The ethical bottom line

I belong to an organization called Vermont Businesses for Social Responsibility (VBSR). The name explains the mission. The organization offers education for owners and managers, networking opportunities, holds conferences, and lobbies the Vermont legislature on relevant issues. The key expression in the group is “the triple bottom line.” This means that a business can, and should, judge its performance not just by the financial outcomes, but also by social and environmental outcomes. Sounds good.

The problem with this philosophy is the body of law on fiduciary responsibility. Corporate officers are required by law to attend to the financial well being of their company. They can be criminally liable if they don’t keep their eye on the financial bottom line. Given two business practices, one that makes the world a better place and another that makes more money, they could find themselves prosecuted for choosing the first. Even the most well meaning CEO has to pause and think about the relative financial implications of socially responsible and irresponsible practices.

The hard fact of the matter is that socially and environmentally sound practices are generally at odds with financial gain. Sustainability is a marathoner’s strategy in a sprinter’s world. The pressure of the fourth quarter financial report is in direct opposition to the traditional Iroquois consideration of the effect of today’s actions on the seventh generation hence. By law and practice, the traditional bottom line wins.

It isn’t practical to try to change existing fiduciary constraints on corporate officers, at least in the short run. The institutional inertia on that subject is huge. Millions of investors have placed their money in stocks with the assumption of fiduciary priority. What we need is a new option for people forming corporations. Call it an E-corporation, to contrast with the usual S-corporation.

An E-corporation would be formed in the same general way as an S, with a registration, bylaws, officers, and the like. The essential difference would be in the focus of corporate responsibility. The laws establishing the E-corp would specifically place the social and environmental responsibility of the corporate officers above their fiduciary responsibility. The rule would be, “If you can’t make money with practice X without destroying the environment or being unjust, then do something else.” Investors in an E-corp would expect that while their financial investment would gain value in the long run, the benefits they receive from it would be a combination of financial, environmental, and social. The corporate charter would be established for a particular period of time, or for the accomplishment of a particular task. The renewal of the charter would not be a mere matter of paperwork, but a substantive process of review and evaluation. The corporation and its officers would be judged by the achievement of numerical goals (not necessarily financial) and adherence to rules laid out at the time of incorporation. The periodic charter review would give management, employees, and stockholders an ongoing incentive to monitor and correct the behavior of the corporation.

So why would an investor, by definition someone trying to make money, want to put money into an entity that places social responsibility above finance? The answer lies in a sentence in the third paragraph above: “Sustainability is a marathoner’s strategy in a sprinter’s world.” More socially conscious companies generally don’t rocket up the charts, but they have been shown to be stable performers over time. A socially and environmentally conscious company will tend to retain trained and productive personnel, avoid lawsuits and labor actions, and have lower energy and waste disposal costs. A socially responsible company will not become the next Enron. Every portfolio should be diversified between higher performance, higher risk and lower performance, lower risk investments. An E-corp can be part of that low risk anchor at one end of the portfolio.

The establishment of an E-corporation law would give entrepreneurs and investors a bona fide socially responsible alternative to the S corporation and its fiduciary straightjacket.

The jump not taken

You're standing at the open door of an airplane, three miles up. You have a sewing machine under your right arm, and a bundle of nylon cloth under your left. Your assignment: to jump out of the plane and invent the parachute on the way down.

This is, of course, completely insane. You have no chance of success. This is how we’ve handled nuclear waste disposal in America.

After a twenty year hiatus in building nuclear power plants, the Bush administration is promoting a renaissance for the nuclear industry. There are two problems with this: It's dangerous and it's unnecessary.

First, the danger. There is no geologically stable place to put the highly radioactive waste and store it for 25,000 years. The federal government has approved a plan for Yucca Mountain in Nevada, but there are still arguments about whether it will contaminate the aquifer beneath it. A disquieting number of scientists are saying that those promoting the site "cooked" their research. Many Nevadans don't want it, and I don't blame them. On the face of it, the concepts “geologically stable” and “25,000 years” are contradictory. A short 10,000 years ago, my hometown in Vermont was submerged beneath part of the Atlantic Ocean. The fact remains: there is no place for the radioactive waste we're producing right this second, and we don't know when there will be one. Experts on all sides admit that it is many years away. Even if Yucca Mountain gets built as planned, all the space in it is already booked. In the next decade, three quarters of our nuclear plants will run out of room in their waste storage pools.

