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Volume 3 Number 29 November
11, 2005 |
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Deciding for a very significant "other" Making an ethical decision for a corporation may
itself be unethical Deciding for others, which I discussed in last week's column, can be, even under the best of circumstances, difficult. Most often, the circumstances under which we must make these choices aren't the best, making things even more difficult. Sometimes, it's nearly impossible. Right after I published last week's piece -- and if you haven't read that, I recommend it, as it will make what I'm about to say more understandable -- I came across a news story that had a textbook case of a real surrogate decision-making dilemma. This is the sort of case teachers give students to get them thinking. In this case, a young girl is in a coma on life support and doctors, seeing no hope for her survival to any kind of a meaningful life -- or even long-term survival at all -- recommended removing life support. The girl's father, the only legal guardian, disagreed and wanted life support continued. So far, it's not an uncommon situation. However, there was a fly in the ointment. The girl is in a coma because of a beating, and the father is accused of beating her. As it stands, he is liable only for a charge of child abuse. If the life support is removed, and the girl dies, the father could be charged with murder or manslaughter. So, while it might be in the girl's best interest to have life support removed and to be allowed to die, as she surely will at some point, it is definitely in the father's interest to keep her alive as long as possible. Now, it's possible that the courts may step in and order life support removed, but, if they do, the father's attorneys can argue in his defense that it was the state that killed her because it ordered the life support removed. Had the courts not acted, the girl would still be alive, they could say. On the other hand, if she were kept alive, she might survive for quite some time and might eventually die from something like pneumonia or an infection. Then, the father's attorneys could argue that she died from the illness and not the beating. Very often, we see this sort of conflict of interests play out in a very different way. Someone must decide whether a person on life support should be allowed to die, and the sole decision-maker is someone whose own interests would be furthered by a quicker death. Suppose the decision-maker is a nephew and the sole heir. The sick person's continued existence is eating up money from the estate. So, while the sick person may have wanted, at some point, not to die so soon, the decision-maker has a definite interest in speeding up the process. Another textbook case. But I digress. What got me started on this whole deciding-for-others tack was an issue raised a while back when I discussed whether we should do something to give corporations some ethical motivation. (See: Businesses and ethics, Sept. 30) People responded, as they always do, that corporations are made up of people and that people can make ethical decisions. It's a continuing problem that many people can't seem to get their head around the idea that the corporate entity is not just the sum of the parts of the people who inhabit it. It is a separate and distinct entity with its own interests that are separate and distinct from the interests of the people who work for it. Actually, the corporate entity has only one interest, making as much money as possible. The people who work for a corporation are not the corporation. They are employees. And, as such, they are fungible. One CEO goes out, another comes in. The corporate interest, it's sole interest, remains the same. And the CEO must respect that interest. He may see a different way of doing that, but ultimately, he must serve that interest. The CEO, and every other employee of the corporation, is a surrogate decision maker. And as such -- in the absence of advance directives or substituted judgment -- must rely solely on the corporate entity's "best interest" in making decisions. To do anything less, I've concluded to my surprise, would be unethical. For a corporate employee -- from CEO down to mailroom clerk -- to allow his or her own ethical interests from getting in the way of the corporate entity's one interest would violate the principles of surrogate decision-making. It would, as in the case of the abusive father and the comatose child, substitute the decision-maker's interest for that of the entity for whom the decision was being made. The corporation, after all, has no ethical motivation. It's only motivation -- by law -- is making as much money as possible for the stockholders. If that can be done -- and done in the short term -- by a certain decision, it doesn't matter whether the decision is ethical or not. If it is, well and good. If not, too bad. The ethical interests of the decision-maker or decision-makers are irrelevant. I have two examples of this, one old and another quite recent. Back in 1984, when spreadsheets were still quite new, Steven Levy wrote a piece in Harper's Magazine. Titled "A spreadsheet way of knowledge," the article said that the new technology allowed its users to calculate things, and do all kinds of what-if scenarios, but didn't provide a place to compute the intangibles. I've written about this before. See: "When crunching numbers, don't crunch people too," July 27, 2001. Levy tells the story -- if I remember it correctly -- of a restaurant owner who was considering expanding his operation. So, he got a spreadsheet and plugged in how much he intended to spend under different scenarios, how much extra revenue each scenario would generate, and what extra expenses he could anticipate. Just for laughs, he included