What happened to Corporate Morality - The Answer 

The real answer is provided by Robert Reich in his new book “Supercapitalism.” In it, Reich investigates what has happened to social morality, or the “corporate statesman.”  What he found is that we, yes we, are the unwitting culprits.  As new technologies have evolved, barriers to entry have lowered and competition has intensified.  There have been two beneficiaries of this intense competition:  The consumer and the investor.  This “supercapitalism” has driven companies to seek the lowest cost.  Those that accomplish this have a competitive advantage.   This drive toward lower costs often involves seeking the lowest labor markets, and an avoidance of concerns such as what effect the processes or actions have on the environment.  Yet, we as consumers flock to those companies that can give us the bargain prices.  At the other end, just about all of us are investors, whether it be through direct investment in the stock market, or through mutual funds or 401(k)s.  We want the highest returns form our investments.  And we benefit financially from those concerns.  This drive toward the highest returns has also intensified the effort on the part of companies to show their investors that they can provide the highest returns.  As a consequence, companies are more concerned about taking actions that improve their stock prices and dividends than they are in taking socially responsible positions. They can’t afford to, because if other companies offer higher returns, our fund managers will move our investments to other companies.  Or as individual investors we’ll sell the stock and move it somewhere that offers higher returns.  The focus is the short term. 

So we need to examine ourselves.  We are schizophrenic.  We want these lower prices or higher returns, but another side of us is concerned about the negative social and environmental impacts. Even those companies that try to act more socially responsible (usually in specific areas and for limited times) often find themselves experiencing lower returns and thus lower stock prices, or higher costs.  There are numerous examples of companies who for years acted more socially responsible, and who eventually were acquired by other companies that took advantage of the lower value that resulted from their “social” conscience.    

A third issue is the time and money that lobbyists spend serving companies by trying to influence our laws.  These actions are primarily in response to the companies trying to get laws passed or prevent laws from being passed that may effect their  competitive position.  This is a result of the same intense competition.  So with their contributions to political campaigns, they get access to the congressmen and their staffs.  They dominate the discourse with our legislators.  They drown out the individuals and groups that represent the social good.  This results in the vast dissatisfaction the public has with congress. 

As the final paragraphs in Reich’s book state: 

“ The triumph of supercapitalism has led, indirectly and unwittingly to the decline of democracy.  But that is not inevitable.  We can have a vibrant democracy as well as a vibrant capitalism.  To accomplish this, the two spheres must be kept distinct.  The purpose of capitalism is to get great deals for consumers and investors.  The purpose of democracy is to accomplish ends we cannot achieve as individuals.  The border between the two is breached when companies appear to take on social responsibilities or when they utilize politics to advance or maintain their competitive standing.  

            We are all consumers and most of us are investors, and in those roles we try to get the best deals we possibly can.  That is how we participate in a market economy and enjoy the benefits of supercapitalism.  But those private benefits often come with social costs. We are also citizens who have a right and a responsibility to participate in a democracy.  We thus have it in our power to reduce those social costs, thereby making the true price of the goods and services we purchase as low as possible.  Yet we can accomplish this larger feat only if we take our responsibilities as citizens seriously and protect our democracy.  The first step, which is often the hardest, is to get our thinking straight.”[1] 

So what do we do?  First, we need to pass campaign reform so that political campaigns are financed by the public.  This includes TV time being given equally to all candidates at no cost.  Next, we need laws that regulate how far companies can go in increasing the social costs resulting from their actions.    Only by having laws that all companies have to meet can we level the playing field, maintain fair competition, and assure we know what the true costs are to our citizens.