Social and environmental stability could be a bigger problem than geological stability. Can we predict what the climate will be in even a hundred years? The groundwater levels? The politics? The economy? Will our grandchildren, and their grandchildren, have the resources to safely maintain the mountains of radioactive waste we're leaving them? We don't know, so we're gambling their lives for our own wasteful habits.

More power plants, including nuclear plants, are unnecessary. Europeans have a standard of living equal to ours while using just over half the energy per person. We have inefficient buildings, lights, appliances, industrial motors, you name it. Before we start making more radioactive waste we should eliminate our electrical waste. Efficiency programs typically cost half as much per kilowatt-hour as generating electricity. They can be implemented quickly, and have zero risk. Efficiency could displace our entire nuclear generating capacity. Why juggle with hand grenades when tennis balls are so readily available?

And then there’s wind power. Large-scale wind farms are able to sell electricity at the same price as natural gas fueled plants. Unlike natural gas and uranium, the price of wind never goes up, and the supply never runs out. The United States has enough potential wind resources to equal twice our present electrical use. Wind power could easily provide the same percentage of our power as nuclear does now.

Some people object to the aesthetics of wind turbines and their effects on the land where they are placed. It’s tough to argue a subjective issue such as aesthetics, but I’ll take a few steel towers over a pile of nuclear waste. The fundamental point is that wind turbines are reversible. If we decide that a wind installation is a bad idea, we can take down the towers, break up the concrete foundations, and let the forest grow back over it all. Once we dig up the uranium ore and purify it, we’re stuck with it for a thousand generations.

The bad news is, we've already jumped, and we're in for a hard landing. We have to deal with the radioactive waste we've created. The good news is, we have alternatives that we can use right now: efficiency and renewable energy. The sooner we start, the less weight we'll be carrying when we hit.

.....and Statistics

In 2005, the London Times published a leaked secret memo written by a top aide to Tony Blair. It revealed that the Bush administration had lied through its collective teeth about its intent to invade Iraq (vs. diplomatic efforts) and had persistently lied about Iraq’s threat to anybody outside its own borders. Almost the entire U.S. news media met this account of impeachable offenses with something equivalent to closing its eyes, plugging its ears, and humming the Flintstones theme very loudly. It seems that every piece of evidence of presidential prevarication before and since has been met with similar indifference.

It makes me back nostalgic for the days when the name Monica Lewinsky was being driven into my forehead like a tent peg. Remember when all we had to worry about was whether the prez got something extra with his pizza? The contrast between the cries of moral outrage from people who had always disliked Bill Clinton and the cynical indifference of everyone else now starts me thinking. Just who are we to judge either of these guys? I did some research.

According to a University of Chicago study, about twenty percent of married Americans have cheated on their spouses. A University of Michigan study gave a range of 26 to 75 percent. The UMich respondents must have had the same difficulty as the former President in defining a sexual relationship. Other university and government studies reveal that sixty to seventy-five percent of Americans have cheated academically, ten percent admit to cheating on their income tax, about a third have used illegal drugs, twenty eight percent have driven drunk, and virtually everybody has exceeded the posted speed limit. Twenty percent of teenage boys have shoplifted. I haven’t found the stats on teenage girls, but I’m not optimistic.

Let’s face it, we're a nation of lying, cheating petty criminals, and one of us is the president. Tom Delay’s and William Jefferson’s freewheeling approach to campaign funding indicate that some of us are in the House of Representatives as well.

A study on children and lying found that about half of the five year olds tested would lie about doing something wrong, and five percent would persist in the lie, even when shown a videotape of their actions. A follow up study ten years later found that this persistently lying five percent became the leaders in their peer groups. It seems that lying in the face of damning evidence is an indicator for leadership, not a disqualification.

So how do our recent presidents compare as liars? Clinton denied having a sexual relationship with Monica. Bush Senior and Reagan denied all knowledge of the Iran Contra affair (Refresher: Secretly and illegally selling missiles to Iran as ransom for U.S. hostages and using the proceeds to illegally finance terrorist attacks on Nicaragua). Reagan got caught lying about Libya back in the early eighties, admitted it, waited a few months for America's political memory to clear, and started again. Then he bombed them. Carter seemed pretty straight, for a president. He admitted to "lusting in his heart," but kept his hands to himself. He wasn't reelected. Ford had neither the time nor the wit to do much lying to us. Nixon? Ah, Nixon. For Richard Nixon, lying wasn't an incident, it was a lifestyle choice. From the Checkers speech, to the bombing of Cambodia, to Watergate, he was untainted by the truth. And so on back, with lies about the Gulf of Tonkin, the Bay of Pigs, Gary Powers, and Truman's whopper about the atomic bomb being dropped on Hiroshima, “a military target”, "so as to minimize civilian casualties."

