Are Corporate Ethics Obsolete?

Since we know that Congress can’t police its own ethics, why are we still pretending corporations will do so?

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BY Geoffrey James - 06 Jan 2017

The first act of the incoming Congress was an attempt to castrate an independent ethics committee. The motive for the move was completely transparent: members of Congress would prefer to keep scandals in-house and under their own control.

The move was quashed by public outcry, led in part by President-Elect Trump, who while he said the idea was a good one (characterizing the office as "unfair"), suggested that Congress should have different priorities.

That Trump would see an independent ethics watchdog as "unfair" is not surprising, considering that he faces his own ethical struggles, particularly relative to conflicts of interest between his duties as Trump and his many businesses.

Trump's disdain for independent ethics watchdogs, however, is far from unusual in the corporate world. While many corporations have "ethics officers" or even entire departments dedicated to "promoting ethics," few corporations are ethical.

To explain why, I must make an important distinction. A person who "does the right thing" regardless of circumstances is ethical. A person who "does the right thing" only when it's to his advantage is a sociopath.

Publicly held corporations are natural sociopaths because they only behave in an ethical manner when it increases stockholder value. Any corporate officer suggesting that a company "do the right thing"--even though it damaged the company--would either be fired or laughed out of the job.

I know I keep harping on this issue, but it's an important one, especially when we're talking about ethics: the current epidemic of forced labor (i.e. slavery) in the supply chain.

As I've pointed out previously, slavery has grown alongside with globalization because slavery (when combined with torture) rivals automation as a way to create innovation and efficiency in manufacturing.

Since slavery is a huge moral evil, a truly ethical corporation would delve deeply into its supply chains and eliminate slavery, even if that meant raising prices and lowering revenue. This, however, never seems to happen.

Instead, corporations hire third-party firms to do pro-forma investigations and rubber-stamp the paperwork. This provides the corporation and its officers with plausible deniability in the event of a PR disaster.

When they handle slavery this way, corporations are managing risk, not acting ethically. If the risk of being "outed" as supporting slavery remains low, most companies are perfectly happy to import goods that might be slave-manufactured, in part or completely.

This is classic sociopathic thinking. Absent a reward (for acting) or a punishment (for not acting), no sociopath would pay money out of his own pocket to free a slave. Similarly, no corporation is going to open that can of worms if they can help it.

"Work/Life Balance" is another example of how corporations to behave like sociopaths. Every article on "Work/Life Balance" that I have ever read claims it will increase productivity, hence profit, hence shareholder value.

I have never seen an article making the argument that corporations should create "Work/Life Balance" because "it's the right thing to do," even though it would mean lower productivity, lower profits and less stockholder value.

This is not to say that corporations don't employ ethical, caring people. However, employees are expected to act ethically if and only when it's the advantage of the company. Taking a stand on principle is a recipe for getting fired.

Here's the sad truth: unless constrained by either regulation or public opinion, most corporations will do whatever it takes--including slavery, wage theft, pollution, unpaid overtime--to increase shareholder value.

In other words, "corporate ethics" is an oxymoron. Since that's the case, let's stop pretending that corporations will "do the right thing" on their own. That's not going to happen in corporations any more than it's going to happen in Congress.

Rather than let Congress police their own ethics, we should instead demand regulations that constrain corporations to act for the greater good (even if it means less profit) and laws (like salary transparency) that open corporate operations to the light of day.