporations.” They explain that “if an individual business owner or partnership defrauds, kills, pollutes or otherwise acts badly, the owners pay the price. But if a corporation does [the same], the owners don’t go to jail or pay the fines. The corporate structure creates a one-way wall: It allows the owners to reap all of the profits of corporate activity, while they are protected from any responsibility for corporate illegalities.”

Even when corporations act legally, business-as-usual is costly. Take Wal-Mart Stores Inc., for example, the world’s largest retailer. As writer Karen Lowry Miller notes in Newsweek (April 28), Wal-Mart is inherently predatory in its efforts to sell products at ever-cheaper prices. “[Wal-Mart] has expanded from its home base in Arkansas to more than 4,400 stores in 10 countries, and from general merchandise to food and gasoline. It squeezes discounts out of its 30,000 suppliers around the world.”

If suppliers are squeezed, customers can save pennies on each widget they buy. But there are costs as well. In order to shave pennies off prices, producers and suppliers are forced to lay off workers, cut health benefits and skimp on environmental-protection efforts. As a result, while pennies are saved, quality of life is compromised in working communities worldwide.

Those critical of this corporate “squeeze or be squeezed” approach to the global market are quickly accused of being antiglobalization. However, as Naomi Klein, author of “Fences and Windows,” notes, globalization is not simply about economics. “It’s time to stop conflating basic principles of internationalism and interconnectedness — principles only Luddites and narrow internationalists oppose — with a specific economic model that is very much in dispute,” she writes.

“Part of the confusion about what we mean when we use the term ‘globalization’ stems from the fact that this particular economic model has a tendency to treat trade not as one part of internationalism, but as its overarching infrastructure. It gradually swallows everything else — culture, human rights, the environment, democracy itself — inside the perimeters of trade,” Klein explains.

Hawken takes a similar line. “Trade is great. Trade is civilizing. Trade is not the issue. The question is who sets the rules and who enforces them. What will the shape of the relationships be among nations, regions, peoples, companies, markets — and the commons which support all life on Earth?” he asks readers of Utne.

So far, corporate culture has failed to live up to its hype. “While there’s no shortage of numbers pointing to increases in exports and investment, the trickle-down effects promised as the political incentive for deregulation — a cleaner environment, higher wages, better working conditions, less poverty — have either been pitifully incremental or non-existent,” Klein laments.

As Hawken explains, “Sustainability has to be about improving the quality of life of all people on Earth and honoring all forms of life.”

So far, however, corporate thinking remains rooted in the mid-1800s, when the railroad monopolist Cornelius Vanderbilt boasted: “What do I care about the law? Ain’t I got the power?”