The Zero-Impact Corporation

File this under “Food for Thought.”

Last month I blogged about a Starbucks ad telling customers “Everything we do, you do.” (See: You Are Starbucks.) The idea implied by that poster was that all the stuff Starbucks does (in particular, all of its “corporate social responsibility” activities) is actually done by its customers — after all, customers are the ones paying the bills. Without customers, Starbucks wouldn’t exist.

It’s long been acknowledged that there’s a sense in which corporations don’t exist. On the “nexus of contracts” view, a corporation is just the name we give to the intersection of a whole bunch of private contracts: suppliers, employees, managers, and customers, all linked together by this thing we call a “company.” (Example: you can think of Walmart as just a vehicle by which millions of Americans buy tons of products from millions of Chinese. Exxon is just a mechanism by means of which millions of car drivers hire to oil-rig workers and geologists to help each of them exploit a tiny bit of the earth’s petroleum reserves.)

So, from that point of view, consider this: since corporations (in some sense) don’t exist, they also don’t pollute. Nor do they have any social impact at all, either for better or for worse.

Seen this way, Shell Oil has never emitted any pollution. Sure, smokestacks bearing its name have, but that’s just a short-hand way of saying that millions of car-drivers (and folks who heat their homes with oil or natural gas) have each contributed, incrementally, to that pollution. Likewise, Exxon has never spilled a drop of oil in the ocean. And Walmart has never driven a smaller store out of business: if a smaller competitor went out of business, it’s because thousands of consumers chose to shop at Walmart rather than at the smaller store.

Now keep in mind that this is not intended as a way of letting corporations (or managers) off the hook for bad decisions. It’s a kind of thought experiment, to see where it gets us, ethically, if we look at the corporation as a conduit between people who want to sell things (e.g., garments sewn in China) and people who want to buy them (e.g., North American teenagers).

Of course, from this point of view, no company would get credit, either, for any of the good things it “does.”

So, is this way of thinking about things helpful, or dangerous? Does it make sense for some of the examples suggested above, but not for others? Why?

14 comments so far

  1. Jason Garner on

    I tend to think of a conduit as passive and a corporation is not a passive agent acting on the behalf of it’s customers.

    The persons employed in a corporation take actions, positive and negative, on my behalf and I do not have complete knowledge of these actions. Perhaps as a customer I am the cause or the enabler of these actions, but I can’t take (sole) responsibility in the face of ignorance.

    In fact, often corporations act to keep me ignorant, despite my efforts to the contrary.

  2. Chris MacDonald on

    Jason:

    Thanks for your comment. I think I mostly agree.

    But I have to admit I’m driven in different directions by different examples.

    In the Walmart example I gave, it makes perfect sense to me to lay 100% of the blame (or credit!) for the small store going out of business at the feet of the consumers who voted with their dollars.

    On the other hand, consider SUVs. Yes, we have an abundance of SUVs because millions of people bought them, but that happened at least in part (maybe in large part) because of canny decisions made by execs at the big automakers aimed at getting around fuel-consumption regulations. Marketing arguably drove demand, there, rather than the other way around.

    Chris.

  3. peterkorchnak on

    It’s a chicken and egg problem: what came first, consumers in need of products or the corporation selling them? Corporations saying, it’s not our responsibility, it’s yours is hypocritical, as is consumers saying that it’s the corporations’ fault. We all bear the responsibility for our actions.

  4. Complexities on

    This kind of thinking assumes that all of the consumers *know* what the corporation is doing in order to provide the goods and services in their name. And that presumption is clearly false.

    It is a possibility in that we will soon have corporations that *will* inform us exactly of their activities. Once this has happened then the corps *can* absolve their corporate responsibility.

    Interesting thought and post though.

    Follow up thoughts? Let me know:
    http://www.twitter.com/willwalmsley

  5. Chris MacDonald on

    Complexities:

    Yes and no. Consumers don’t need information in order to be substantially causally responsible, though they may need info to be morally responsible. But even then, there’s such a thing as culpable ignorance.

    In some cases, it’s also a collective action problem. It might well be that everyone shopping at a new Walmart store hopes the ol’ hardware store on the corner survives — but also wants low prices, and wishes everyone else would keep patronizing the ol’ hardware store instead of them.

    Chris.

  6. DarryleHuffman on

    To me that is an abstract way of looking at business. When I was doing my BA I had an accounting professor tell me that the government considers a business like real person. They do this so they can pay taxes just as an individual would. Now if you apply the logic of the abstract would the business be liable to tax. That would be good court case. The crux of the matter would be is the business something like man or just a name.

  7. Chris MacDonald on

    Darryl:

    There have been court cases. Corporations can be treated as individuals by the law. But the ethical question is separable, at least in principle. The law finds it convenient to treat the corporation as a single entity (e.g., for the convenient collection of taxes).
    But raising the question of taxation is a good opportunity to point out out that corporate taxes, while paid directly by the corporation, are in effect just taxes on the wealth of (thousands or millions of) individual shareholders.