And now we have Dubya. I’ll spare you the prose: Air National Guard service, insider trading, the Clear Skies initiative, the Healthy Forests initiative, the Taliban’s offer to hand over Bin Laden, pre 9-11 knowledge, post 9-11 air quality in Manhattan, every excuse for invading Iraq, torture as policy, Social Security, and more things than there is space to write.

So Clinton was a piker when it came to presidential lying. Denying adultery in a case that had been dismissed just doesn't measure up to dropping bombs on people, subverting democracy and running secret wars. It's strictly minor league.

The American people recognize this. We are used to being lied to by politicians and each other. We have lowered our expectations to the point where corruption doesn't shock us, treason doesn't surprise us, and adultery doesn't even register. Whatever our personal crimes, deep down we realize that the only difference between us and Bill Clinton is that he got caught. Americans in general and the news media in particular seem to be extending this forgiveness to the lies of the Bush administration. Not to do so would be a perilous step towards holding ourselves to a higher standard.

No, officer, I didn't realize I was speeding.

Second Things Second: End lobbying as we know it

Years ago, I was sitting at a table talking with the members of a jazz band from L.A. It was just after the videotape had come to light showing twenty L.A. cops beating the daylights out of Rodney King. We had been discussing it for a while when I noticed that the drummer, a Hispanic guy, was silent. I asked him his opinion and he said, “The only difference between Rodney King and anyone else is that he happened to have a camera pointed at him.”

The investigation of uber-lobbyist Jack Abramhoff is like the video of Rodney King in that respect. The consternation and disgust of those who are paying attention to the Abramhoff case would cause their skulls to explode if they were fully aware of the everyday system of corruption we call lobbying.

We should ask ourselves, who has the right to lobby Congress? According to the US Constitution, it is we, the people of this country, and nobody and nothing else. I say “nothing” because a corporation is a thing, not a person.

Corporations have tried to obtain the rights of persons since nearly the beginning of this nation, and have succeeded in practice, although not truly in law. Back in the 1880’s, the clerk of the Supreme Court added his own spin on a decision that has been wrongly accepted ever since as legal personhood for corporations. (Read Thom Hartmann’s excellent book “Unequal Protection” for the details.) Their well-financed minions have swarmed the capitol before and since, distributing favors, junkets, and money. Their interests are mostly at odds with those of the American public. I’ll repeat: The Constitution guarantees political rights to U.S. citizens, period. The extension of political rights to things such as corporations has contaminated our experiment with democracy, and we need to clean that up.

Lobbying should be limited to two types. First, individual U.S. citizens and groups of U.S. citizens, unpaid, on their own time, have a constitutional right to petition the government for redress of grievances. Second, given the distances of most Americans from Washington D.C. and the time pressures of everyday life, we must allow paid lobbyists representing groups of U.S. citizens to express the views of those groups to Congress, under certain restrictions. The primary restriction is monetary. These lobbying organizations must be limited to collecting donations of no more than $50 per person per year. I discussed this limit in another essay on campaign finance. The purpose of the $50 limit is to prevent tiny groups of wealthy people from drowning out the voices of large groups of ordinary people. The corollary restriction is that these citizen’s lobbying organizations cannot receive funding, support in kind, or guidance from any corporation or foreign government.

The first amendment to our constitution prohibits the government from making any law “abridging” “The right of the people……to petition the government for a redress of grievances.” The financial limit could well be interpreted as an abridgment, but it also could be interpreted as a guarantee. In practice, the absence of such a limit has resulted in the voices of the people in general being drowned out by the voices of corporations and a microscopic minority of wealthy individuals. The uncontrolled flow of hundreds of millions of dollars into lobbying efforts is as effective an abridgement of our constitutional rights as a repeal of the petitioning clause of the first amendment. Looking back at the long acceptance of various wrongheaded supreme court decisions, I see a tough fight on this point, but a much needed fight.

I’ll repeat my call from an earlier essay: We need a movement dedicated solely to political and electoral reform – campaign finance, lobbying, conflict of interest, voting rights, voting districts, paper ballots, and candidate registration. I’d say that campaign finance and the integrity of the actual voting process come first. We need to put our multitude of issues on the back burner and deal with the fundamental political problems that keep us from making progress. The system as it stands is specifically designed to defeat us.

(See my earlier post, "First Things First," for thoughts on the priority of campaign finance reform.)

