Sometimes, however, the gain from the unfairness or wrong is witnessed. It’s seen as an “opportunity” (unethical though it may be), and gains are made from seizing the opportunities contained within the loopholes of the rules most follow. The result: these incomprehensible moral robbers have left us with paths of destruction from unemployment and financial ruins.

I’ve led groups at school and at work; each has refined my sense of direction, compassion, and intuitiveness. What I’ve come to learn is that there must be a conscious willingness to treat people—customers, employees, consumers—respectfully.

In every decision, a company should screen its actions of intention through some sort of tort-screen-process-matrix. Filter the action through such questions as:

Is it negligent?

Is it a nuisance?

Is it harmful to a person?

Is it harmful to the economy?

Is it harmful to intangible property?

Is it harmful to a certain group of people?

The moment an establishment grossly violates this social contract or tort screening, the establishment should be restricted from certain freedoms. Remember, a corporation is a legal entity that can exercise human rights.

If it has acted in bad faith and caused mayhem, as with any other entity, its rights should be suspended or otherwise dissolved. Think of it like this: If you went next door and caused harm to your neighbor, you would be imprisoned. Rights and freedoms would dissolve.

Monetary penalties aren’t the answer. The billion-dollar fines assigned to AIG and Siemens, or even the multimillion-dollar fines of the hundreds of other corporations, simply aren’t effective. Such a response is as much a penalty as the speeding ticket is to the politician.

The five-hundred-dollar traffic fine deprives the fast-food worker of his entire paycheck. This same penalty does little if any harm to the person who has the ticket “resolved” or has enough wealth that the traffic stop itself is seen as the only inconvenience. What has been achieved with this one-sided penalty? Again it’s the consumer who loses out: prices increase and the stock value downgrades.

“Mistakes” are foreseen by companies. Fines, penalties, and lawsuits have become variables in equations for the profitability of committing an underhanded act. Let me explain it this way: If I murder someone, it’s highly probable that I’ll receive a long prison term. But what if the penalty for murder was a million-dollar fine? Would this be more effective than jail time?

Not at all. Criminals would have a shopping list of people to murder. Why? Because if they’re offered two million dollars for a “hit,” murder becomes profitable. Behold the practices of entities known as corporations.

It’s likely that you’ve heard of the Ford Pinto controversy. Allegedly, Ford’s cost-benefit analysis indicated that it was cheaper to settle lawsuits than to recall each car. The eleven-dollar repair cost would have prevented the fuel tank from exploding if the car were involved in an accident.

Instead, there are claims of hundreds that have died from the fuel tank flaw. Several million dollars and more than three decades later, Ford still exists and is profitable.

Blame doesn’t reside on one company or even one industry. Let’s not forget about pharmaceutical companies. They have been increasingly negligent in their practices. Each quarter, penalties imposed upon these societal violators set new records. However, each quarter, these same companies are more profitable than the previous. The same is true for petroleum companies, despite the environmental harms they are responsible for.

Profit means growth, growth equates to acquisitions, and acquisitions stifle competition. To effectively compete with a large soulless monster, you have to take on some of the “successful” traits of the monster.

Every business class teaches:
the larger the risk,
the larger the reward.

Perhaps it’s time for a Business 2.0 revision:
If the reward is larger than the penalty,
the risk should be taken.

My earlier premise of respect to the whole establishes a concept of fair balance. Sometimes, this respect is conveyed to an individual; other times, it can be extended demographically. I understand that balance is subjective; however, like in any household, certain rules are implied, whether or not they’re stated outright. You may not know to take off your shoes as you enter my home, but I’d hope you would know not to defecate on my bed. Certain social norms are known intrinsically and respected.

As a human, I’m responsible for my own behavior. The corporation, however, is an entity that lacks a conscience. Its sole responsibility is to increase the wealth of its stakeholders. Still, the lack of conscience and the sole purpose of wealth maximization should not allow harmful acts to become acceptable or a business norm. Expected losses from predictable harms should not be a variable within a forecast equation. This expression is illogical within this universe, and in the end it errs.

There are managers guided by the company’s mission statement. They never veer from what they see as rules set in stone. Then, on the other extreme, there are the barons who “make things right.” Both of these neglect a realistic balance of respect for customer and laborer. Both the customer and employee could care less about company guidelines or corporate pencil-whipping. This is where the problem exists.
In theory, an effective leader is essentially a judge and an executor of decisions. Decisions should rely on rules that are acceptable to society. Should paint that contains lead be used for children’s toys because it’s cheaper and yields higher profit margins? Most people would say no. Society considers the intentional harm of a child to be wrong.
In today’s corporate world, the leader’s job description isn’t to act in a judicial manner; it is to increase profits. So the job description for the leader, and the foundation of a company’s mission statement, is to maximize stakeholders’ wealth.

Another question can then be asked:

“Is this wealth maximization achieved in a quarter,
a year,
ten years, or
twenty-five years?”

Read this again:
“Is this wealth maximization achieved in a quarter,
a year,
ten years, or
twenty-five years?”

Prior to Enron, business schools didn’t emphasize course study on ethics. With the millions of new ethically educated graduates in the workplace, new questions have arisen. For one, how do you measure, or evaluate, a decision to determine whether it’s ethical?

If I can become extremely wealthy today, but the manner of receiving this wealth causes grave amounts of destruction to the environment tomorrow, this increase of profit is far worse than profits received from the twenty-five-year R&D investment in which a cancer vaccine is created.

Is the immediate profit to stakeholders more responsible than the long-term risks that later profit society and the investors? Do capital gains trump product safety? And finally, should a stakeholder have to wait several years before a return is made?

Tomorrow’s destruction…
is today’s high-return for stakeholders.

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Excerpt  from You Against Them
Copyright © 2011-2012 by John-Talmage Mathis