Corporate Citizens? Play Ball!
Suppose you were coming up to bat in the bottom of the ninth: man on first, nobody out. Suppose the game were tied, you were a solid bunter, and the pitcher got behind 2-0. But then, suppose your manager knew the pitcher was 37 years old and one loss away from being put on waivers; that the old southpaw has a disabled child, whose expenses are enormous. If your manager were a good citizen, would he take off the bunt sign?
This is a stupid question, of course (and, please, spare me the virtues of the hit-and-run), because citizens expect managers to play to win. A baseball team can appear to be a kind of person with (what Adam Smith called) "moral sentiments": the Red Sox might, all together, show up for the Jimmy Fund night. But a baseball team is not a social good. It is the competition among baseball teams that yields a social good. A baseball team is nothing but an artificial creation, a kind of Frankenstein community chartered to pursue more runs. It occupies the negative space created by the league's rules and regulations. I need not add, I suppose, that if your neighbor treated the neighborhood with the self-centeredness of a baseball team, you probably wouldn't have much to do with him.There have been a great many articles and blog posts excoriating the Supreme Court for pushing an old (and, from the start, rather shaky) legal metaphor--that a corporation is a person or citizen--to where it has become stupid and dangerous. (My favorite is this comment by my old friend David Boghossian, suggesting that if corporations are citizens, then Google should run for president.)
Besides, companies need to recruit the best talent they can. Genius comes in many political wrappings, as any baseball team can tell you. Google has threatened to pull out of China, I suspect, more because it wants to continue to attract and inspire brilliant employees than because of any other long term calculation. If corporations were persons, then open networks and "slash and burn media" have forced on them what Harvard's Lynn Sharp Paine calls (too glibly, perhaps) "moral personality." This means, usually, moral cowardice.
NO, THE REAL problem is American CEOs with no relevant expertise using shareholder money to buy their way into public conversations: auto execs on global warming, bankers on macroeconomic imperatives, software companies on education. Meanwhile, who is watching their businesses? Again, a corporation is not a social good; it is a creature of rules, legal and strategic. We presuppose corporate megalomania because we assume that competition brings a social benefit: technological refinements, economic growth, management innovations of all kinds. And in case you haven't noticed, competition is really serious these days. (As I wrote here a few weeks ago, Fortune 500 companies are three times more likely to be selected out--fail of be acquired--than 20 years ago.)
Nor are managers of major companies less lazy or risk averse than ordinary citizens. Recently, Malcolm Gladwell had a great piece about flocking behavior on Wall Street. But 20 years ago, the Harvard Business School's Michael Jensen defended the leveraged buyout wave precisely because he thought this would be the only way to keep managers from being, well, business administrators: incurious, subject to inertia, self-important. Better to have Henry Kravis breathing down your neck, Jensen implied, than Korea Inc. stabbing at your back.
The point is, the more CEOs are distracted by electoral politics, the worse their businesses become. No taxation without representation, a CEO might say. I say, it would be better for us to forgo corporate taxes entirely--which are only about 12% of the US government's income, and generally passed on to customers as a cost of doing business--in return for a strict ban on companies lobbying or acting politically in any way. We could recapture lost tax revenue by levying a more heavily progressive income tax on big salaries and on the top 10% of the population that own 80-90% of stock. We could put a value-added tax on consumption, excluding such necessities as food, clothes, etc.

















So the real reason we should be aghast at the Supreme Court's ruling isn't because unlimited corporate electioneering is bad for our democracy, it's because unlimited corporate electioneering is bad for business?
The whole argument seems like a stretch to me . . . I mean corporations already have large PR departments devoted exclusively to spreading propaganda and lobbying politicians. Doing a few campaign ads will hardly strain these operations . . . . and the CEO, I'm sure, will still have plenty of time for golf.
February 2, 2010 7:58 AM | Reply | Permalink
My point, precisely, is that we should not be satisfied with CEOs "playing golf." Why did VW flourish when GM faded? Can't you see what a disaster this was for the country? You need to stop living in these stereotypes, Purple State. Not all managers are fat, rich, and evil. We have to create a context, rules and social expectations, that encourage managers to be responsible, which means committed to sustaining their businesses.
February 2, 2010 10:51 AM | Reply | Permalink
Sure, but not if sustaining their businesses means outsourcing jobs and lower wages here at home -- two things that we really could put a stop to but only if the government represented something other than corporate interests.
February 2, 2010 6:58 PM | Reply | Permalink
We have to create a context, rules and social expectations, that encourage managers to be responsible, which means committed to sustaining their businesses.
