Corporate Personhood and the High Cost of Profit: An Ethical Analysis
The business model should be of great concern to anyone alive in the world today. Humans have created a self-perpetuation machine that is inherently unethical as well as monstrous. It is vital to understand the influence that can be seen worldwide.
The business model America has creating and humanity is suffering from, is no other than capitalism and mainly the corporate structure. The following is an evaluation of that structure. It has been the largest influence in promoting environmental degradation, the mistreatment of humans as well as animals, and above all else, complete disregard for ethical conduct. There are many examples that can be drawn on for realizing this truth. However, I will start the history of corporations, then move into a few examples and drive the point home, discussing a topic which effects everyone in America: health care.
One hundred and fifty years ago, the corporate structure was very different from what it is today. Corporations were rare and controlled by many laws. Today, they are what could only be described as global superpowers with unrivaled influence that is hard to regulate due to globalization, international commerce, and the fact that they enjoy the same rights and privileges as human beings but almost none of the responsibilities.
Corporations were originally a group of people contracted by the government to fulfill a particular function, like building a bridge, building, or dam. They were regulated with charters stating how long they could stay in business and how much capital gain they could acquire. They could not own another corporation, and their shareholders were liable. Corporations were once a gift to the people, designed strictly to serve the public good.
During the Civil War and the Industrial Revolution, corporations took off. There were large subsidies distributed for many things, such as railways, banking, and manufacturing. After this boom in productivity, corporate lawyers realized they needed more power. Those lawyers would seek to remove some of the previously listed constraints to gain that power.
The 14th amendment at the end of the Civil War, was placed in the Constitution to give equal rights to the once enslaved black population. The amendment states: “No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”
Corporations used this amendment to promote the idea that a corporation is a person, and the Supreme Court agreed. Although the 14th Amendment was intended to protect newly freed slaves, it was used by corporations to gain power. “Between 1890 and 1910, there were 307 cases brought before the court under the 14th amendment; 288 of these brought by corporations, 19 by blacks.” 1
A corporation is a group of people who receive a charter from the government to act as a separate entity or person. The corporation with these capabilities could buy and sell property, borrow money, sue in court, and be sued. The problem with this outline of such an entity is that a corporation has no conscience that would attach ethical activity. The disturbing part of the corporate composition is that the bottom line, the basis of a corporation, is profit. They must put their financial interests above all other interests. Corporations must create the highest amount of capital gains for its owners and shareholders. In fact, it is required by law that they perform these financial objectives even if it means sacrificing the public good.
This is not to say that corporations are not necessary or do not do well for the public. They provide a wide range of goods and services for the public, but they have become a nightmare that is more than just a business issue. Many CEO’s are concerned with the model in which they must ascribe. This does not make them automatically unethical. Sometimes it is the reverse, CEO’s work hard to try and do the best they can and minimize environmental degradation and unethical conduct. The problem is that they can only do so much with the responsibilities and characteristics of a corporation.
When it comes to an entity that has the rights of a person with only the motivation for profit, there is no such thing as enough. The point of a corporation is to get large and profitable. This means that they will do whatever it takes to avoid responsibility, which will require them to pay for costs, even if they are negative externalities. An externality is the impact a transaction has on a third party that has not consented to its involvement. There are positive and negative externalities. Corporations provide both, but the negative aspect is what will be focused on.
Corporations must minimize costs at every turn, and at some point, they decide that instead of taking responsibility for such actions, they will let someone else deal with the ramifications of their negative externalities. A good example is pollution. Many corporations pollute, but they do not correct their unethical conduct because it would mean greater costs and the loss of profits. The corporation has only the capabilities for which it was designed: to make capital, money, wealth, and profit.
Externalities and the drive for profit are why corporations so often abuse those who work for the business. The laying off of workers is done because it saves money. Unions are so often broken up to keep their influence from disrupting the corporate model. Workers' comp was created in a necessity to hold businesses responsible for injuries that happened to workers on the job. Sweat shop workers are paid .01 percent of the price of the items they manufacture. All of these situations occur because it is about making a profit for shareholders and not sustaining or helping the public interest.
This problem is all too pervasive at stock exchange outlets. There are no environmental issues or human concerns attached to the streaming numbers, figures, and dollar signs on Wall Street. When brokers buy carpet, they see nothing about environmental degradation. When brokers sell arms industry stocks, they think nothing about the loss of human life. We have created a system detached from reality, and until the structure of this system is changed, we will always have these problems.
