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Restoring Corporate Accountability

The trickle down mentality (if the rich are allowed to get richer some of that wealth will eventually trickle down to the rest) seems so entrenched it becomes difficult to imagine how that can be turned around. A few moments of contemplation inspired this essay, though further research could reveal better, more effective solutions.

At the heart of the matter is: what is the purpose for any corporate entity? I had assumed it was to provide goods or services to benefit the community, and society in general. A corporation is a social endeavor, with a group of people having diverse skill sets working together to achieve that which is difficult or impossible through an individual effort.

The alternate concept, apparently commonly accepted now, is a corporation is the means by which those with the capital are able to manipulate their workers to provide further wealth to those owners. In line with this concept, a corporate raider firm is legal, where companies are taken over, whatever available wealth is extracted and the corresponding debt is place on that company, and then the raiders leave, having just 'stolen' that which was never earned by the raiders. Bain Capital is a recent such firm in the news. Similarly a hedge fund is able to rake in billions of dollars simply by manipulating the markets, taking a little money each time with each minor market rise and fall caused by their computerized transactions generated barely milliseconds apart, never having contributed in any way to benefitting society. This is sometimes called high frequency trading.

When someone is given income far and away much higher than everyone else, the simple human tendency is to subsequently assume he/she must be better than everyone else, that those earning so much less must not be as elite. That separation can lead to less empathy for others, and therefore less humane treatment of others, since those others are not as worthy of fair treatment as those on 'my' level.

At the time of this writing Switzerland voters were just given the opportunity to take a step toward restoring some level of corporate accountability, by limiting the pay of executives to no more than 12 times that of the lowest level of employees. The voters rejected the proposal, not too surprising given the many warnings such a limit would somehow damage the Swiss economy.

A corporation provides limited liability to its owners, to avoid the owners being sued and thereby financially responsible for an entity whose overall wealth is far greater than that of an individual. However this limited liability to being sued does not mean limited liability for criminal misdeeds, although that also seems to happen (where executives approve local pollution, affecting the health of local citizens and are never held personally responsible for the consequences of those personal decisions).

Is there an alternative to forcing the levels of pay through legislation?

Another alternative (I have never read such a proposal but I expect someone else must have thought of it) is legislation just to force the publication of the ratio of executive pay compared to the lowest employees in every corporate or banking entity.

I suspect some will reject the proposal as infringing on corporate privacy. However every corporation is a social enterprise, and society should know what it is offering (which goods and services) and whether it is also harming society (like pollution). In that context, if it is accepted that excessively high executive pay is likely to harm the lowest employees and also likely to result in less humane business decisions, when based on just furthering the executive wealth rather than providing better goods and services, or fair wages to its workers.

Although there has been a steady push to grant corporations with all the benefits of personhood but none of the accompanying responsibilities, like accountability, the executives are not entitled to special treatment just because they are executives. The corporation exists because society allows it, and therefore there should be some mechanism for accountability when the corporation executives misbehave. The fight against the entrenched concept of corporate personhood is another major political controversy.

This proposal is nothing other than requiring publication of wage inequality for public review. By itself it does not force changes to hiring well paid executives. However it enables public discussion as to whether the executives are behaving fairly. If the company is able to afford extravagant wage packages for the executives then it should afford sharing some of that wealth with the workers that are actually producing the goods and services provided by the enterprise.

Those companies without their top executives milking the enterprise can legitimately claim within this public forum they are more humane than their competitors that do not share earnings across the corporate hierarchy. Those companies with the very high inequality rates could be subject to public demonstrations, where the local populace might lack tolerance for executives behaving as if they are more elite than everyone else.

Unfortunately, recent history indicates public demonstrations are not as effective as they might have been years ago, like the civil rights movement of the 1960s or the labor movement for a 8 hour day of work in the 1880s. As corporations have become so huge, spanning state and national borders, they have become less susceptible to social influence, having less of a base in any one community that might force changes in inappropriate corporate behavior. The same lack of accountability also applies to national governments, whose elected members have campaigns funded by the same rich corporate executives who will reject any accountability on their rashly unfair wage scales.

However the Swiss vote, though it failed to bring change, does generate some degree of hope. In an article before the proposal was rejected, one executive makes the comment: "With Swiss citizens having a direct say on lawmaking through referendums, companies need to take into account how their compensation policies are perceived by the public."

With the threat of public displeasure, it is readily apparent the highest paid executives will certainly be reluctant to have their unfairness available for public review. That revelation means there is still a possible mechanism for the public holding the executive accountable for the consequences of such decisions, even if only within a public forum.

created - Nov. 2013
last change - 11/25/2013
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