Couldn't it be argued that an oil company executive who authorizes the expenditure of corporate funds to support a pro-drilling candidate is demonstrating exactly that commitment to sustaining his business? In a world where government actions can have a profound effect on a business, isn't it imperative on managers to do all they can to influence those actions in favor of their companies? Yes, there are plenty of reasons for corporations to stay out of political controversies that don't significantly affect their business--and I'm sure most companies will be wise enough to avoid becoming embroiled in politics unnecessarily--but when a government policy has a direct and significant impact on a manager's business, wouldn't responsibility (as defined above) require the manager to get deeply involved in politics?
February 2, 2010 11:11 PM | Reply | Permalink
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January 12, 2011 7:50 AM | Reply | Permalink
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March 27, 2011 9:32 AM | Reply | Permalink
You need to stop living in these stereotypes, Purple State. Not all managers are fat, rich, and evil.
As a VP of a major corporation myself, I hope I prove that at least two of those adjectives are not universally applicable to managers . . . I just wish I felt a bit more confident that the one most unlikely to apply was "fat."
February 2, 2010 10:41 PM | Reply | Permalink
When politics threatens the survival of a corporation, then they would be irresponsible not to get involved. Laws are proposed typically to win votes or solicit campaign contributions, which explains the pandering to eco wacko groups. You want to prevent companies from arguing their case but I'm guessing you have no problem with labor unions and environmental groups pushing their agendas.
February 2, 2010 9:57 AM | Reply | Permalink
Can't you tell the difference between a group of citizens, who are ends in themselves, united to advance a social purpose and a company, which is just means to an end, namely, advancing within the rules of the game to profit and survive. Adam Smith knew the difference between the instrumental, artificial world of exchange-values, and the natural world of humans and use-values (in the latter, water is infinitely valuable, in the former, nearly worthless). Can't we know this? Company managers have a much bigger threat than "politics." It is other companies. What would we think of a baseball manager who, instead to getting his team to practice, is lobbying the Commissioner of Baseball for rules that favor his ball park?
February 2, 2010 11:38 AM | Reply | Permalink
There are plenty of organizations, Chamber of Commerce etc, foundations, and think tanks, with paid staff who are focused on what favors business.
And if it threatens their survival, I would say that they should be involved. But most of their involvement has nothing to do with their survival, but rather with how much profit they are making. For example, the finance industry trying to stop this bank fee on the biggest banks.
If corporations had the long term economic health of the country as their focus, there might not be so much of a problem. But what so many are concerned with is what will increase their next quarterly report, even it undermines the long-term health of the economy (see: shipping jobs out of the country). And this is not to mention their tendency to disregard public and worker saftey for a better quarterly report.
February 2, 2010 11:44 AM | Reply | Permalink
It is government regulations that mandate quarterly reports. This leads to a myopic business view focused on next month not next year. Tax policy also causes companies to make decisions that otherwise would not be made, which is why I support eliminating corporate taxes completely.
As to the fee on banks, why should banks pay a 'fee' - which is simply another tax, so Obama can spend another trillion to get himself re-elected? Most of these banks did not receive 'bail-out' money, those that did have largely repaid it with interest. Since it was the government that caused the mess in the first place, why should the banks be punished? It's just another cynical attempt to get more money to squander.
February 2, 2010 3:46 PM | Reply | Permalink
So you think unless corporations are allowed to continue buying politicians that it will threaten the existence of our 'free market' economy? It might threaten a bit of their profits since they would not be able to legally bribe politicians to write laws that help their specific business ventures but it won't 'threaten their survival'.
I would like to see a constitutional amendment that individual rights given to 'we the people' do not apply to business ventures.
February 2, 2010 12:47 PM | Reply | Permalink
I agree...I think the SCOTUS messed up on this one, big time. I have a hard time believing the founding fathers would have supported corporations running the country.
February 2, 2010 1:07 PM | Reply | Permalink
It goes much farther back than the latest SCOTUS ruling stilli, back to the early 19th century, but I fully agree that the latest ruling is still another step in the wrong direction.
February 2, 2010 1:29 PM | Reply | Permalink
The problem is that the left views business as the enemy. The government should try to enhance companies profitability, since that is the source of jobs and economic growth. It should not place obstacles in the way of prosperity unless absolutely required to do so. Most 'environmentalism' has nothing to do with the environment, it is simply anti-business, anti-capitalist, left wing extremism masquerading as environmentalism, with a goal of simply blocking or destroying any business venture.