Corporations cause large trouble for the public because of their irresponsibility and unwillingness to fix problems due to costs. Unlike when the corporate model was in its inception, shareholders are not legally responsible for corporate actions and ramifications. The public cannot lock up CEO’s or the company’s shareholders for crimes brought against the business. The only thing the public can do to teach corporations a lesson is to hit them where it really hurts, their pocketbook. Unfortunately, some forms of legal caps have been implemented to prevent the courts and judges from creating fines that are “unreasonably large.” 2
Due to the fact that criminal ramifications can only be brought against the company, this legal person, and the only punishment is financial, corporations create a cost-benefit analysis on whether it is cheaper to break or follow the law. Obeying the law hinges on whether it is cost-effective. The only thing the legal system can do is fine corporations for their criminal activity, which creates a problem if there are caps on how much can be fined. If it is cheaper to break the law, it will happen, which has only financial ramifications for the business but also physical ramifications for the public.
The Multinational Monitor is a free, non-profit bimonthly magazine founded by Ralph Nader and published by Essential Information. Essential Information was also founded by Ralph Nader and is a non-profit organization that tries to promote citizen involvement in community activities and engagements. The Multinational Monitor primarily focuses on corporate analysis. It publishes articles also pertaining to the environment, globalization, privatization, and the global economy.
The Multinational Monitor published an article called The Top 100 Corporate Criminals of the 1990s. 3 The Monitor did a more recent article entitled The 10 Worst Corporations of 2006. In this article, the authors, Russell Mokhiber and Robert Beissman, explain how Smithfield, the largest pork producer in the United States, is on the list for labor violations. (They have also been previously listed due to pollution.)
"For more than a decade, the more than 5,000 workers there have attempted to organize a union, only to be met by a vicious anti-union campaign that has included organized beatings of union supporters, operation of an official company police force within the plant (not a private security operation, but a governmental police force) with the power to arrest workers and detain them at the plant, the deployment of the local sheriff’s department to intimidate workers, racist slurs, and use of the Immigration and Naturalization Services department to harass Smithfield’s increasingly immigrant workforce.
Smithfield opened the Tar Heel plant in 1992. Workers sought an election for union representation in 1994. The union campaign failed, but the National Labor Relations Board (NLRB) general counsel charged the company with violating federal labor law. In 1997, the company agreed to rerun the election and pledged to respect labor laws.
That promise was betrayed. The workers and their union, the United Food and Commercial Workers (UFCW), lost the 1997 election, only for the NLRB general counsel to issue a new set of charges. By 2004, the full NLRB finally ruled on those allegations, which had been upheld by an administrative law judge.
The NLRB found that, among other wrongful acts, Smithfield illegally: interrogated employees concerning union sentiments; threatened plant closure; threatened reprisals against union supporters; threatened wage freezes; assaulted a union supporter; and caused the arrest of a union supporter." 4
The ultimate case study for profit over the public is Wal-Mart. They have 4,730 stores nationwide and 138 million customers. In 2002, Wal-Mart Stores had $245 billion in revenues. However, the average Wal-Mart sales representative made $8.23 an hour or $13,861 in 2001, but the federal poverty line for a family of three was $14,630. 5 In 2005, the average two-person family (one parent and one child) needed $27,948 to meet basic needs. 6
In 2006, Wal-Mart employed 1.39 million people. In January of that year, Wal-Mart reported that it covered 43% of its employees’ health insurance. 7 The average large company in 2005 covered roughly 66% of its employees. To achieve this goal, Wal-Mart would have to cover an additional 318,000 employees. 13 states have released data stating that Wal-Mart forces employees to rely on taxpayer-funded health care. 8 This is mostly because the coverage that Wal-Mart provides is too costly, with large deductibles and a qualifying period of 180 days for full-time workers. The store promotes using Medicare and Medicaid to cover medical expenses.
It is estimated that Wal-Mart costs taxpayers in California $82-million a year for health care, food stamps, and other social services. Nationwide, due to federal assistance for Wal-Mart employees and Wal-Mart's greed, taxpayers provided $2.5 billion in eligible services. 10 Low wages mean less money for the community. Also, Wal-Mart stores do not buy American products; they have exclusive dealings (70%) with China. They take business away from local Mom & Pop stores and export money out of towns into the pockets of wealthy shareholders. Wal-Mart is the most profitable retail company in America because it buys cheap foreign goods by exploiting foreign workers, cuts huge costs at home by exploiting its domestic workers, and sticks the public with the bill.
Corporate crime causes much more harm than all street crime. Many people will cite that street crime is violent, but corporate crime is too. The difference between street crime and corporate crime is that corporations have the influence to define the laws under which they live. Corporate crime is underprosecuted, with very few corporate prosecutors to begin with. This is all too relevant today, when one sees street crime, s/he can call the police at 911, but what number does one use for corporate crime?
