Monday, February 1, 2010

Corporate Citizens? Not Quite.

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 were enormous. If your manager were thinking like a 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 as if it were a kind of person with (what Adam Smith called) "moral sentiments": the Red Sox might, 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.

You can see where this is going. 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.)

Still, the most imminent danger of supposing corporations are citizens seems lost in the conversation. I mean the danger to American corporate renewal and to the economy as a whole:

SURE, LET'S THINK about how Congress might put restrictions on corporate contributions to campaigns. But I wonder if the danger isn't exaggerated, at least as compared with established kinds of lobbying. Most corporations sell to customers half of whom vote "the other" party; they generally can't afford to alienate people by identifying closely with any candidate. With bloggers in every quarter of commerce and politics, it is hard to believe any corporate contributions might be kept discreet. Candidates don't need their bribes pushed in voters' faces.

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 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.)

There isn't a scarcer resource in any business today than CEO attention. There isn't a business in the world that hasn't been roiled by magical technologies and global assaults. Do we really want senior managers thinking about how to rewrite the legal rules in America while, in the rest of the world, managers are rewriting strategic ones?

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, the worse their businesses become. No taxation without representation, a CEO might say. I say, it would be better for the commonwealth 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.

And just who is "we"? Ordinary citizens. Which is where my argument falls to the ground.