February 2, 2010 3:38 PM | Reply | Permalink
Are you old enough to remember Love Canal and Times Beach? Bald Eagles, our national symbol, almost going extinct? All in the efforts to help businesses be more profitable. And all I ask is that is that the US government remain business neutral, they shouldn't get in the way of it, unless there are tangible reasons too (i.e. anti-competitiveness, monopolistic practices, breaking of labor laws, etc.). Which they aren't. So you agree with the notion of corporate personhood? You think that corporations plying R's and D's with money to have their best interests looked after, above everyone else's interests, is in everyone's best interests?
February 2, 2010 3:48 PM | Reply | Permalink
"What they aren't" is the government being nuetral in business related issues.
February 2, 2010 3:50 PM | Reply | Permalink
Bernard, I'm somewhat sympathetic to the notion that transparency and risks to corporate reputation will serve as a check on at least some overtly partisan corporate political activity but... that's now what we should be worried about. It's also not so much car executives pretending to be ecologists that worries me. It's that big businesses have corrupted both parties on regulatory issues and that by demanding huge subsidies from government as a solution for basically everything from ethanol productions to TARP to health insurance, have crowded smaller businesses and entrepreneurs out of many markets.
Worse... some of these businesses need to be replaced by government agencies outright and they use their influence over both parties to prevent that. So though private industry has failed to deliver universal health care, alternative energy or universal home ownership and retirement security we let them persist in their failures.
February 2, 2010 7:04 PM | Reply | Permalink
"It's that big businesses have corrupted both parties on regulatory issues and that by demanding huge subsidies from government as a solution for basically everything from ethanol productions to TARP to health insurance, have crowded smaller businesses and entrepreneurs out of many markets."
Agreed. My point is precisely that managers have a natural tendency to get complacent, and to use their company's accumulated wealth to try to change laws and regulations in their favor rather than innovate, change the strategic rules in their industry. It is also a bit of a thrill for them to become talking heads.
As for "universal health care...universal home ownership and retirement security" etc., I would never look to the private sector for these things or anything "universal," for that matter. In fact, any time there is a natural monopoly, or a universal need, we should be looking to the "commonwealth" to act. On the other hand, the networked economy we live in allows government agencies to rely more and more on individual entrepreneurs, working with in government standards, to deliver services. Think of charter schools. Or, indeed, think of the way the stimulus package supports battery startups for electric cars.
February 3, 2010 3:01 AM | Reply | Permalink
Thanks Bernard. I guess we have to hope that the benefits of the network can bypass some of the bottlenecks of influence that the big guys have put in the way.
February 3, 2010 8:19 AM | Reply | Permalink
Bernard, I appreciate your attempt to mount an argument against activist corporate participation in politics that might actually appeal to some corporate leaders. The argument is similar to arguments that have sometimes been offered in debates about religion and politics, in which one tries to convince religious leaders that they should stay out of politics because it is bad for religion.
The problem is that the argument just isn't that convincing, especially in the field of corporate participation as opposed to religious participation, so I don't think we should waste a lot of time advancing it and relying on it. The argument seems based on a string of assumptions tending to the conclusion that corporate participation in the political arena is inordinately expensive, time-consuming and ultimately self-destructive, even from the standpoint of the corporation's own profits, and is thus a misallocation of valuable corporate resources that would be better spent on primary business operations and competition.
But it's hard for me to believe this is true as a general principle. Most businesses who participate in politics are not trying to rewrite the entire social contract, or pursue grandiose, Herculean social and political agendas. They are just trying to rewrite the rules of widget regulation; re-engineer a few trade barriers; or make the extraction of the resources they need, or the employment of the workers they need, less costly and burdensome for their companies. While wasteful and unproductive expenditures of time and money no doubt occur, I assume that on the whole companies know how to pursue these interests effectively in the political arena. Indeed, I suspect that on average their participation is much more efficient and effective than the participation of average citizens, since they have the resources at hand to hire expert operatives who make it their business to cultivate influence, and know much more about how the game is played than ordinary folks.
So why should Destor, Purple State, Libertine and I, along with a few hundred million other Americans, take an interest in limiting the role and influence of corporations on our politics? For the simple reason that we in the former group possess numerous shared individual interests that are in many cases - though not all - in conflict with the interests of the corporations.
Is a corporation my enemy? Not necessarily. But corporations are, in some cases, my economic and political competitors in some areas, and have different interests than I do. There might be some corporation that has a very strong and entirely understandable economic interest in dumping waste water and chemicals into a local river I love, or in cutting down large swaths of the forest in which I roam, or in reducing their own tax burden so that my family and I either have to pay more taxes ourselves, or accept fewer or lower quality government services. If I find those particular corporate interests and lobbying agendas to be contrary to my own interests, and if I find that I share my interests with a very large number of other people, then it makes obvious sense for me to work with those other people cooperatively to advance our common interests, and to thwart the interests of our corporate competitor.