Today, corporations can get away with prosecution and non-prosecution agreements when they commit a crime. If they do admit guilt, it is often by a smaller sub-sect of the company with nothing to lose. This allows the main corporation to not to claim guilt and simply pay a fine. This avoids the corporation starting a criminal record that would require community service (or other equal ramifications) for accumulated convictions.
Russell Mokhiber from the Multinational Monitor has some issues with corporate crime as well. The following is pulled from his report 20 Things About Corporate Crime:
"The FBI estimates, for example, that burglary and robbery street crimes cost the nation $3.8 billion a year. The losses from a handful of major corporate frauds — Tyco, Adelphia, Worldcom, Enron — swamp the losses from all street robberies and burglaries combined. Health care fraud alone costs people in the United States $100 billion to $400 billion a year.
The FBI estimates that 16,000 people in the United States are murdered every year. Compare this to the 56,000 who die every year on the job or from occupational diseases such as black lung and asbestosis, and the tens of thousands of others who fall victim to the silent violence of pollution, contaminated foods, hazardous consumer products and hospital malpractice. These deaths are often the result of criminal recklessness. Yet, they are rarely prosecuted as homicides or as criminal violations of federal laws.
Corporate criminals are the only criminal class in the United States that has the power to define the laws under which they live. Exhibit A: the automobile industry. Over the past 30 years, the industry has worked its will on Congress to block legislation that would impose criminal sanctions on knowing and willful violations of the federal auto safety laws. Today, with very narrow exceptions, if an auto company is caught violating auto safety laws, only a civil fine is imposed." 11
On top of all the negative attributes that are bellowing from a corporate-run society, it is important to never forget that LLCs (Limited Liability Company) are completely unconstitutional. 12 If one would like to know more about corporations and their effects, such as environmental degradation, worker exploitation, and unethical conduct, I highly recommend the documentary The Corporation. The Corporation has won 26 international awards, 10 audience choice awards, including the 2004 Sundance Film Festival, and is the all-time number one selling Canadian documentary. It is a 6-hour documentary, but the shareware version can be seen for free by going to thecorporation.com. It takes an objective view, consulting both sides of the corporate analysis argument and features many well-known corporate insiders, critics, academics, and intellectuals such as Noam Chomsky, Naomi Klein, Milton Friedman, Howard Zinn, and Michael Moore.
The business model of profit before people hits hardest at home in the United States. The privatization of healthcare is manifestly and undeniably unethical. With the current system today, it is obvious that large corporations are becoming exuberantly wealth by profiting off of disease, injury, and death.
Commercials for healthcare promote the slogan “everyone deserves affordable health care.” This is exactly the problem: the rhetoric should be “everyone deserves healthcare,” not just those who can afford it. The American healthcare system forces individuals to place a value on their body and many can’t pay the price. Even if one does have health insurance, the co-pays and deductibles can be outrageous, sending the average middle-class family into debt and bankruptcy. Many individuals who can’t pay for healthcare are not helped by state programs such as Medicaid (which lowers the quality of care to begin with) but are left with huge credit card debt, which can be impossible to get out of with such high hospital bills and credit card APR often reaching the 27th percentile.
To illustrate the inherent unethical nature of the healthcare system, we will refer to a well-known ethical dilemma created by the psychologist Lawrence Kohlberg. Lawrence Kohlberg created (Kohlberg’s) stages of moral development to explain the development of moral reasoning. He would often ask young children to answer tough moral questions to understand how morals developed. The aim was to create a dilemma with no right answer so the children would have to come up with detailed and descriptive reasoning. The following is probably his most famous dilemma.
"In Europe, a woman was near death from cancer. One drug might save her, a form of radium that a druggist in the same town had recently discovered. The druggist was charging $2,000, ten times what the drug cost him to make. The sick woman’s husband, Heinz, went to everyone he knew to borrow the money, but he could only get together about half of what it cost. He told the druggist that his wife was dying and asked him to sell it cheaper or let him pay later. But the druggist said, “No.” The husband got desperate and broke into the man’s store to steal the drug for his wife."
Many will take one side of the argument, stating that it is more ethical to steal or not steal. However, one shouldn’t care about either. If we look at the base principle of this dilemma, we see a problem with not the participants but the situation as a whole. Due to the system these individuals are in, it forces these individuals to put a price on their health, well-being, and life. Any system that does this can accomplish economic slavery and is inherently unethical.
