January 10, 2015

Dan Payne’s Boston Globe op-ed (“The scandal double standard”) is a good one and is worth more than a casual read. He succinctly describes the illogical differences between the public’s perceptions of political versus corporate misbehavior. The capacity of the public to ignore (or quickly forget) corporate waste, fraud, and abuse that ultimately costs taxpayers billions, while becoming apoplectic over comparatively minor (and in some cases imaginary) scandals in the public sector is indeed stunning and sad. Corporate officers should be held to standards of conduct no less exacting than government officials in part because they are, like government officials, stewards of publicly created entities.

One of the least well understood things in American life is the history and nature of corporations. To the average American, the corporation is the ultimate example of a private organization, entitled to at least the same level of freedom from government intrusion as are individual citizens. The Supreme Court’s declaration that corporations are entitled to individual constitutional rights, including free speech, isn’t really that shocking to most Americans. The average American is not conscious of the fact that corporations are government-created entities chartered for the purpose of facilitating commercial innovation and economic development that furthers “the public interest.” As such corporations are obliged to operate in the public interest, which means that like government officials, corporate officials should be held to higher standards of conduct than individual private citizens.

Americans revere the entrepreneur and the small businessman who risks everything and with his own blood, sweat, and tears “builds a successful business,” but as Elizabeth Warren has so eloquently explained, it is IMPOSSIBLE to build a business without the assistance of the government, and thereby the taxpaying public. The corporation, which today is an organizational form available to virtually anyone, is literally granted by the public through a government to business people (small, medium, and large). With this charter, the recipient is shielded from legal liabilities to which private citizens are fully exposed. By incorporating, business people are accepting a big favor from their fellow citizens that prevents them from having to "risk it all" to build and maintain a successful business. In return, what do corporate charter holders owe to the public? What social responsibilities are taken on when one is granted exemption from certain personal legal responsibilities? Thanks to the fact that the direct beneficiaries of corporate freedoms have long dominated American politics and public policy making, this is a question not often publicly pondered about a responsibility that has been largely stripped from corporate charters that are today simply a matter of filling out some paperwork and paying a small fee.

The responsibilities of corporations to the public only make the papers in the wake of some massive corporate scandal, and even then little attention is paid to the fact that corporations owe more to the public than individuals. The recent passage of the so-called “Cromnibus” legislation, which contained language restoring the ability of financial corporations to engage in high risk behavior without losing access to taxpayer bailouts, is a glaring example of how short the public’s memory is for corporate malfeasance.

Thanks to the Supreme Court, corporate “people” now enjoy many of the rights of individual private citizens, but remain unburdened by many of the responsibilities of individual private citizens to their fellow citizens. Sadly, too many American citizens tolerate this socially destructive inequity in part because they aren’t terribly clear about the obligations they owe to their fellow citizens. Americans understand legal rights much more clearly than they do legal responsibilities. “Corporate social responsibility” has devolved from being a legal fact to being little more than a corporate marketing strategy.

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