IrresponsibleUseOfFr's Journal: The Corporation, The Culture, and The Media

I was reading The Corporation: The Pathological Pursuit of Profit and Power. It is a very insightful book about the most dominant institution of my time.

Before discussing the book in particular, let's be clear on definitions. An institution is organization that compels people on what they can, can't and must do. Government is an institution. Marriage is an institution. The church is an institution. So is the corporation.

The corporation is driven by one metric: profits for share-holders. The case law for this is setup by Dodge vs. Ford. Shareholders can sue managers that do not pursue profits as their top priority.

This doesn't mean that corporations need to go after consumers in an unenlightened fashion. The best way to really exploit someone is to get to know them a little first. Corporations do the same. They are set up to gain our trust in order to exploit us most.

Another fact is that corporations are only concerned with their own costs, not the total. If there are costs that they can get other parties to pay for, they will pass them on, no matter how high and no matter what said party is able to pay. A corporation, by its very nature will do it. In economic theory, these are known as externalities. An externality is a cost occurred on a third-party that was not taken into account by the transaction. Corporations are driven to make all costs external to transactions.

Of course, the only institution that can deal with the corporation is the government. To a large part, the government has been derelict in its duty to protect its citizens from the exploitive aims of corporations. The government's key role in regulating corporations is to make sure they internalize costs that they cause to society. Deregulation is the equivalent of getting rid of the police. Privatization of schools and social security defeat the whole purpose of having those programs. But the key thing to remember is corporations are not concerned with the public good. They are concerned with maximizing profit no matter what they may claim about caring for people.

All this is argued very effectively in the book. But, the two things that I'd like to discuss. The first is the disconnect between managing companies and shareholders. Managers of established blue-chip corporations do not get there on any type of merit. If George W. Bush were not a Bush there is no way he'd be president. It is much the same with other top executives. There is no expectation that Ken Lay of Enron will ever have the financial concern of a hard-working mother in What Cheer, Iowa. Despite his misdeeds, Ken Lay will never be poor in the way people can be in Iowa.

There is an echelon of people for whom there is no merit for their position. We effectively become socialism for the rich, capitalism for the poor. The point is that the drive to pursue profits comes not from Mom and Pop shareholders but rather rich, major stake shareholders who are usually the ones running the company. However a significant percentage comes from the masses, and although there total stock is great in number than maybe any single person owns. The power is dilute and nigh impossible to organize. So managing companies have free reign to pay among themselves, what ever they want, to do what ever they want as long as they don't upset the major stake shareholders.

So, the issue may not be from corporations per-se but the culture from which the major stakeholders arise.

The other thing I'd like to point out is that corporations seek to consolidate themselves but isolate their consumers, employees, and critics. The most important tool they have at their disposal is the media. The media is in a sorry state in America. I'm not talking about the sex and violence on television. I'm talking about the general laziness of the news. This is not a matter of liberal or conservative viewpoints. I'm talking about the news being lazy. Crossfire, Larry King, and O'Reilly factor are the best examples. Pundits through out statistics and arguments, but there is substance. No one follows up on the facts and figures. Viewers are left to take arguments on face value. That isn't news. Viewers are not being informed. We need credibility. Calling on two pundits and have them argue over something is not a news program. There has to be some follow-up. Follow-up is hard, so most news programs move on to a new story or invent stories (like the West-Nile Virus).

The press holds an important place in democracy. It must inform. Even the correct course of action given the available evidence can be the wrong thing to do if the evidence is wrong. The press is responsible for coming up with evidence, and they are surely failing.