For the most part, the question of whether a corporation is a person or not is not germane, since the same considerations arise if Destor, Purple State, Libertine and I find our interests in conflict with the personal interests of the human being Bill Gates, rather than the corporate interests of Microsoft. The real issue is whether a political agent of any kind, personal or corporate, commands a very large sum of resources - that is, whether they are rich. If they are rich and function as an organized political unit, either because they are a rational and disciplined corporation or a rational and disciplined individual human being, then they are frequently in a position to exert a very disproportionate influence on political decision-making, and see to it that their own interests count for more than the interests of tens of millions or hundreds of millions of other people.
For those of us who are not personally rich, and who do not comprise the class of powerful and wealthy corporations and individuals, I don't think we should waste a lot of time looking for too-clever-by-half arguments designed to convince the wealthy and powerful that they should do us all a favor and stay out of politics These arguments aren't going to work very well. The controllers of concentrated power and wealth are going to work the political system to advance their interests, at least to the extent the law allows them - and sometimes in ways the law doesn't allow. Instead of trying to talk them into being nice to us, we should focus on building coalitions among ourselves to advance our own interests, and to work unapologetically to re-direct power and wealth away from the pinnacle of the pyramid and toward the base. We should do that just because the result is a good outcome for everyone who does not occupy a position at the pinnacle.
The only effective political tool against the concentrated wealth and power of the few is the potential for broad political solidarity and pooled wealth and power of the many. But a great many modern liberals seem to love entering political debate with all ten of their thumbs tied behind their backs. Like medieval serfs whose heads are so stuffed with ideologies manufactured by their rulers, and designed to rationalize the privileges enjoyed by those rulers and sustain the rulers' interests, the modern liberal mind is encumbered with self-defeating and self-denying ideologies that deflect people from the frank and unembarrassed pursuit of their own interests.
February 2, 2010 11:48 PM | Reply | Permalink
"I don't think we should waste a lot of time looking for too-clever-by-half arguments designed to convince the wealthy and powerful that they should do us all a favor and stay out of politics."
Dan K, as usual a very thoughtful and articulate criticism. On the whole, there is little in your underlying approach that I would take issue with. But I don't think you appreciate how radical is the proposal I am half-seriously advancing.
First, Bill Gates is so closely associated with Microsoft, and is so wealthy, he may not be our best example, although you'd have to admit he is very different persona now than when he was defending himself against anti-trust suits. On the whole, when people act as private citizens, they have to appeal to some notion of a universal good. It is hard to imagine Bill Gates starting a nonprofit arguing for bundling browsers with operating systems, though when you look at the NRA, you can see how these lines get crossed. No solution is airtight,but the question is: what kind of problems do you want to struggle with? I would rather have rich people restricted to activities in the commonwealth, rather than acting as managers, advancing the peculiar interests of their companies.
Second, competition these days is very intense. When managers at General Motors or AT&T or Procter & Gamble or General Electric commit to changing the contours of the playing field, they are simultaneously committing to a range of products and strategy and business architecture, all of which are very hard to undo. These managers are much more anonymous than Bill Gates is, and much less rich. They should be forced to get up every morning and worry about whether the company will still be around in five years. Because if they are not prepared to innovate, they won't be around. Tinkering with the playing field may buy them a little time; but the forces working against them are much bigger than anything Congress can control.
By the way,I very much like the analogy to religion. The separation of religion and state really is good for religion, as any American who has seen the empty brooding cathedrals of France can see. I live much of the time in Jerusalem where an established religion is destroying both democratic life and itself. America's founders all had lively religious imaginations, and wanted the freedom and creativity of individuals to continue to inform theology. Freedom and creativity are necessary for business strategy, too, a Philistine comment in the context of religion, perhaps, but another way of saying that freedom and creativity are necessary for just about anything of value. Nobody is as smart as everybody.
One last thing, I am not trying to tell the heads of corporations that getting out of politics completely is for their own good any more than I would try to tell Cardinal Spellman that getting out of politics would be good for the Catholic Church. My appeal is to the readers of this blog, ordinary citizens, to think about rules that we could enact to rein in corporations. But, again, the analogy to religious institutions may be helpful. In return for staying out of politics as institutions, churches pay no taxes. Obviously, ministers and congeragnts
February 3, 2010 3:39 AM | Reply | Permalink
(oops, hit the wrong key...)