    Chris.

  8. nitin on

    To argue whether there is a drop of clean water in a bowl full of dirty water is noteworthy and also useless. It is useless because anyone can see it is dirty water and it is noteworthy because someone is trying to see clean water and dirt separately. So is the debate. Who is at fault. In one sense its a dirt that is visible but untill the ones who knows what is dirt is willing to come out, as peter said, its a egg and chicken problem, both can be blamed or none should be blamed. I think to solve he problem of ethical responsibility or gaps whether it is from walmart, exxon or Shell, it is the question of need of Uncontrolled-Mind. The business world is just a world to attempt to make unorganized world of mind into pockets of Organized minds and leave the rest for other worlds. Those who cant fit they are in duality mode with those who wanted to fit. This egg-chicken theory is like this only. The credit, the courts are like the carrot and stick metaphors for business world to run and control and lead the unorganized minds. So in my point, only one can blame oneself for not being organized and not others. The mystery of blame game can’t be solved from a relative point of views as all relativity is attached to every other issues. So if one gets free, the whole system can collapse and will be disaster. One has to check the authenticity of Absolute and handle all relative issues accordingly.

  9. DarryleHuffman on

    I can see your point about the tax issue. It took me sometime to figure that out.

  10. Nurglitch on

    It seems like a pretty neat idea to treat businesses as a nexus of contracts aside from the groups of people actually forming them, but I think it abstracts away precisely what we want to talk about when we talk about that businesses’ responsibilities.

    Take corporations, for example. They’re just one of three different types of business. While they aren’t exactly their owners, managers, or employees, they’re where the buck stops for legal liability.

    But the buck doesn’t stop outside of boundary demarcating the corporation, as individual officers can be held liable for actions taken with their consent, or within their zone of control. A vice-president of marketing isn’t responsible for producing a shoddy product, but they are responsible for advertising it as if it wasn’t, for example. Similarly the shareholders owning less than 20% stake are less responsible than those owning a controlling stake.

    I guess what I’m saying is that ethical responsibility, like legal responsibility, should not abstract away the nature of the relationships involved, especially when those relationships exist to inform various rights and responsibilities. Call it an ethic of corporate care…

  11. Julian Friedland on

    Interesting point Chris. You should check out the latest Moyers Journal on corporate free speech:
    http://www.pbs.org/moyers/journal/09042009/watch2.html

    I make another at times like these though, as I mentioned in my latest blog: http://www.businessethicsmemo.blogspot.com

    It’s not really corporations who act. It’s the individuals leading them (including shareholders). And there is no reason those individuals should act less ethically professionally than they do (or should) personally.

    To say, as Starbucks seems to, that corporations are the sum of what consumers do is only as true as the reverse, namely, that consumers instantiate what corporate executives (and their shareholders) desire.

  12. petewalker on

    Chris. your feedback please on this concept: Because corporate-type organizations (i.e., competing for something) are legally persons, it’s in society’s best interest to agree that these are pseudo-persons for document-processing purposes only. The term “document” is limited to data and not stretched to the the equivalent of a 14th Amendment because the members of a corporate-type organization have the human rights their governments accord (these rights include accountability and protections under corporate-type law). Pseudo-person human rights are only a concern in reference to other pseudo-persons and to organizational functionality. Further, an organizational structure is simply one type of a human-created machine (the term “mechanism” appears consistently in references to corporate law). Another way to say this is we know from irrefutable history that these pseudo-persons are born sociopaths who more often than not overpower the internal checks and balances of their human members and all but the most extreme external checks and balances (it’s noteworthy that many human sociopaths are useful and even indispensable society members — given that society doesn’t always know whom they are). Therefore if society is to have human rather than machine control, these pseudo-persons must be on permanent probation rather than have anything close to full autonomy, and society must agree on the terms and enforcement of this probation. This is possible because society consists of three primary power bases: community, business, and government. When one power base becomes sub-optimally powerful, the other two bases can selectively combine forces to regain or preserve their autonomy. – Thanks in advance

  13. Chris MacDonald on

    Pete:

    That’s a lot to comment on. A few quick thoughts:

    Corporations are legally persons in *some* senses, rather than “legally persons” full stop. Best not to overstate the current situation.

    I doubt “document processing” is sufficient. Corporations ought also, for example, to continue to be able to own property.

    I think the sociopath metaphor (familiar from The Corporation, a very misleading film) is unhelpful. Lots of organizations, corporate and otherwise, are constituted for special purposes, and pursue those purposes with single-minded zeal.

    The bit about “more often than not” strikes me as an unsupported statistical claim. I strongly suspect it’s false, though honestly I’m not even sure how we could check it. Don’t forget: most corporations don’t make headlines; the ones that do bad things do.

    I don’t know what “permanent probation” would look like; I’d have to hear a more concrete proposal before I could have any opinion at all.

    Chris.

  14. petewalker on

    Yes, critical thinking is better served after emotion subsides… In the above case frustration is with perceived corporate influence towards US public education textbook choices.


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