OpEdNews - Page 2 of Article: The Scorpion, The Frog, and the Corporation

Put simply, when the corporation is subordinate to government and the rule of law, prosperity throughout society is possible. But when government and the rule of law are subordinated to corporations, the result is ruin for all.

Bold pronouncements, all. Now to the supporting arguments.

The Corporation vs. Society.

The stakeholder problem. It is an article of faith among libertarians and regressives, a faith undiminished by the historical record or practical experience, that the unregulated free market of self-serving buyers and sellers will, "as if by an invisible hand," yield the optimum social benefits.

This reassuring dogma conveniently neglects the "third parties" to economic transactions: the "stakeholders" - individuals affected by the transactions without their informed consent. These include individuals residing downwind and downstream from polluting industries, taxpayers who must pay for the medical costs of smoking, citizens at risk of injury or death from toxic chemical releases, and homeowners near airports. Add to these, the customers who are not informed of the consequences of their purchases: teen-agers induced to take up smoking, consumers of insufficiently tested drugs, etc. The costs of these third-party "externalities" do not figure into the profit-maximizing plans of corporations, unless those costs are imposed by force of law and regulation, which is to say, by government.

There is another remedy, say the libertarians: the threat of law suits by individuals harmed by corporate irresponsibility. Unfortunately, the regressive Republican Congress has pulled the teeth from this watchdog by enacting so-called "tort reform" - limitations on awards to plaintiffs. So today, damage claims by customers and stakeholders are simply regarded by large corporations, as "the cost of doing business." (For more reasons why "the courts and torts" solution doesn't work, see my "Privatization and Public Goods.").

The Stock Market is geared for the short term. In contrast, wise and just social policy plans for the long term. Imagine two competing lumber companies: the first clear-cuts, moves on and leaves a ruined landscape. The other employs sustainable forestry, leaving ground cover and seed trees, and replanting seedlings, in the expectation of harvesting trees fifty years hence. As a result, the first company, free of the costs of sustainability, has twice the return on investment for the first two years than its competitor, and sells lumber at 80% of the price of the other. However, after ten years it is bankrupt. The second company, sustains lower profits and higher prices far into the future. If you were an "in and out" investor, which stock would you buy? This admittedly simplistic illustration distorts reality. Some far-sighted commercial enterprises do flourish, and "ruin and run" companies can and do fail. Nonetheless short-term planning is endemic to corporate structures. Fortunately, this corporate myopia can be mitigated through subsidies and tax incentives -- i.e., through government intervention in the market.

In sum: For most investors, the sooner and the greater the return, the better. But societies flourish when citizens are psychologically and morally invested in the long-term success of their nation. It's called "patriotism."

Corporate Volunteerism doesn't work. Corporate officials often proclaim, in person or through their trade associations, that government regulation is unnecessary, since voluntary acts of "good corporate citizenship" will suffice. No company, they argue, can afford to be ill-thought of by the public.

To be sure, corporations will contribute to civic enterprises and strive to be "good corporate citizens." It's good public relations, which means a worthwhile return on the modest expenditures involved. But when public service collides with the bottom line, the results are all too familiar and predictable.

I found this out when I served for seven years on the Public Advisory Panel of The Chemical Manufacturers Association (now The American Chemistry Council).

Following the 1984 disaster at the Union Carbide plant in Bhopal, India, the CMA established a program of "Responsible Care-" toward industry workers and toward the public in general. The published principles of the Responsible Care program are commendable and uncontroversial, describing just the sort of behavior one would expect of an industry cognizant of its public responsibilities.

At the three to four yearly meetings of the Panel, various industry initiatives and programs designed to ensure safety and environmental quality were presented to us, and we visited numerous plant facilities and ecological restoration areas adjacent to the plants. All quite impressive.

I will credit the chemical industry with fine corporate citizenship, at least with regard to numerous "small things."

However, since the advent of the Bush administration and the relaxing of government regulation and oversight, the industry has failed spectacularly to meet its civic responsibilities. Immediately after the Supreme Court decided the outcome of the 2000 election, the Public Advisory Panel was abolished. Then followed three responses to public issues by the CMA/ACC which together have undone the gains of the Responsible Care program. The first was opposition to efforts to meliorate global warming. The second was an attempt, in conjunction with the EPA (!) to test the toxicity of insecticides on human subjects: infants younger than 13 months. This "CHEERS" program was abolished by congressional action. Finally, the industry thwarted congressional efforts to require strict security measures at chemical plants.

As a November, 2003 60 Minutes broadcast dramatically demonstrated to an audience of millions, the insecurity of chemical plants are disasters waiting to happen, since it is apparent that a terrorist with a satchel charge might be able to simply walk into a facility and set off an explosion that would release chemicals that could kill hundreds of thousands. The protection of these facilities is a public imperative, to date still unrealized. It is clear, at last, that the chemical manufacturers will not volunteer to secure these facilities. So they must be made to secure them by the only agency capable of enforcing that security. That would be the government, of course. (Follow this link for more about these issues and the American Chemistry Council).

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