Executive Times
		2005 Book Reviews
		The Corporation: The Pathological Pursuit of Profit and Power by Joel Bakan
		Rating: •• (Mildly Recommended)
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	Personification Joel Bakan, a Canadian law professor, attempts to create controversy with his new book, The Corporation: The Pathological Pursuit of Profit and Power. By personifying corporate entities with the psychological makeup of humans, Bakan sounds an alarm about placing too high expectations in the hands of monsters. Bakan describes how corporations have evolved, and expresses concern that corporations have been given too much power in society. He offers suggestions on how to reduce the harm that corporations have been built to generate. Here’s an excerpt from the beginning of Chapter 2, “Business as Usual,” pp. 28-35: Business leaders today say their companies care about more than profit and loss, that they feel responsible to society as a whole, not just to their shareholders. Corporate social responsibility is their new creed, a self-conscious corrective to earlier greed-inspired visions of the corporation. Despite this shift, the corporation itself has not changed. It remains, as it was at the time of its origins as a modern business institution in the middle of the nineteenth century, a legally designated “person” designed to valorize self-interest and invalidate moral concern. Most people would find its “personality” abhorrent, even psychopathic, in a human being, yet curiously we accept it in society’s most powerful institution. The troubles on Wall Street today, beginning with Enron’s spectacular crash, can be blamed in part on the corporation’s flawed institutional character, but the company was not unique for having that character. Indeed, all publicly traded corporations have it, even the most respected and socially responsible among them, such as Pfizer Inc. In 1849, Charles Pfizer and his cousin Charles Erhart established a small chemical firm in Williamsburg, then a rural section of Brooklyn accessible from Manhattan only by boat. Over the last century and a half the firm, Pfizer Inc., has prospered and become the world’s largest pharmaceutical company. Williamsburg, now linked to Manhattan by bridges and tunnels, also prospered, then declined, and now, at least in part because of Pfizer, it has enjoyed something of a revival. On a recent summer afternoon, Tom Kline, a senior vice president at Pfizer, took a documentary film crew on a walkabout tour of the inner-city neighborhood that now surrounds his company’s original plant in Williamsburg. A tall white man in late middle age, dressed in neat blue slacks and a matching wrinkle-free short-sleeved shirt, Kline looked conspicuous in this predominantly low-income neighborhood, but he clearly felt at home here. (During the tour he greeted strangers on the street as if they were old friends, promising one woman that “working with you and Pfizer and our other partnerships, we’ll make this a better place” and saying “Love you” to another person after a brief conversation.) The tour commenced at the Flushing Avenue subway station, whose stairwell entrance lies just across the street from the entrance to Pfizer’s plant. Kline explained how he had almost been mugged on the subway station’s platform one evening in the early 1980s as he waited for a train to take him home from the plant, where he then worked as plant manager. He had fled from the would-be muggers, made it safely to the far side of the tracks, and hid there terrified but oddly inspired by his plight to do something about the spiral of crime and drugs that was ruining the neighborhood. He had decided, at that perilous moment, to scuttle Pfizer’s recently devised plan to close the plant and instead work “to make a change to make this community better.” Today the plant is still open, and thanks to Kline and Pfizer, the subway station is safer. Kline showed the film crew a yellow box attached to the wall of a designated waiting area on the subway platform. The box is connected to a sophisticated security system, financed and maintained by Pfizer, which allows threatened subway patrons to summon help from Pfizer security guards at the nearby plant. Down the block from the station, at Pfizer’s original corporate headquarters, there is a children’s school, developed by Kline, and partly funded by the company. Though the school is officially part of the New York City public school system, principal Sonia Gerrardo explained that the “children really have an ongoing relationship with the company” through Pfizer mentors and volunteers. There is also a middle-income housing development in the neighborhood, spearheaded by the company’s Redevelopment Program and administered jointly with the city. Kline believes that “if we really want to improve the conditions of American cities, we business people . . . have to take responsibility,” and his actions show that these are not empty words. As Hank McKinnell, chairman and CEO of Pfizer, said, Kline is “the driving force behind the rejuvenation of a very devastated inner city area.” McKinnell, however, wants Pfizer to do more than just save cities. “Pfizer can be the company which does more good for more people than any other company on the planet,” he said. Every year his company donates hundreds of millions of dollars’ worth of products and cash around the globe, making it, it claims, “one of America’s most generous companies.” McKinnell is especially proud of the company’s work to end trachoma, an infection that blinds eight to ten million people every year. Pfizer produces Zithromax, a drug that prevents trachoma with just a single dose per year, and donates it to African countries. McKinnell claims that the drug has cut the infection rate in Africa in half and could eliminate the disease altogether by the year 2020. “We at Pfizer never stop looking for innovative solutions to society’s problems,” the company proclaims on its Web site. “Whether it’s donating medicine to people in need or lending employees to local schools [or] rebuilding our first neighborhood we are dedicated to our company purpose: helping people around the world live healthier, more productive lives.”