Notes From Babel

Saying Thanks to Corporate “Sociopaths”

with 9 comments

A couple months back, Andi and I went to wish farewell to one of many friends who are picking up and heading Out East from California.  Our friend’s dad let me borrow Thom Hartmann’s Threshold, a sort of progressivist manifesto.  Much of it is fairly predictable stuff, employing lots of distressing anecdotes developing the ultimate lesson that the Environment is good and cheesed at us meddlesome humans.  There is at least one idea, however, that I thought very interesting:

In his manuscript “Toys, War, and Faith: Democracy in Jeopardy,” Maj. William C. Gladish suggests that this special breed of person [speaking of corporate executives] is actually a rare commodity, and thus highly valued.  He notes that corporate executives make so much money because of simple supply and demand.  There are, of course, many people out there with the best education from the best schools, raised in upper-class families, who know how to play the games of status, corporate intrigue, and power.  The labor pool would seem to be quite large.  But, Gladish points outs, “There’s another and more demanding requirement to meet.  They must be willing to operate in a runaway economic and financial system that demands the exploitation of humanity and the environment for short-term gain.  This is a disturbing contradiction to their children’s interests and their own intelligence, education, cultural appreciation, and religious beliefs.

“It’s this second requirement,” Gladish notes, “that drastically reduces the number of quality candidates [for corporations] to pick from.  Most people in this group are not willing to forsake God, family, and humanity to further corporate interest in a predatory financial system.  For the small percentage of people left, the system continues to increase salaries and benefit packages to entice the most qualified and ruthless to detach themselves from humanity and become corporate executives and their hired guns.”

Without going so far as Gladish—and certainly not so far as Hartmann, who calls corporate executives “sociopaths”—I think there is something to this point.  It cannot be persuasively suggested that the entire corporate culture is full of benevolent free market warriors who want above all to keep the government at bay to leave the private sector free to  serve the public.  Nor does the trite disclaimer, that yes, there will always be some bad apples, ameliorate the condition.  It’s more than just “bad apples.”   The image of the “invisible hand” has proved too powerful for its own good, leading to overuse and oversimplification.

At bottom, it is true that a conflict of values occurs among us, as economic actors, in our respective quests for pecuniary increase.  Corporations—those legal persons among us who happen to lack the quality of being human—are authorized and duty-bound to advance but one objective.  This objective, of course, is one shared between corporations and humans.  Humans, however, are bogged down in their pursuit of money by nagging scruples such as respect for others, respect for the environment, an abiding consideration for family and community and the propagation and well-being of their offspring, etc.

A human thus must act rationally to achieve several objectives, only one of which is the accumulation of wealth.  A corporation, on the other hand, enjoys the advantage of being significantly more streamlined in its pursuits.  It is limited only to the extent it can fill its ranks with enough humans who are able to sublimate or eliminate their extraneous desires.  Thus, it seems plausible that the very existence of corporations stimulates the proliferation of individuals with a substantially redacted set of scruples and affections.

There is little that can be done to the corporation itself to improve this condition. The condition, in fact, is the same that our Founders identified in the nature of government itself.  The solution devised for the problem in government was to decentralize it and to limit its scope through federalism.  The solution our leaders have devised to prevent the accumulation of power by corporations, oddly, has been to increase the power of government.  This not only undoes the careful work of our Framers, it also makes it much more convenient for corporations to capture more influence and control.  For example, Jonathan Adler recently pointed out that, during Senator Al Franken’s opening statement during Elena Kagan’s confirmation hearings, in which the Senator railed against the recent Citizen United opinion, he asked:

“Do you think those [environmental and consumer protection] laws would have stood a chance if Standard Oil and GM could have spent millions of dollars advertising against vulnerable congressmen, by name, in the last months before their elections?” Even assuming that major corporations would be willing to risk consumer backlash by entering partisan political contests so directly, this example fails.  The federal Clean Air Act, and in particular the provisions imposing nationwide emission controls on new motor vehicles, were not opposed by the major automakers.  To the contrary, the major automakers were the primary backers of federal motor vehicle emission controls, as they sought to preempt more stringent (and potentially variable) state standards. Absent automaker support, it’s questionable whether limitations on automotive emissions would ever have passed at all.

