Sunday, 28 August 2005

Corporations as Teenagers

60 Minutes ran a segment tonight on Merck and its continued marketing of Vioxx in spite of internal knowledge of studies implicating it in life threatening cardiovascular side effects. It got me to thinking about one of my recurring themes here. My profound concern remains that the extraordinary power vested in corporations is one of the gravest threats to a healthy and happy future for humanity that exists today. The depth of my concern about this particular topic is what puts me in the eyes of many as a "far-left winger".

While it is true that this fear of mine engenders some sympathy from me for the "anti-corporate" crowd, I don't count myself among their number. No, corporations have provided us with such an extraordinary capabilities and tools, that I am not ready to rage against the machine and advocate violent revolution. Nor do I believe that nationalization of industry is a panacea which will quell the corporate beast and protect us from its excesses. Such a solution simply transfers the power to a different entity, replete with a new set of dangers which are all too evident in so many of the last century's experimentations with Marxism.

What I seek is balance and moderation, but what I see in the love affair which the right currently has with free market capitalism is anything but balanced or moderate. In their eyes, anyone seeking to rein in corporate excess is left-wing whacko, in bed with communists and opposed to freedom. In my eyes, I am actually right of center, because I advocate a free market system with govermental regulatory control, rather than a socialist system with added market incentives to promote innovation. Much of the disagreement actually comes in what is perceived to be the current state of affairs. Certainly what exists in the United States, and much of the Western World is a flavor of what I advocate, but with what I believe to be a dangerous erosion of controls, as the corporate boardroom increasingly permeates the halls of government power.

The right leaning reader of those words will perceive a socialist hatred of corporations, but that is a misperception. I do not hate corporations. I do not believe most corporate executives are "capitalist pigs" who want to put profits before people. But I do believe that the rules of the game are being bent in such a way that more and more corporations are pressured to put profits before people, and no amount of laissez faire theory is going to convince me that is a good thing.

Markets are amoral. Human beings are not, nor do they want to be. The trick is in allowing the markets to work, while encouraging the human beings who control the corporations to behave as moral human beings. This should not be an impossible task. I agree that regulation should not be unnecessarily cumbersome or burdensome, but it should be strongly prohibitive of inhumane or dangerous practices, with such severe consequences for non-compliance that no executive team should ever be weighing the financial risk of wrongful death lawsuits against the lost revenue of not going forward with a dangerous product. The consequences should be sufficient to guarantee an ethical decision.

Such strong regulations do not only benefit the consumers, workers, or neighbors of industry that they are designed to protect, they benefit the corporate decision makers who are no longer put in the moral dilemma of choosing between the interests of the stockholders or the lives or well-being of their other stakeholders. Severe regulatory consequences keep the interests of stockholders and the other stakeholders in alignment.

I believe corporations actually want tougher regulations, but are simply unwilling to say so. Like teenagers, they will push their limits, but they really want the limits to be there. A few loud mouths on the radical extreme have pushed for massive deregulation and demonized those who cry foul as either entrenched bureaucrats or leftists, largely muting the voices of reason which should be emanating from within industry.

It may well be that in spite of the current deregulatory trends there are still too many regulations. It is certainly true that some regulations are too stiff while others are too loose. I do not claim to have the facts to know which way the bars should move overall. But common sense tells me that when lives and health are at stake, the consequences of corporate misbehavior need to be far more severe than is currently typical, given the huge amounts of money involved in some of these decisions. To some extent, any pecuniary consequences should probably be scaled to the size of the corporation, to keep size from cushioning them. But more frequently where corporate decisions play roulette with the lives of others, criminal penalties should fall to the decision makers, and the protection of incorporation should not apply.

Merck was under tremendous pressure when Vioxx was their up and coming drug, to have a new blockbuster product to keep their R&D going. Combining that with a loosening culture around FDA approval (some of which made sense, some of which did not), and a lack of regulation around advertising practices and when a product should be pulled in the face of mounting evidence that there might be a problem, put an undue pressure on the decision makers to cross their fingers and hope that the bad news might prove to be a red herring. I really don't believe that they had incontrovertible evidence that Vioxx was killing people and just didn't care. I believe that there was somebody willing to push the possibility that the danger was overblown, and the decision makers had too much financial incentive to hope against hope that such was the case.

2 comments:

Walker said...

Sometimes I feel like arguing with myself. There's that lefty-leaning piece of me that really believes I'm being terribly naive when I write such stuff as:

"I do not believe most corporate executives ... want to put profits before people."
or:
"I really don't believe that [the Merck decision makers] had incontrovertible evidence that Vioxx was killing people and just didn't care."

In fact, I just don't know how culpable these folks are or what their real motivations are. It's the same dilemma when trying to assess the inmost motivations of the neocons who pushed our invasion of Iraq. Are they cold-hearted opportunists who care only about American preeminence, or naive idealists, who somehow justify the sacrifice of a few strangers for a cause they believe ultimately serves the betterment of humankind. If it's the latter, I wonder why we've not heard of more of them hanging their heads and weeping over the disastrous results from their adventure.

But back to the corporate executive question, I console myself that the position I have taken in this post allows for the possibility that there are better natures involved, and truly evil intent remains a minority position. At any rate I can be quite certain that good intention and callous indifference coexist in the corporate world, and in many cases within individual boards of directors. It is not necessary to accurately assess the goodness of the players in order to understand that society would be better served for the highest ethical standards to be demanded from our corporate leaders.

Blogger said...

eToro is the ultimate forex broker for new and pro traders.