Are corporations inherently wicked? - editorial

Business Horizons, July-August, 1991 by Craig Dunn, P.

Evidence at his 1990 trial showed that John Borowski ordered his employees to dump toxic wastes down a sewer. A judge sentenced Borowski to two years in jail and fined him $400,000. The president of metal-finisher Borjohn Optical Technology Inc. in Burlington, Mass. thus became the first person ever convicted under the four-year-old "knowing endangerment" provision of the Clean Water Act.

Thus begins an April 22, 1991 Business Week article entitled "The Crackdown on Crime in the Suites," an article documenting the increasing legal liability of both managers and the corporations they represent. What is perhaps most amazing about the current changes in the law is that we as a society have only recently felt it necessary to intensify sanctions against corporate wrongdoing. Why might this be so? Are corporations suddenly behaving worse that they have in years past? Has corporate conduct formerly considered morally acceptable now been "criminalized"? Do current legal precedents mirror a fundamental transformation in the way we understand the corporation's impact upon society? Which is the "right" story to be told - and what are the managerial consequences of choosing correctly or incorrectly?

Each of these question demands an answer informed by an historical account of the "nature" of corporate enterprise, and some appreciation for the link between law and morality. Those who fear all history is burdensome of the corporate business form is as fascinating as it is sensible. And the controversy surrounding the modern corporation is just as intriguing. Social, political, and organizational theorist routinely concede that business has produced a cornucopia of wealth - while in the same breath condemning the corporation for robbing individuals of their very humanity. Corporate activity has thus been considered noxious, largely due to the negative impact of business dealings on people - those inside as well as those outside the firm. It is interest in this relationship between the corporation and people that spawned the current issue of Business Horizons.

Concern with the issue of whether corporations are inherently wicked demands attention be given to two provisional questions: (1) What is the nature of the corporate enterprise? and (2) What might it mean to be wicked? Rather than addressing the relationship of the firm with all interested "stakeholders," attention will be limited to the impact of the corporate form upon the moral habits of managers - those who animate the corporation. Several biases will become evident. The first favors the view that individual virtue "counts" - and organizational structure affects personal virtue. The second premise represents a limitation to the first: There exists no ultimate institutional resolution of the human condition. Although it is plausible that institutions affect moral practice, such systems are powerless to change human nature. Given this formulation, not only is the corporation a social as well as an economic institution; to the extent that managers within the firm are held harmless for actions they take on behalf of the firm, the corporation additionally functions as a pseudo-religious institution.

Such an outlandish claim demands justification. We will first trace corporate law to its roots in trusteeship theory, itself an outgrowth of accords between church and state. The moral character of the corporation will next be examined, followed by an overview of the primary tenets of morality itself. Finally, the metaphor of the Hebrew tabernacle will be employed to establish that the corporate form has often (although John Borowski might think not often enough) functioned as a mediating institution safeguarding managers from the law. In the process the true complexion of the corporation cannot help but be revealed.

THE NATURE OF THE CORPORATION

For more than two centuries social theorists have probed the riddle of whether the corporation qualifies as a moral entity. The business ethics community has debated this same issue for several decades now. In spite of copious dialogue the dilemma persists. The mystery of the corporate nature can perhaps best be understood against the backdrop of trusteeship theory, for the corporation is essentially a network of "trust" relationships.

The Corporation as a Network of Trusts

Trusteeship had its earliest origins in Roman law, where the trust was conceived as "a device through which the law permitted a testator to impose a duty on his heirs to convey part of the estate to a third party who could not legally be heir to the testator" (Fraher 1989). As with all trust arrangements, the involvement of three parties was called for: trustor, trustee, and beneficiary. The vehicle of the trust allowed for property dispositions such as the following:

1, Beowulf (trustor), do bind my lawful

heir, Beowulf Jr. (trustee), to transfer

one-third of my estate to my long-time

companion Apollo beneficiary) upon

the most regrettable occasion of my

death.

Although the Roman citizen could not bequeath property directly to a non-spousal lover - unless he had legally adopted his companion, which had become common practice - the trust allowed for the intended end of transferring estates to a third party without violating the laws of survivorship then in place.