So, to answer Senator Franken’s question: Yes. The Clean Air Act would have “stood a chance” even if GM could have spent millions of dollars on political advertising, because GM would have spent millions of dollars in support of legislators who supported federal air pollution controls.

Getting back to the contemporary fervor over wealth distribution, one helpful observation concerns the way American jobs have moved further and further from “actual” work.  In a recent episode of the NBC series Community, Troy realizes he has a gift for plumbing, but rejects the urgings to pursue this practical trade.  Instead, he vows:  “I’m gonna be sophisticated and have no job. Or a job that looks from a distance like I do nothing.”  I think this is a powerful statement about American sentiment toward labor.  For my part, I have a job that, from a distance, looks like I do nothing.  An attorney’s job is made up entirely of talking and writing.  It can take a bit of solving for X to figure out those efforts yield a net benefit to the universe, as the efforts are so attenuated from the business of corporeal stuff. I think this phenomenon holds for many of our jobs, including those of the very wealthy.

Perhaps there is a connection here:  if it all looks like we doing basically nothing, then why should the ostensible nothing performed by folks with names like Pendlebury-Davenport or a Mannering-Phipps yield so much more of the rich stuff than my ostensible nothing?  Nothing and nothing alike, we might say, so spin the wheel and spread the love around. Fat Cats.  Greedy Bastards.  Eat the Rich.

In reality, we don’t do enough solving for X.  If you have job that, from a distance, looks like you do nothing, then somewhere along the way there is probably some greedy bastard responsible for translating your otherwise useless skills into something you can hold, smell, eat, and put over your head.  Without a willingness to give up sitting for a living and take up a profession that involves building or fixing or growing something, one should proceed with caution before striking out against corporate America.

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Written by Tim Kowal

July 11, 2010 at 4:15 pm

9 Responses

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  1. I consider this unlikely to be correct (even if far from impossible). Notably, there are very many people who use unethical methods at the drop of a hat, including many lawyers, salesmen, and, indeed, plumbers.

    Combining this tendency with a good head and a first-rate education obviously limits the pool considerably, but hardly to the degree needed. Instead, I see other problems, most notably that the current system often amounts to one group of executives setting the salaries for another group of executives, who will eventually be able to return the favour. (In a worst case scenario, the two groups coincide in the first place.)

    If we were to make a supply-and-demand argument, I would look at the concept of levers: If you have ten men trying to push down a lever, it really pays to put the one who can exerts the greatest down-ward force at the end of the lever. Indeed, a 10 % increase in force at 1 m is worth as much as a 100 % increase at 0.1 m. The CEO of e.g. BP is placed on an extremely long lever—and picking a CEO just 1 % better could conceivably make a difference of tens of millions of dollars.

    michaeleriksson

    July 11, 2010 at 4:47 pm

  2. I generally agree. But one could imagine there being two equally sharp, shrewd candidates for the position of CEO of BP, to use your example. One candiate has a soft-spot for the environment; the other could care less. Thus, the latter would be more likely to engage his or her calculating mind toward creative, profit-maximizing solutions such as lobbying for exemptions or easing regulations imposed on the corporation. The corporation would probably be better off hiring the latter candidate.

    This is the point that Hartmann was making. I really don’t know how much that actually plays out, but I think it’s entirely plausible that being free from overactive moral compunctions would tend to give someone a spot at closer to the end of the lever—to use your example—and, thus, to tens or even hundreds of thousands in additional compensation.

    Tim Kowal

    July 11, 2010 at 4:59 pm

    • Yes and no: Without a doubt, being ruthless can have a considerable positive effect on both the bottom line and the chances of being placed at the end of the lever. Therefore, the demand for the ruthless would be larger. However, my point was directed at the supply—where I argue that the supply is not anywhere small enough to explain typical salaries of e.g. Fortune-500 CEOs in a pure supply-and-demand framework (of the kind I read from the quoted text and you discussion).

      michaeleriksson

      July 12, 2010 at 7:24 pm

  3. Its nice we are so willing to speculate as to how evil corporate CEO’s must be while writing about it on our Blackberry as we drive to Starbucks in our BMW. Hartmann is right we are much to virtuous to be good CEO’s…..those guys are sociopaths. LOL.