You don't have to be crazy to run this place, but it helps

I submit the following in honor of the jury deliberations in the trial of Ken Lay and Jeffrey Skilling.

Back when I was in engineering school, I sat next to a guy in one class who had served in the Navy aboard a nuclear sub. He told me about the battery of psychological tests he had to go through before being approved to serve aboard a “Boomer.” His conclusion was, “If you were crazy enough in the right way, you got in.”

I am beginning to think the same way about corporate management. A few stories have come together for me. Recently, I was talking to my representative to the state legislature. The traditional business interests had come out against net metering, the law that allows people with solar power to run their electric meters backwards and get credit with their utility. This would account for about one ten-thousandth of our state power supply. On the other hand, an amendment had gone through allowing the electric utilities to jack up their prices instantly depending on fuel costs. Not a peep from the business community. My rep was in a meeting with some Chamber of Commerce types and asked, “What gives? Net metering has a microscopic effect and you protest. Fuel cost adjustment could bankrupt you and you couldn’t care less. Explain this.” The business execs explained that net metering was government interference with the market, while fuel cost fees were market economics. So they would be willing to be bankrupted as long as it was done according to market principles? Exactly.

This is a relatively benign example of the phenomenon. The classic case (mentioned previously in this blog) is that of the executives at Ford who left the Pinto on the market, despite a defective fuel tank. They decided that it was cheaper to pay off the families of the few dozen people who would inevitably burn to death in rear end collisions than to recall the cars and replace a support bracket. Place that moral decision before a hundred ordinary citizens and 99 of them would say “Recall the car, and be quick about it!” The hundredth would be under the supervision of mental health professionals.

Then there are the executives at Union Carbide who decided that they could save money on safety measures at a chemical plant in Bhopal, India. Thousands died when that plant blew up, and thousands more will suffer for the rest of their lives. There are the oil company execs behind a leaked internal memo on global warming. They admitted that global warming is happening but proposed that government action could be delayed by a vigorous PR campaign. And so it goes, with high level executives authorizing the clearcutting of 400 year old trees, the spewing of toxic chemicals into our rivers, the sale of deadly consumer products, and the degrading of workplace safety with resulting carnage. Consider Enron, Worldcom, Tyco, Halliburton and their ilk, or for history buffs, Standard Oil and Peabody Coal. Sure, there are exceptions, more in the ranks of smaller businesses, but I get the feeling that a lot of what looks like virtue is really lack of opportunity.

Joel Bakan, a professor of law at the University of British Columbia, wrote a book (which became a movie) called The Corporation. Its thesis is that the corporate “person” behaves like a human psychopath, remorselessly pursuing its own interests at the expense of others. Given our experiences with corporations, it is a convincing thesis. It presents questions, though. Where do these people come from, the top executives who make these decisions? Do they lack a moral compass from childhood, or is it stripped from them later? Is it the very structure of the organization that discourages them from moral behavior?

Most likely it is the usual combination of factors that bring out the worst in people: In most cases, a system of exclusive schools selects individuals with ruthless ambition and a sense of entitlement. In business school they are trained to make decisions according to math, not morals. At work, they are surrounded by and competing with like-minded peers, guided by the amoral rules of financial return, with a diffused sense of responsibility for physically and temporally distant consequences.

The final factor is the quasi-religious ideology of mythical “free markets” and “ideal consumers” with “enlightened self interest.” The corporate executive bent on some act of social or environmental destruction can justify his actions with a reference to the holy ur-text of capitalism, Adam Smith’s “Wealth of Nations.”

We shouldn’t be surprised at insanity in an expensive suit. Between nature, nurture, and working environment, how could these people be anything but crazy? A culture predicated on financial return above all will select, in a Darwinian sense, those fit for making money at any human cost. These are the people who successfully dance the line between public piety towards the common good and private actions to beggar their workers, despoil the environment, and cheat their government. These are the people who carefully skid along the edge of the law, pushing over into crime when the odds are right or using campaign finance (bribery) when the odds are against them. These are the compartmentalized minds that spend their weekdays striving to pad a military contract or further cut the pay of some starving sweat laborer, and spend their evenings and weekends trying to instill strong moral values in their children.

What separates them from the disheveled individual living on the street or in the back ward is wardrobe, personal hygiene, and the way their fantasy world meshes with our own. Our own fantasy world is in turn created by the corporate media, designed and promoted by these same dignified, respected, well dressed sociopaths. We can continue to see the form and ignore the content, or step outside the storyline and recognize that madmen can be charming. Then we can address the legal and social structures that put these morally compromised creatures in power.