There is no shortage of examples of corporations being engaged in foul play – news on another corporate scandal make it to newspaper headlines fairly regularly. Sometimes they are penalized, with quite extraordinary exceptions occurring from time to time, like American International Group’s CEO Maurice R. Greenberg, who has decided to retire in 2005, on a verge of a financial scandal, which left him with around $2.8 billion in AIG stock (Beachler & Shevory, 2014). There is sufficient debate about how this should be addressed – Mark Pincus proposes an intuitive and simple scheme of refunding all the income made during the time of a fraud, which is an astonishingly bigger sum compared to what they usually pay (Pincus, 2005). However, there is concern that such regulation, as pointed out by experts, will lead nowhere.
However, there is an even deeper concern on how should these misdeeds be viewed from the ethical standpoint, and who exactly is responsible here – a person or a company? While corporations present an easy target in terms of being held accountable, it seems wrong to ignore the human factor. However, distributing the responsibility between management and participants of the execution is an equally difficult and controversial task. So, while certain steps should be made towards improving regulations, they should not aim solely at individuals.
How fraudulent behavior could be prevented, and, more importantly – how can it be justified? The important point to remember here is the fact that corporation initially provides limited liability for the investors. In other words, a corporation is intended to relieve shareholders of responsibility. What we see, however, is that such limitation, meant to provide corporations with opportunities for profit, results in abuse, not unlike abuse of authority, or any other excessive privilege a person can get access to.
And this, in turn, leads us to two important points to consider: what are the premises of such behavior, and how it can be amended.
First, we should find out whether the individuals participating in misdeeds can be held responsible for unethical behavior. How is it possible that people consciously do something they would deem unethical in other situation? The answer lies the phenomenon known as conformity, which is well researched and documented. The brightest example of this is Milgram experiment, which tested the degree of obedience to authority. The results were overwhelming, showing ordinary people agree to commit an unethical act with little to no pressure.
Expanding on influence of authority, Saul Gellerman points out four basic premises for an unethical activity: a person may believe his activities do not cross accepted norms for “ethical”; that an activity is illegal but is discreet enough to not be caught; that it is good for the company and, therefore, is justified somehow; or that it is illegal and unsafe, but if he ever gets in trouble, his company would take care of that (Gellerman, 1986). The latter two clearly demonstrate the effect akin to that of Milgram experiment.
Despite changing perception of responsibility for questionable practices, Milgram’s experiment does not give a definite answer to the question of whether such people should be held responsible. Some critics point out that Milgram’s results are not applicable in most cases of unethical behavior because the actual awareness may differ drastically. After all, during the infamous check kiting scandal at E. F. Hutton & Co., there was an actual memo circulating the regional sales managers’ network, which almost blatantly encouraged the scheme while pointing out its illegality (Kornbluth, 1992).
Another way to address corporations’ ethical side is the introduction of corporate social responsibility. CSRs are most widely represented by corporations either initiating amendments to their activities of providing additional initiatives that would benefit the social well-being.
It is hard, however, to categorize CSR as an example of Utilitarianism, or action aimed towards the common good. They are in fact aimed at either adding to a corporate public image or providing an obligatory action while marketing it as complimentary. The field of environmental protection is notoriously famous for this, commonly presenting the latter as the former, the effect known as greenwashing. Taking all this into account and understanding that CSR is either profitable or inevitable for a corporation makes it much more complicated to find one that is favorable. Yet, there are amazing exceptions. One of the brightest is Google – a corporation which actively engages in multiple activities in fields of medicine, environment, education and social well-being. And Google profits from them – not by means of advertising, but by optimizing it’s activities, like reducing it’s own server load as a result of Google Green campaign (Moreno, 2015).
While the corporation presents an easy target in terms of being held accountable and penalized, it seems wrong to ignore the human factor. However, distributing the responsibility between management and participants of the execution proves to be an equally difficult and controversial task. Besides, there is no conclusive point on to what degree a person can be held accountable working as a subordinate in an institution with limited liability. So, while certain steps should be made towards improving regulations, they should not aim solely for individuals.
Beachler, D. W., & Shevory, T. C. (2014). When good companies go bad: 100 corporate miscalculations and misdeeds. Santa-Barbara, USA: ABC-CLIO.
Gellerman, S. W. (1986). Why ‘good’ managers make bad ethical choices. Harvard Business Review.
Kornbluth, Jesse (1992). Highly Confident: The Crime and Punishment of Michael Milken. New York City: William Morrow and Company.
Moreno, C. (2015). Doing Their Part: 3 Excellent Examples of Corporate Social Responsibility. [Blog post]. Web.
Pincus, M. (2005). Will SEC ever make corporate insiders pay for fraud? [Blog post]. Web.