Moral obligations lost in a fog of rhetoric

Reinventing business "ethics": How corporate honchos gave themselves cover to be as rapacious as they wanna be

Attention class! Here's our word of the day: "Hegemony." Can you say heh-jeh-meh-nee, boys and girls? The word describes a situation in which some force (a group, a creed, a strongman, an ideology, etc.) becomes the domineering power over a society. Think of a gang of schoolyard bullies. Like them, various kinds of hegemonies have arisen throughout history to rule local, national, and even global "schoolyards," shoving other interests aside and subordinating the whole community to their will.

Today, we Americans (and indeed, most people around the world) are facing an especially virulent, plutocratic version of this overbearing power. It's called Shareholder Hegemony.

Never heard of it? No surprise. It is rarely mentioned by the mass media, not taught in our schools, and politicians almost never it bring to public attention. Also, it can't be seen, for it's not an incarnate hegemony, like an emperor, church, cartel, or occupying army. Rather, it's an ideological concept, really nothing more than a figment of the corporate imagination. And yet, during the past three decades, it has become the preeminent force shaping everything from economic and political inequality to global climate change and your civil rights.

Shareholder hegemony is a doctrine asserting that the first, foremost, and only moral obligation of corporate executives is to maximize the profits of their shareholders. Absurd? Yes. What about customers, workers, communities, suppliers, the environment, the nation, the common good, and all the other legitimate interests directly impacted by corporate decisions? "Not our problem," the proponents say, "for our strict duty is to do whatever it takes to make as much money as we can for those who own our stock -- everyone else be damned."

This grotesquely shriveled ethical standard has been fabricated and foisted on us by a tiny group of insiders who comprise what amounts to a cult of Machiavellian corporatists. They number only a few thousand people, including CEOs, board members, in-house lawyers, Wall Street money managers, lobbyists, right-wing think tank ideologues, and business school deans. Yet, collectively, these elites have become the formulators and promulgators of the corporate order that now dominates our nation of 323 million supposedly sovereign people.

The recent ascendancy of corporate supremacy in America is not happenstance. It has come over us incrementally during the past 30 years or so by the deliberate design of moneyed interests. Key to their steady rise has been the corporate cult's use of rhetorical flimflammery to make our society accept their fantastical "shareholder uber alles" tale as something real, something we should believe and adopt as a core governing principle.

Their big breakthrough came in 1970, when their ideological mumbo jumbo received a veneer of academic legitimacy from the University of Chicago's reigning guru of laissez-faire economics, Milton Friedman. He embraced shareholders-above-all as an absolute truth: "Do corporate executives, provided they stay within the law, have responsibilities in their business activities other than to make as much money for their stockholders as possible?" he asked, before he answered unequivocally, "No, they do not."

It's the law

Surely Friedman snickered when he added that sly qualifier "provided they stay within the law." As we've all learned, corporations write the law, routinely dumping millions of dollars a year into lobbyists, lawyers, legislators, and judges to ensure that the definition of what's legal will stretch like a giant prophylactic over practically any corporate sin.

Indeed, in an amazing demonstration of the cult's manipulative magic, by the mid-1990s it had elevated its shareholders-first postulation into such widespread public use that it was perceived as law: Enough professors, CEOs, lobbyists, reporters, et al, had repeated the phony notion of shareholder primacy so often and so emphatically that they managed to weasel it into America's vast and vacuous trove of conventional wisdom.

Not only had they created a lie that wouldn't die, but they beefed up its hegemonic punch by proclaiming that corporate managers are legally bound to act to harm workers or any others if those actions financially benefit shareholders. Even many progressives were caught up in the powerful riptide of this "legal obligation" excuse. Watchdog Ken Jacobson notes in a 2012 Alternet article that our solidly progressive friend, Sen. Al Franken, hornswoggled by the corporate claim, once declared: "It is literally -- literally -- malfeasance for a corporation not to do everything it can to maximize its profits. That's a corporation's duty to its shareholders."

In fact, there is no legal basis for ranking stock prices and corporate owners above any other interest. No national law requires it, nor does any state law. More tellingly, not even one corporate charter has been found that so much as mentions a duty of executives to increase stock prices to maximize stockholder profits. To the contrary, until the 1970s, when the cultists started pushing their radical (and ridiculous) model of "shareholder capitalism," a more humble corporate culture preached and practiced "managerial capitalism," to balance the drive for profits with the needs of various other constituencies. Jacobson cites a 1943 "credo" penned by Robert Wood Johnson, founder of Johnson & Johnson, designating five groups to be served: Customers were first, workers second, managers third, and communities fourth. Shareholders, he declared, were the "fifth and last responsibility" of the company.

Johnson also wrote that, while "business must make a sound profit," much more is required from corporate executives:

"We must be a good citizen -- support good works and charity, and bear our fair share of taxes. We must maintain in good order the property we are privileged to use. We must participate in the promotion of civic improvement, health, education, and good government..."

In another excellent report on the fallacy of shareholder supremacy, written two years ago for The American Prospect, business journalist Steven Pearlstein noted the abrupt shift that the Business Roundtable had made in its definition of corporate responsibility. In the 1980s, the Roundtable (a lobbying collective for large US corporations and banks) formally recognized the important "symbiotic relationship" that the corporate community enjoys with the larger community from which it benefits. The group publicly acknowledged the "responsibility" of corporations to provide "first of all" quality goods and services at fair prices, as well as providing jobs and building the economy.

By 1997, however, the Roundtable's statement of corporate purpose withered from serving the public good to serving shareholders alone. Singing from Friedman's one-note hymnal, the group decreed: "The principal objective of a business enterprise is to generate economic returns to its owners." As for everyone else: Adios, chumps.