Just What Is a Corporation Supposed to Do?

By Mitchell

There's been a fair amount of chatter on the blogs this week about Wal-Mart (Rich Lowry here; Professor Bainbridge here and here; Amy Welborn here, and that just scratches the surface). No question the big W continues to be a favorite whipping boy out there; an acquaintance of mine forwarded an email he'd received from MoveOn promoting the documentary Wal-Mart: the High Cost of Low Prices. What's interesting about the whole thing is how some on the extreme left and extreme right seem to find a common ground in opposing Wal-Mart.

I've no time for Wal-Mart myself; I think its success is in many ways symptomatic of all that is wrong with modern Corporate America. Amy hits it on the head with her comment:

But there is a price for everything, and the price of a Wal-Mart culture is great, not just on local businesses, but on product manufacture and marketing, period. The control that Wal-Mart exerts in this area is great and has a wide impact, and, among other things, may lower the price on many goods, but because what Wal-Mart offers is wide but not deep, it impacts what manufacturers determine what is worth their time to produce and market.

I would add that in determining the worth of a product, one also determines the worth of the worker producing that product. The many criticisms against Wal-Mart in this regard go to the heart of the matter, which is the obligation that a corporation has to the community and the culture in which it does business.

Many conservatives are uncomfortable talking about the moral responsibilities of corporations. For them, it boils down to a fear of government intervention, which is certainly a reasonable concern. However, as my conservative friend Hadleyblogger Gary (a man who never saw a government regulation he liked) has said, the government often gets invoolved because corporations refuse to regulate themselves. Fr. Pavlik, in answering the question why the Church has so many "rules and regulations," points out that it's a part of human nature to push the envelope as far as possible. We always want to know where the line is, so we can walk right up to it.

Corporations do have a moral responsibility to society, but it's a responsibility that doesn't come from government fiat. It comes from the well-developed conscience of its leaders, the men and women responsible for making the decisions and determining the course which the company will take. A corporate leadership with a poorly-formed conscience, or none at all, will take that corporation into areas of evil: exploitation of employees, disregard for cultural standards, support of programs (such as abortion and homosexual marriage) that lead to a degredation of society. For them, the only responsibility they have is to make a buck for the shareholders.

In fact, someone (perhaps it was Friedman, I'm not sure) once said that the only responsibility a corporation had was to make a profit for the shareholder. And while I don't disagree that is is one of a corporation's responsibilities, it is not the only one, nor is it the primary one. Were that the case, we could hardly argue with the pornographer, the drug dealer, the company that manufactures weapons for terrorists; after all, if they're making a profit, they're only doing their job.

I would suggest that there are three major moral obligations that a corporation has, and that making a profit for the shareholders is the third. The first two are to produce a product that adds something good and useful to society (and I'm not judging gunmakers here, for example; you can't and shouldn't hold an industry responsible for the way in which some people use their product. I'm talking more about things like the porn industry) and to treat their employees in a humane manner that acknowledges their dignity and the dignity of the work they do. Only when these first two obligations are met should the corporation turn to the question of profit. If a corporation can't produce a useful product for a profit, or if they can't afford to treat their employees in a humane way, and if they are unwilling or unable to operate at a deficit, then perhaps they should revisit their business model, or their purpose of existing in the first place.

Isaiah is always a good read during Advent, and in looking at the consequences of their actions Corporate America might do well to heed the prophet's words in chapter 10, 1-4:

Woe to those who decree iniquitous decrees,
and the writers who keep writing oppression,
to turn aside the needy from justice and to rob the poor of my poeple of their right,
that widows may be their spoil, and that they may make the fatherless their prey!
What will you do on the day of punishment,
in the storm which will come from afar?
To whom will you flee for help,
and where will you leave your wealth?
Nothing remains but to crouch among the prisoners
or fall among the slain.
For all this his anger is not turned away
and his hand is stretched out still.

I've related in the past the story of someone who defended his company's policies favoring abortion and homosexual rights by offering that it was all true, but they'd given a lot of money to charity as well. I don't think his words would pass muster with Isaiah, nor would the actions of Corporate America.

When I was in politics you'd see a lot of candidates running on the slogan "Put People Ahead of Profits." We recognized that for what it was, an old liberal chestnut. I didn't think much of it then as a political motto, and I don't think much of it now. Because it doesn't belong in the halls of Congress - it belongs in the boardrooms, and in the hearts of directors, managers and supervisors.