^4 Corporations have always been philanthropic. They have donated to charities, sponsored Little League teams, and helped to build theaters. Traditionally, such generosity was quietly practiced and peripheral to their main goal of making money. Now, however, large corporations such as Pfizer have put corporate good deeds at the core of their business plans. A sense of responsibility to society, not just to a company’s shareholders, has come to define the very nature of the corporation, what it is supposed to be and what it must and cannot do. Corporations are now often expected to deliver the good, not just the goods; to pursue values, not just value; and to help make the world a better place. During the 1980s, testosterone-fueled corporate slashers such as Sunbeam’s “Chainsaw” Al Dunlap, who once posed on a magazine cover wielding a machine gun to symbolize his take-no-prisoners approach to management, were cheered as heroes and fearless knights of the bottom line. These men now seem like barbarians, uncouth and uncool, as ridiculous as their red suspenders. Today’s leading CEOs cultivate compassion and seem genuinely concerned about how their corporations’ actions affect social and environmental interests, not just their stockholders’; they say they are obliged to meet social and environmental bottom lines, not just the financial one. As Goodyear Tire’s Samir Gibara explained, today “the corporation is much broader than just its shareholders. . . . The corporation has many more constituencies and needs to address all these needs.” Its obligations are no longer limited to making money for investors but, according to William Ford, Jr., chairman of the Ford Motor Company and greatgrandson of corporate social responsibility pioneer Henry Ford, “corporations could be and should be a major force for resolving environmental and social concerns in the twenty-first century.” Former Harvard business scholar Ira Jackson believes that such attitudes herald the start of an entirely new stage of capitalism, what he calls “capitalism with a conscience.” There is much evidence to support his view. Corporations now boast about social and environmental initiatives on their Web sites and in their annual reports. Entire departments and executive positions are devoted to these initiatives. The business press runs numerous features on social responsibility and ranks corporations on how good they are at it. Business schools launch new courses on social responsibility, and universities create centers devoted to its study (at the University of Nottingham, tobacco giant ABT donated $7 million to create an International Centre for Corporate Social Responsibility). Social responsibility is on the agenda wherever business leaders meet—at the World Economic Forum in Davos, Switzerland, WTO ministerial meetings, industry conferences, and international trade and investment summits—and corporations compete against one another for ever higher moral ground.^6 Pious social responsibility themes now vie with sex for top billing in corporate advertising, whether on television or in the pages of glossy magazines and newspapers. A recent television advertisement by Shell is typical. It shows self-styled “romantic” environmentalist Frances Abbots-Guardiola flying around beautiful mountains and lakes in a helicopter and talking to aboriginal people in grass-roofed huts. She eyes skeptically a convoy of heavy dump trucks lumbering across the pristine landscape. “This woman is trying to protect a fragile environment from being destroyed by oil and gas,” a lyrical Scottish-accented narrator tells us (she must be one of those anticorporate Greenpeace types, we think). “Despite that, she’s not at war with the oil company. She is the oil company”—a Shell geologist, we learn. The message is clear, as is that of legions of similar advertisements: corporations care about the environment and communities, not just the soulless pursuit of profit; they are part of the solution to world ills, not the cause; they are allies of governments and nongovernmental organizations, not enemies. Just a few years ago, says Jackson, “you’d have been laughed out of the office, if not escorted out by an armed guard” for suggesting to a CEO that his corporation should abide by the UN Universal Declaration of Human Rights. Yet recently in New York, a hundred CEOs from the world’s largest corporations met with their counterparts from NGOs such as Greenpeace and Amnesty International, along with national ambassadors, to sign a promise to adhere to the general principles of the Universal Declaration of Human Rights. This is just one example, says Jackson, of the new corporate order of conscience. He, along with many other business pundits, applauds big-business leaders who embrace the values of corporate social responsibility and predicts failure for those who do not.