Can corporations learn to care about people?

(Note: This was my Managing for Society column in
Manila Times on February 21, 2006.)

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.