It is often sad seeing individuals’ answers and reactions to such a question. Even adults get caught in the trap of the American economic group-think exercise, basing moral evaluation on action of the individual and not the whole manifestly unjust situation. Groupthink is a thought process that is projected by members of the same group who try to minimize conflict and reach a consensus without evaluating, testing, or analyzing ideas, thoughts, and arguments. What most people don’t realize is that justification for such a system comes from belief in numbers, not analytical and ethical reasoning. Strictly because so many accept this system is what makes this situation a dilemma in the first place.
The point of all this ethics and groupthink talk is that it is important. As you continue reading, I encourage you to keep in mind ethics and the powerful forces of large masses of people having the same idea. The more people who have the same idea has no connection to the validity of the argument or idea they support.
Business Ethics (or lack thereof) Applied
Now I will apply business ethics to contemporary American society. Hospitals need to run a profit in a privatized system to stay open and are becoming increasingly commercialized. Shannon Brownlee holds a master’s degree in biology from the University of California. Her stories and essays about medicine, health care, and biotechnology have appeared in the Atlantic Monthly, the New York Times Magazine, the New Republic, and Time. She is the author of Overtreated: Why Too Much Medicine Is Making Us Sicker and Poorer, and the following is an excerpt from that publication describing privatized hospitals.
"Today, hospitals still need to run a profit to stay open, even nonprofits, which make up more than three quarters of the more than five thousand hospitals in the United States—and most still turn to paying (or insured) patients in order to do so. From the humblest rural clinic to the most prestigious academic center, nonprofit hospitals generally earn at most between 2 and 6 percent profit on annual revenues, in part because forty-seven million Americans under sixty-five, or about one in six of us, have no health insurance. At most nonprofits, about 3 to 5 percent of patients are uninsured; at public teaching hospitals, it’s a whopping 15 to 20 percent. In 2003, hospitals reported losing twenty-five billion dollars providing care for which they received no compensation. Outside researchers suggest hospitals may be inflating their losses, which may be closer to sixteen billion dollars.)In their search for margin, hospitals are constantly looking for ways to attract affluent customers—or at least, patients with well-paying insurance. One sign of that search began appearing in the 1990s, when the entrances to hospitals started to resemble hotel lobbies. Even nonprofits with religious affiliations began sporting soaring atria, booths offering fancy coffee, and valet parking. Hospital boards began hiring vice presidents for marketing and branding, and approving the construction of “VIP suites,” where cash-carrying patients, many of them from foreign countries, can enjoy such special treatment as fluffy white bathrobes, daily newspaper delivery, and gourmet meals. Billboard ads and lattes in the lobby are only the most obvious signs that hospitals have become more-commercial enterprises.What all this means is that any hospital administrator with an ounce of good business sense is going to want to maximize the number of patients in profitable service lines, which they have taken to calling “centers of excellence,” whether or not they are, in fact, excellent. Even at academic medical centers, administrators exert subtle pressure on the physicians working in profitable departments to keep up their productivity by performing more-profitable procedures. In this sense, a hospital is no different from any other business. In recent years, IBM has shifted its focus from selling hardware to servicing large database systems, where profits are higher. An even better analogy for the hospital industry is a low-margin, high –volume business like personal computers. Dell earns only about 5 percent profit on each computer it sells, but it sells million and million of them.Similarly, hospitals want as many “bed turns,” or as much “throughput,” as possible in their profitable departments. The best way to accomplish this is to expand the capacity of high-margin departments to increase volume. You can think of it as the Billie Sutton strategy: Willie Sutton robbed banks because that’s where the money is; hospitals invest in their moneymaking product lines because that’s where the profit is. Yet, when hospitals focus not on profits, but instead on providing care that helps patients, they often wind up being punished financially." 13
Pushing people through hospitals because it creates more profit is just one problem with the privatized healthcare system. The biggest problem is with insurance. Insurance is just like all other businesses whose bottom line is profit. To cut costs, the insurance companies have an arsenal of ways to prevent spending money on health care bills. One way is to deny individuals healthcare altogether because they have certain pre-existing condition that will eventually require a large amount of medical treatment.
Becky Mielke from Michael Moore’s documentary Sicko had the following story to share. “I work in a call center. So people call in and their asking for insurance quotes. There’s certain preexisting conditions basically industry wide that will not be covered; diabetes, heart disease, forms of cancer, that if you have these conditions you are most likely not going to get your health insurance.” The list of deniable claims due to pre-existing conditions is enormous. Becky states that the list “could wrap around [her] house.” 14
If the insurance companies are unable to deny an individual insurance in the application process or a number of other ways they use to weasel their way out of paying for healthcare, they call in someone like Lee Iner. Lee Iner was also featured in the documentary Sicko, and his job was to get the money that was paid for medical bills back anyway he could. He would look for a slip-up on insurance applications or preexisting conditions that individuals are unaware of or forget to fill out on the insurance application form.