a scenario in which he sold the restaurant, and put the proceeds, along with what he intended to spend on expansion, into certain revenue-generating securities. It turned out that the spreadsheet indicated the last scenario would have been the most profitable. The restaurant owner, however, liked the business. That's what he did. That's what he enjoyed. So he went ahead with the expansion. Levy pointed out, and correctly so, that a middle manager at a major corporation couldn't make that same decision. If the spreadsheet said the most profitable thing would be to close the operation, he'd have to recommend closing the operation -- no matter how he felt about it personally. More recently, following the Judith Miller/New York Times fiasco, the Cleveland Plain Dealer announced that it had two stories about government corruption, but wasn't going to print them because it feared retribution. In the past, newspapers have often been fearless about exposing corruption and reporters have been willing to go to jail to protect their sources against corrupt politicians. However, this time, the papers executives had a different approach. "Doug Clifton, editor of The Plain Dealer, revealed his decision to withhold two investigative articles about local corruption because he believed the newspaper might be criminally prosecuted. He wrote that he was doing so even though both he and his reporters were prepared to go to jail if necessary. "The column was about the prospect that Judith Miller of The New York Times and Matthew Cooper of Time magazine would be jailed for refusing to name sources in a case involving the identity of an undercover intelligence agent. Ms. Miller was jailed last week, while Mr. Cooper agreed to testify after his source released him from the confidentiality pledge. Time also faced a contempt charge, but The Times did not. "Mr. Clifton said in an interview that The Plain Dealer's lawyers had persuaded him that 'the paper could be criminally charged as an institution,' and that 'the corporate citizen, the corporate entity, has a different level of responsibility' than individual journalists." And there you have it. As a
surrogate decision-maker for the corporate entity, It wasn't always that way. I cut my teeth at a small newspaper, where the owner, CEO, and publisher was a conservative. He was very interested in making money, but he was, first and foremost, a newsman. He wouldn't shy away from a good story, even when it had some potential liability. Yes, it was a corporation, but it was small and all the stockholders were family members. So, he could make that decision. Today, after most media outlets have been subsumed as "profit-centers" by a handful of giant corporate conglomerates, the calculus has changed. One editor of a major newspaper recently lamented that the focus of his job-performance review has changed markedly over his career. Years ago, when he first began, his performance, he said, was judged on the quality of the news product, whether the newspaper had won any awards, how well the newspaper served the community, and the community's reaction to the news product. Today, he said, the only metric for his performance is how much money the paper makes for corporate. The other metrics, previously so important, aren't even discussed. Now, it's not outside the realm of possibility that some stockholders, the alleged "owners" of the corporation, could get together and decide that they were willing to forego profit in order to maintain some ethical standards they found important. We even see that in some small companies, much as my old boss was willing to put himself and the company in jeopardy in pursuit of a good story. But the larger the corporation is, the less likely that is to happen. For major corporations, large blocs of their stockholders are other corporations, mutual funds, institutions, etc., for whom the only consideration is achieving as much profit as possible -- so that they can satisfy their own single interest of making as much money as possible. If you are the manager of a major investment fund and you see that one of your holdings is performing poorly, you don't really care why. You are going to dump it as quickly as you can. Otherwise, the investors who hold shares in your fund are going to start dumping them. So, as I said earlier, I've surprised myself with the conclusion I've reached. It would be unethical for a corporate decision-maker -- short of a directive from an overwhelming majority of the stockholders -- to allow his or her own ethical interests to influence a decision that could harm the one interest of the corporate entity. But that brings us full circle. I don't think the situation is hopeless. The simplest solution, and one that I referred to in the September 30, column is to use corporate law to give corporations an interest other than just making as much money as possible. In that column I pointed readers to a piece by Robert Hinkley -- How Corporate Law Inhibits Social Responsibility: A corporate attorney proposes a ‘Code for Corporate Citizenship' in state law. Hinkley suggests that we add a few words to corporate law: "Directors and officers would still have a duty to make money for shareholders, ... but not at the expense of the environment, human rights, the public safety, the communities in which the corporation operates or the dignity of its employees." From an ethical point of view, this would give the employees of the corporation much wider latitude in deciding what was really in the best interests of the corporation, simply because the corporation would have, as most other "persons" do, more than one interest. In the employees' role as surrogate decision-makers, they could then make ethical decisions more readily. |
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© Copyright 2005 Carlton Vogt |