Can the corporation learn to care about people?

Can the corporation learn to care about people?

Ben Teehankee

February 21, 2006

Managing For Society column, The Manila Times

Time and again, public harms have been caused by corporate activities. A short list of corporate misbehavior includes harming the environment through factory emissions, harming employees through the contractualization of essential jobs, and harming customers through misleading or debasing promotional practices or the sale of substandard products and services.

What strikes me most about corporate misbehavior is not that they happen, because any person can make a mistake and the corporation is an artificial person, after all: It’s the fact that such misbehaviors keep happening. Could this be because corporate leaders are incorrigible in their greed and completely insensitive to society’s expectations? I doubt it. Basic decency seems sufficiently, if not abundantly, available among corporate leaders. I believe that at the root of the problem are flaws in the basic nature and design of the corporate entity itself. These flaws make it very difficult, if not impossible, to ensure the decent behavior of corporations no matter the character of their leaders.

The first flaw is that corporations treat human beings as commodities. To a corporation people are things with a monetary value: employees are pieces of expenses and customers are pieces of revenue in an income statement. A commodity is a thing that can be bought, used, replaced or disposed of, as needed. In this view, employees are best when they can be as cheap, replaceable and disposable as possible. Also, if they don’t like the conditions of their employment, the argument goes, they can always leave. Similarly, the unhappy customer faced with an unsafe or substandard product can always choose to buy a competing product.

In a market-oriented, commodity world, there are no commitments to people. Relationships are contractual, temporary and purely utilitarian. David Ellerman, former World Bank economist, takes very strong exception to this view of people as things and likens it to slavery. Arguing in particular against the commodity treatment of employees, he says that “the capitalist, like the slave owner, has used a legalized fraud, which pretends the worker is an instrument….”

The second flaw is that the corporation is designed by law to be mainly accountable to shareholders and, therefore, tends to downplay the welfare of the people it affects. Joel Bakan, law professor at the University of British Columbia, asserts that the modern corporation, with its tendency for relentlessly pursuing profit even at the expense of others, perfectly fits the profile of the psychopathic personality. The chilling cost-benefit analysis used by managers in a well-known car manufacturer in the 70s to justify the sale of what they knew to be an unsafe car model illustrates Bakan’s point. The perverse corporate logic goes: it is often cheaper to allow harm to people and just pay for it later, should one get caught.

Can the corporation be reformed to care more for people? In 1973, UP law professors Guevara, Campos and Bautista proposed that corporations be allowed to include in their bylaws the right of employees to choose among themselves a representative who will sit in the board. Strangely, the provision did not make it to the final version of the Corporation Code in 1979. In Germany, partly through the efforts of the Catholic labor movement and the Christian Democrats, corporations with more than 2,000 employees are required to have equal representation of employees and shareholders in the board.

For the Philippines, the only Catholic country in Asia, it is unconscionable not to give a voice to employees in the governance of the corporation. Such a revision to the corporation code is long overdue and may usher the way for a more humane corporation.