"We’re gonna go after this like it’s a murder case; and I mean a whole unit dedicated to going through your health history for the last five years looking for anything that would indicate you concealed something, miss represented something, so that they can cancel the policy or jack the rates so high you can’t pay them. If we couldn’t find anything we couldn’t disclose on the application you can still get hit with a pre-existing denial cause you don’t even have to have sought medical treatment for it. In some states its legal to have what is called a prudent person pre-existing condition… what that says is that prior to your insurance kicking in, if you had any symptom which would incline a normally prudent person to have sought medical care then the condition of which that symptom was a symptom is excluded. That’s how it works. Their suppose to be fair and even handed but with an insurance company it’s their friggin money. So it’s no unintentional, it’s not a mistake, it’s not an oversight, your not slipping through the cracks; somebody made that crack and swept you towards it and the intent is to maximize profits. Looking back I don’t know if I killed anybody. Did I do harm in people’s lives? Yea." 15
People in the financial part of the insurance industry have the hardest time dealing with the unethical dilemma. It is seen as a net loss when insurance claims are paid. 18,000 people in America died in 2006 from not having health insurance. 16 Even more perished due to the denial of insurance claims. Some in the industry couldn’t take it anymore. On May 30th, 1996, Dr. Linda Pino, a former medical reviewer for Humana, testified in front of the U.S. Congress and said the following.
"My name is Linda Pino. I am here primarily today to make a public confession. In the spring of 1987 as a physician I denied a man a necessary operation that would have saved his life and thus caused his death. No person and no group has held me accountable for this because in-fact what I did was I saved a company a half a million dollars for this. And furthermore this particular act secured my reputation as a good medical director and it insured my continued advancement in the health care field. I went from making a few hundred dollars a week as a medical reviewer to an escalating six figure income as a physician executive. In all my work I had one primary duty, that was to use my medical expertise for the financial benefit of the organization for which I worked and I was told repeatedly that I was not denying care I was simply denying payment. I know how managed care [hurts] and kills patients so I am here to tell you about the dirty work of managed care and I’m haunted by the thousands of pieces of paper in which I have written that deadly word, denied." 17
We have created a system that disregards health because it is profitable to do so. Having a system that must profit from providing healthcare is a system that will profit from death. As we proceed, never forget about ethics and the necessity to think independently.
Resources:
1. The Corporation (DVD). Achbar, Mark and Abbott, Jennifer. Zeitgeist Films. 2004 Mary Zepernick <www.thecorporation.com>
2. Kelly, Carly N. & Mello, Meichelle M. “Are medical malpractice damages caps constitutional? An overview of state litigation.(Medical malpractice: U.S. and International Perspectives)” Jurnal of Law, Medicine & Ethics. Fall 2005 p.515 From General OneFile
3. “The Top 100 Corporate Criminals of the 1990s” Multinational Monitor. July/August 1999 Volume 20 Number 7 & 8. <http:>
4. Mokhiber, Russel & Weissman, Robert. “J’Accuse: the 10 Worst corporations of 2006.” Multinational Monitor Nov./Dec. 2006 Vol. 27 No. 6 <http:>
5. Bianco, Anthony & Zellner, Wendy. “Is Wal-Mart Too Powerful?” BusinessWeek. October 6, 2003. <http:>
6 - 8. “Wal-Mart Wages and Worker rights” The Real Facts About Wal-Mart. 2005 <http:></http:>
9. “Wal-Mart: No Bargain?” CBS News. August 7 2004. <http:>
10. “Everyday Low Wages: the Hidden Price We All pay For Wal-Mart.” Wal-Marts Labor Record. Congressman George Miller. 2004. <http:>
11. Mokhiber, Russell. “20 Things About Corporate Crime.” Multinational Monitor. Jan./Feb. 2007. Vol. 28 No. 1 <http:>
12. The Corporation (DVD). Achbar, Mark and Abbott, Jennifer. Zeitgeist Films. 2004 <www.thecorporation.com>
13. Brownlee, Shannon. “Overtreated: Why Too Much Medicine Is Making Us Sicker and Poorer.” Holzbrinck Publishers. 2007
14 - 17. Moore, Michael. “Sicko” Dog Eat Dog Films. 2007
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