^7 Even President Bush now says that corporate responsibility is a fundamental business value, indeed a patriotic duty. “America is ushering in a responsibility era, a culture regaining a sense of personal responsibility,” he told a group of top business leaders in a speech addressing Enron’s collapse, “and this new culture must include a renewed sense of corporate responsibility. . . . Business relationships, like all human relationships, are built on a foundation of integrity and trust.” Not everyone, however, is convinced of corporate social responsibility’s virtue. Milton Friedman, for one, a Nobel laureate and one of the world’s most eminent economists, believes the new moralism in business is in fact immoral. When Friedman granted me an interview, his secretary warned that he would get up and walk out of the room if he found my questions dull. So I was apprehensive as I waited for him in the lobby of his building. This must be how Dorothy felt, I thought, just before Toto pulled back the curtain to reveal the real Wizard of Oz. Friedman is an intellectual giant, revered and feared, deified and vilified, larger than life. So I felt some relief when he entered the room smiling, a charming little man who, like the wizard himself, barely broke five feet. Friedman surveyed the lobby, now a chaotic makeshift television studio (the interview was for a government-funded TV documentary). Lights and cameras cluttered the room, tangles of wire covered the floor. Two crew members stood ready, cotton balls in hand, to remove the shine on the great man’s nose. Bemused, Friedman curmudgeonized, “ABC came in here the other day with two guys and one camera. Here we see government fat and waste at its worst.” Friedman thinks that corporations are good for society (and that too much government is bad). He recoils, however, at the idea that corporations should try to do good for society. “A corporation is the property of its stockholders,” he told me. “Its interests are the interests of its stockholders. Now, beyond that should it spend the stockholders’ money for purposes which it regards as socially responsible but which it cannot connect to its bottom line? The answer I would say is no.” There is but one “social responsibility” for corporate executives, Friedman believes: they must make as much money as possible for their shareholders. This is a moral imperative. Executives who choose social and environmental goals over profits—who try to act morally—are, in fact, immoral. There is, however, one instance when corporate social responsibility can be tolerated, according to Friedman—when it is insincere. The executive who treats social and environmental values as means to maximize shareholders’ wealth—not as ends in themselves—commits no wrong. It’s like “putting a good-looking girl in front of an automobile to sell an automobile,” he told me. “That’s not in order to promote pulchritude. That’s in order to sell cars.” Good intentions, like good-looking girls, can sell goods. It’s true, Friedman acknowledges, that this purely strategic view of social responsibility reduces lofty ideals to “hypocritical window dressing.” But hypocrisy is virtuous when it serves the bottom line. Moral virtue is immoral when it does not.^8 Though Friedman’s views are rejected by many sophisticated businesspeople, who think his brand of cynicism is old-fashioned, mean-spirited, and out of touch with reality, his suspicion of corporate social responsibility attracts some weighty support. William Niskanen, a former Ford economist and now chairman of the Cato Institute, said he “would not invest in a firm that pioneered in corporate social responsibility.” “I think Ford Motor Company still makes fine cars and trucks,” he continued, “but I think the [socially responsible] actions by the new Mr. Ford are likely to undermine the value of the corporation to the owners.”^9Peter Drucker, the guru of all business gurus, who believes that Friedman is “probably our greatest living economist,” echoes his view that corporate social responsibility is a dangerous distortion of business principles. “If you find an executive who wants to take on social responsibilities,” Drucker said, “fire him. Fast.” Harvard Business School professor Debora Spar insisted that corporations “are not institutions that are set up to be moral entities. . . . They are institutions which have really only one mission, and that is to increase shareholder value.” And Noam Chomsky—Friedman’s intellectual and ideological nemesis—shares his view that corporations must “be concerned only for their stockholders and . . . not the community or the workforce or whatever.”^0 Corporations are created by law and imbued with purpose by law. Law dictates what their directors and managers can do, what they cannot do, and what they must do. And, at least in the United States and other industrialized countries, the corporation, as created by law, most closely resembles Milton Friedman’s ideal model of the institution: it compels executives to prioritize the interests of their companies and shareholders above all others and forbids them from being socially responsible—at least genuinely so. In 1916, Henry Ford learned this legal lesson the hard way and unwittingly helped entrench the law’s intolerance of corporate social responsibility. _____________________________________ 1. Interview with Tom Kline. The documentary crew was from Mark Achbar’s Big Picture Media company and was making the film version of this book. See supra, Introduction, note 2. 2. Interview with Sonia Gerrardo. 3. Interviews with Hank McKinnell and Tom Kline. 4. Interview with Hank McKinnell (“planet”); www.pfizer.com (“gener¬ous” and “innovative”). 5. Quoted in Princeton University Development Offices, “Princeton Receives Grants to Address Greenhouse Problem,” available at www.prince¬ton.edu/cfr/FALLOO/BPAmoco.html. 6. Interview with Ira Jackson. 7. Ibid. 8. Interview with Milton Friedman. 9. Interview with William Niskanen. 10. Interviews with Peter Drucker, Debora Spar, and Noam Chomsky. The Corporation teaches us that we should expect what we’ve been getting from corporations because that’s what we’ve legislated them to do. Changes in laws could lead to reductions in the current and potential harm that corporations deliver to society. Steve Hopkins, January 25, 2005
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