15 March 2024
A friend of mine, a good Catholic, asked me to compare the Ten Commandments (Commandments) with the Code for Corporate Citizenship (Code). The Code is a proposal I originated more than twenty years ago to change the corporate law duty of directors so that they must protect the following from severe harm:
· the environment,
· human rights,
· the public health and safety,
· the dignity of employees, and
· the wellbeing of the communities in which they operate.
My first thought was that there are many similarities.
The Commandments are directed at all people (or at least all believers). According to the Bible, they were handed down by the Creator to the people of Israel many centuries before the birth of Christ. Their purpose is to foster community by discouraging individual behaviour that is harmful to others.
The Code is a proposal to amend existing law to require corporate directors to put a stop to it when their company is discovered inflicting severe harm on the environment or one of four other elements of the public interest. On 31 July 2007, The Australian Financial Review called it a corporate Hippocratic Oath, citing its imperative to require directors to do no [severe] harm. Like the Commandments, the Code makes it clear that, even though certain behaviour is not otherwise prohibited by law, it’s wrong and should not be continued.
Why Some Behave Badly
Every day a few big companies cause more harm [acting legally] than an individual can cause in a lifetime. When a company or industry is discovered to be causing severe harm, the Code will keep it from continuing. It will also reduce the possibility of similar harms arising in the future.
Some think if corporate directors just acted morally and ethically (e.g., in accordance with the Commandments) corporate inflicted damage to the public interest would stop. As a corporate lawyer for more than forty years, I can tell you this is a pipe dream. The existing duty of directors in the corporate law makes it impossible. Several factors contribute to this.
First, the one instruction the law gives directors is to “act in the best interests of their corporation.” This directive is very different from the Commandments. There’s no concern for community involved. When significant amounts are at stake, it requires directors to protect their business (even though doing so will perpetuate the harm it is causing).
Corporations don’t start out to cause severe harm. After their business is successful and billions are invested in it, advancements in science discover that it is damaging the environment (e.g., through the emission of greenhouse gases (GHGs)) or some other element of the public interest (e.g., by selling carcinogenic products which are killing millions of people each year).
When these discoveries are made, directors are forced to choose between continuing their business as it is, or closing or modifying it in a way which eliminates the harm. So long as the company is not violating existing law, closing or modifying its operations at great cost and risk can’t possibly be in the company’s best interests. Instead, company managers plan a strategy to keep government from changing the law to make the way they do business illegal. They employ lobbyists, lawyers, and public relations experts to delay and frustrate new legislation.
Secondly, this problem of corporate personnel not acting morally or ethically is compounded by how people in corporations work together. The corporate structure assigns roles to officers, directors, and employees. These roles ask the actors to just do their job and not allow their own morals, ethics, consciences, or opinions to interfere. Sometimes, individual behaviour which is harmless and innocent, combines with the similar behaviour of others to result in overall behaviour that is severely harmful.
Also, some people plan the company’s operations. Others carry out those plans. People at the top of the organization chart have more power than those at the bottom.
Lawrence E. Mitchell, the author of Corporate Irresponsibility— America’s Newest Export, says that this inequality of power creates a situation where the weaker parties’ moral development is stifled, and the stronger parties become inattentive to rationality or justice.
It is easy to see how this results in companies acting in a manner that is contrary to the public interest. The people high on the organization chart are under pressure to deliver improved financial results. They become single minded in doing so. Sometimes their instructions to people lower in the chain of command can be interpreted to mean, “It’s not illegal. I don’t care what you think we should do. Just get it done.”
The people responsible for implementing the company’s plans have no alternative but to comply. They comfort themselves that their job is to obey orders, and that nothing they do is illegal. Moreover, their contribution to the destructive result is small and may not be immoral or unethical.
Finally, the foregoing makes it difficult to hold any one person individually responsible for corporate behaviour. This has the effect of diluting corporate personnel’s inclination to follow their consciences while at work. In other words, it increases the likelihood that individual officers, directors, and employees will participate in an operation even though they know it severely harms the public interest. This lack of personal accountability makes it less likely that people working in the corporate system will make any serious effort to bring the company’s anti-social behaviour to a halt
.
