The corporate conscience

By Felix Salmon
January 25, 2010
Justin Fox kicks off his new HBR blog with a cracking post on the jurisprudence of treating corporations as persons. If John Roberts really believes that shareholders control corporations, he says, that's all the more reason not to allow corporations the rights of individuals -- and he uses Milton Friedman, of all people, to make his case:

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Justin Fox kicks off his new HBR blog with a cracking post on the jurisprudence of treating corporations as persons. If John Roberts really believes that shareholders control corporations, he says, that’s all the more reason not to allow corporations the rights of individuals — and he uses Milton Friedman, of all people, to make his case:

The “one and only social responsibility of business,” economist Milton Friedman wrote back in 1970 in a New York Times Magazine essay that launched a thousand arguments, is “to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game …” Friedman contrasted this with the multiple responsibilities that an individual — such as a corporate executive — might have “to his family, his conscience, his feelings of charity, his church, his clubs, his city, his country.” …

The individuals who make up the electorate in the United States are, as Friedman described, beings of many facets — their actions and their views shaped by pecuniary self interest but also by values, beliefs, and loyalties that might conflict with that self interest. The ideal for-profit corporation, on the other hand, is out to do nothing but make as much money as it can “within the rules of the game.” It is supposed to behave in a fashion that for an individual would probably be described as psychopathic. And if corporations are allowed to play a decisive role in shaping the “rules of the game,” we have effectively put the inmates in control of the asylum…

If corporations are persons, they are — if they behave as Milton Friedman wanted them to — persons with mental and emotional impairments so severe that any decent judge would feel entirely justified in declaring them incompetent.

There’s a connection, here, to the increasingly conventional-wisdom argument that walking away from a mortgage is perfectly fine since the banks who lent the money in the first place wouldn’t hesitate to behave in exactly the same way. But if Justin is right, we’d have to be psychopaths to treat corporations as our role models in such matters.

Justin’s timing on this is impeccable, as the world’s plutocrats start firing up their private jets to fly in to Davos and pat each other on the back for their efforts to “improve the state of the world” with their “double bottom-line” or even “triple bottom-line” endeavors. It’ll be interesting to see what Davos Man thinks about the ruling in Citizens United vs FEC: the general default position at the alpine gabfest is that successful corporations, acting in their own self-interest, are perfectly positioned to make the world a better place. Maybe giving them enormous influence in US elections will simply help in terms of steering the country towards more enlightened policies!

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