    Generalizing about CEO’s and accepting Hollywood depictions of them is worthless. The fact of the matter is markets work in spite of the greed of individuals or corporations as long as there is competition. They help us balance our unlimited wants with all other associated costs (environmental included). Unless gov’t limits competition through regulation and other burdens to small business and thus limits competition we can look at the corporations we have as a reflection of our values…..just as Alexis De Tocqueville said “In a Democracy people get the government they deserve” in (relatively) free market economy people get the corporations they deserve.

    Josh

    July 12, 2010 at 11:39 am

    • I’ve thought the very same thing—our values are reflected in the things we buy, how we live.

      Though not really related to your point, I watched an interview with Hartmann yesterday about his views on sustainability. Hartmann thinks we live far too lavishly, and points out that to get even half the world to the US poverty level would take the resources of somethink like 4 planet earths. But even assuming that’s true, what can we pretend to do with that information? Give up the option of living indoors with running water in order to appease some abstract idea about “sustainability”? Besides, the Left expresses concern over redistributing wealth, rather than reducing it. If our poverty level is unsustainable, then we ought to be taking from our rich and poor alike and crating their stuff off to third world countries.

      The reality is, where there is opportunity, we will take it. It is not in our nature to “go without” so that some generation a million years hence might enjoy it instead.

      Tim Kowal

      July 12, 2010 at 11:51 am

      • Right, but thats the folly of people like Hartmann that they suppose they know how to plan a world economy and what it would require. People like him have been talking about “sustainability” forever and there predictions have been dead wrong. What if we had heeded ideas about eugenics and such? Adam Smith says it well “The statesman who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted to no council and senate what-ever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.”

        Josh

        July 12, 2010 at 12:43 pm

        • On the other hand, Josh, there is admittedly some truth to the sustainability-niks’ concerns. But the approach, I agree, ought not be to ration. As we became better equipped at identifying the externalities that certain industries impose on the commons, we do need to be ready to assign the cost of those externalities on the companies and individuals creating them. Most of us would not disagree with imposing on BP the full cost of the damage they’ve caused (though, interestingly, there is apparently a cap imposed by law, probably created in order to entice drilling).

          The really tricky part is how to treat inter-generational externalities—that is, do we owe future generations anything for what we “take away” from them? I wrote about this at length in this paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=961767.

          Tim Kowal

          July 12, 2010 at 8:09 pm

  4. Not really. What have they predicted correctly so far? They say that our reliance on fossil fuels is unsustainable and encourage alternative fuels. The result is we grow corn for ethanol which leads to higher food prices and starvation in poor countries while producing an energy source that is less efficient and less environmental friendly than oil. The market would not have done that. The point is not that we can do whatever we want with no consequence. The point is the market is the most effective way of making these desicions. Elites attempting to plan sustainability is what is truly unsustainable. The market will shift as the public need changes, and that is made up of calculations made by thousands or even millions of people making desicions about all inputs expressed through the price system. Again no one is capable of calculating those things.

    Your BP example is perfect. We know why that legislation was written that way. BP applied for contracts in 500 ft of water….Louisianna approved….the federal Government prefers they drill in deeper (more dangerous water) this is where planning comes in and thwarts that market, and how do they get private companies to accept the risk? They limit it artificially through tax incentives and limits to their liability. Both are in place to encourage risky drilling…..again planning and guiding the economy is the problem…..the market is not.

    Josh

    July 13, 2010 at 10:22 am

  5. Here is an article I read recently in which John Stossel discusses Dinesh D’souza’s book “What so great about America” They build a case that it is our view of Business and Business men in general that makes the country so wealthy. I think it relates to the demonization of business and business people by the left that we are essentially discussing. I would also point out that as much as you can say that CEO’s are single minded in their pursuit of profit (which I think leads them to pursue a balance of many things) you could build a much stronger case that politicians single mindedly pursue reelection in the same way.

    Here is the article
    http://www.realclearpolitics.com/articles/2010/06/30/entrepreneurship_helps_make_america_great_106143.html

    Josh

    July 14, 2010 at 1:31 pm


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