We now find ourselves in a world where a few big businesses inflict incredible harm, governments can’t find a way to make them stop, and the companies won’t stop on their own. The problem has gone on for so long that bad corporate behaviour is considered normal and acceptable. People, seeing nothing being done to avert the climate crisis which has been coming nearer for more than thirty years, are beginning to despair that there is no solution. But there is a solution.
Modifying the Corporate Commandment
Corporations behave the way they do because of the way they are structured under the law. The law is man-made. It is a creation of human beings. Technically, we are at least the co-creator of every corporation in the world today.
The law under which corporations are formed can be changed to eliminate their behaviour which is severely destructive. The Code is a simple change to the duty of directors which will do just that.
Being man-made, it’s curious that when corporations are created (organized) we give them no instructions to encourage them to respect the public interest, be moral, or ethical. We don’t imbue in them anything designed to protect, if not build, harmony and community. This is resulting in disaster. We need to change the corporate structure to include the moral equivalent of the Commandments.
That’s the purpose of the Code. On its face, it doesn’t try to eliminate all corporate anti-social behaviour—only the absolute worst of it (i.e., behaviour which severely harms the planet, kills large numbers of human beings or destroys community).
The Code aims to change people’s mindsets to establish a redline that makes certain behaviours unacceptable. If business is going to interfere in the legislative process to frustrate laws which would prohibit their severely damaging behaviour, then someone inside the corporation (i.e., directors), must be required to make it stop. This is the only solution.
The Code will change people’s mindsets regarding corporations from:
· Corporations are not required to act morally or ethically. So long as they obey the law (which they often write), nothing can be done to stop their damaging behaviour,
to
· Corporations are for making money, but none of them has the right to cause severe damage to the environment, human rights, the public health and safety, the dignity of employees or the wellbeing of the communities in which it operates. Whenever one is discovered causing such damage, its directors must step in to stop it.
Forcing businesses to stop causing severe harm (e.g., companies emitting significant quantities of GHGs) will put corporate directors on notice of a new risk they must consider. That risk is the huge cost which will result from closing or modifying their company’s operations when it is discovered they are causing severe damage.
The presence of this new risk should make directors more cautious in their decision making--forcing them to monitor and take steps to mitigate the risk before substantial sums are invested which might have to be written-off later. It will also change the mindset of employees, customers, competitors, and our communities who will all aid in the Code’s enforcement by pointing out harms before they become severe. It will also change the mindset of investors who will not invest in companies that are likely to be found violating the Code. Finally, it will boost capitalism by creating opportunities for suppliers to develop new technologies which will eliminate severe harm.
Conclusion
The Commandments tell human beings they should refrain from infringing on their neighbours’ rights, property, and dignity. They establish a mindset that delineates between right and wrong, with a view to building harmony and community. The Code will operate similarly regarding the mindset of directors and the behaviour of their corporations.
Corporate directors are under no compulsion to obey the Commandments in the boardroom. The current climate crisis shows just how dangerous it can be when our most powerful citizens are not inhibited by conscience, morals, or ethics. The Code will change this by legally requiring directors to make sure their companies do not severely harm the environment, people, or our communities.
The purpose of the Code is to change the existing mindset regarding corporations much as the Commandments did regarding personal behaviour millennia ago. By increasing the cost of companies being discovered to be causing severe harm, the Code will make directors much more cautious with the public interest.
No one can be sure what was going through God’s mind when the Commandments were given to Moses. Maybe there was just too much destructive human behaviour going on. Isn’t that where we are today with corporations?
We must put an end to the thinking that nothing can be done to stop corporate destruction of the public interest. We provide the vehicle under which they are created. It’s time we set outer boundaries on their behaviour and make sure those limits cannot be violated. Merely differentiating between legal corporate behaviour and illegal is not sufficient (especially when big companies are able to interfere in the legislative process).
Enacting the Code will require directors to make sure their companies “cause no severe harm.” It's about time.