...Obviously minsters and congregants may be politically active, but they cannot use church funds. I would like us to think about similar changes to our social compact with corporations. I'm not really sure what we gain by asking corporations to pay taxes, since they just pass this cost on to their customers. By removing the tax, we are removing an obvious reason why a corporation would legitimately claim to be a "citizen" in need of representation (though I agree they might continue to argue about the regulatory environment). It feels to me more hygienic, as with churches, to see corporations as chartered to fulfill a restricted purpose, pay no taxes, and be banned from the realm of electoral politics. Good for us, and good for them.
February 3, 2010 3:52 AM | Reply | Permalink
Bernard,
It strikes me now that I should have thought more about your important, central proposal - ending corporate income taxes in exchange for a total ban on corporate participation in politics - and less about some of the musings that preceded it and followed it in the comments. The proposal was a bit buried at the bottom of your post.
The proposal is very interesting, and I don't know entirely what to think about it right now. But my main concerns would be:
1. Whether such a ban would be enforceable;
2. Whether such a ban could be written in such a way as to prevent the Sam Alito's of the world from striking it down;
3. Whether we can really afford to do without the revenue.
With respect to #3, You say that corporate taxes are "only 12%" of our revenue. That seems like quite a lot to me, especially given the fact that even the reigning Democratic administration is a profligate defense spender, and so any budget cutting that is required to balance off the lost revenue will come disproportionately out of domestic programs. A 12% drop in revenue could end up being paid for by a 20% drop in domestic spending. What portion of that 12% could we really recover through higher personal rates?
But I am intrigued by your proposal, Bernard. Believe it or not, I am not averse at all to calls to improve US competitiveness by improving the tax environment for business. As a resident of our State of New Hampshire, I do understand how the low tax environment of New Hampshire - the "New Hampshire advantage" - has definitely helped our relatively small and out-of-the-way state stay competitive and ward off some of the worst ravages of the Great Recession. A national policy aimed at making sure the US remains a great place to do business is good for creating and keeping jobs in this country, and is in principle good for the wallets of ordinary Americans all over.
The problem is the need to prevent the interests represented by large concentrations of wealth from having an outsized influence on our politics, so that that wealth is leveraged into legislation and government policies that stick it to the little guy. We also need to work on the distribution of wealth. I believe we could have a society in which business as a whole thrives, but in which the enormous wealth generated by business ends up being much more evenly distributed throughout our society. Maybe your idea of shifting the tax burden from wealthy firms to wealthy individuals would be a step in that direction.
If we are going to offer a new social contract to business, such as your proposal to cut their tax burden if they stay out of politics, why not add in proposal that the top tax incentives will go, by far, to the firms that adopt internal compensation structures, such as 20-to-1 rules, that raise the standards of living of most of their employees, and prevent the extraction of hugely extravagant salaries from corporate earning - a policy that is both bad for our society and politics, and that is also a source of lost potential to raise the standard of living of ordinary Americans.
I think the central problem in contemporary America remains: too few of the people have too much of the money.
February 3, 2010 8:11 AM | Reply | Permalink
I guess I wouldn't be shocked if in some future ruling, this Supreme Court finds unconstitutional the law that forces religious organizations to lose their tax-free status if they endorse political candidates. I also doubt this Court would ever find that, in abolishing the corporate income tax, the government would somehow acquire the power to restrict the free speech rights the Court just gave the corporations. I think the horse has left the barn on corporate speech rights. . . and the corporations, I'm afraid, won't see it as a strategic advantage to give up all that horse power . ..
February 3, 2010 4:18 PM | Reply | Permalink
I guess I wouldn't be shocked if in some future ruling, this Supreme Court finds unconstitutional the law that forces religious organizations to lose their tax-free status if they endorse political candidates. I also doubt this Court would ever find that, in abolishing the corporate income tax, the government would somehow acquire the power to restrict the free speech rights the Court just gave the corporations. lower ab workouts for men | ab ripper x workout list
August 14, 2010 5:40 AM | Reply | Permalink
Great column. But your last line really is what makes me lose interest in concrete proposals regarding the political power of corporations. I'd really like to see some thinking on how to get from where we are to a place where enacting any such proposals becomes viable.
I agree some such legislation NEEDS to be enacted, but that is so precisely because it is pragmatically IMPOSSIBLE to do so given the current system. So what now...?
February 3, 2010 9:53 AM | Reply | Permalink
I fully agree with this:
"It's that big businesses have corrupted both parties on regulatory issues and that by demanding huge subsidies from government as a solution for basically everything from ethanol productions to TARP to health insurance, have crowded smaller businesses and entrepreneurs out of many markets."
September 3, 2010 4:34 AM | Reply | Permalink
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December 17, 2010 3:14 AM | Reply | Permalink