The «psychopathic corporation»

This article is supported by (currently) four blogs, written as case studies, which amplify and illustrate the points made in this article:

>  The one about Tesco
>  Thomas Cook.  Don’t book it
>  Talk talk.  Don’t bother
>  Why call centres can’t, won’t and don’t help you 

‘Psychopathic’—like ‘schizophrenic’ and ‘OCD’—is a proper psychological term, with a precise meaning.  Like these terms, it is all too frequently thrown about by the media and the general public with little or no understanding of its meaning or implication.  This is to be deplored.

However, I believe that Joel Bakan deploys the term ‘psychopathic’ correctly in his book, The corporation, and I hope I do, too.  I also hope I have not misrepresented anything of Bakan’s.

In the book, Bakan asserts,

The corporation’s legally defined mandate is to pursue, relentlessly and without exception, its own self interest, regardless of the often harmful consequences it might cause to others.  As a result, I argue, the corporation is a pathological institution, a dangerous possessor of the great power it wields over people and societies.

and

As a psychopathic creature, the corporation can neither recognize nor act upon moral reasons to refrain from harming others.

His case starts from the observation that

[The legal case] Dodge v Ford [1919, Michigan, USA] still stands for the legal principal that managers and directors have a legal duty to put the shareholders’ interests above all others and no legal authority to serve any other interests—what has come to be known as ‘the best interests of the corporation’ principal.

Apparently this case law is not invariably applied in all US states these days and, while the same principles apply in English and Scottish law, they are (obviously) based on different cases.

Although I embrace these concepts wholeheartedly, I suggest that there is more than one way to “put the shareholders’ interests above all others”.  Or, put differently, to provide the best possible return for the shareholders.

This relies on an understand of “purpose and outcomes”.  In this model, a clear distinction is drawn between

• one’s purpose in doing something
• the thing or things one is doing to achieve that purpose
• the outcomes that accrue if the purpose is achieved successfully.

For example, one client:

• provides IT support services to SMEs (the actions)
• so that their clients can continue to trade in the event of an IT failure (my client’s purpose)
• which result in healthy profits, growth of the business, nice cars parked outside and so on (the outcomes).

Applying this principle to corporations, the standard model says that the purpose of the corporation is “to put the shareholders’ interests above all others”.

The actions Tesco carried out to achieve this purpose are, now, well documented.

The outcomes were more cash in hand, favourable presentations to the market and so on.

However, if one were to promote a world view in which the purpose of the corporation is “to put the customers’ interests above all others” then, paradoxically, the shareholders will be better served because all businesses that put the customer first fare better (all other things being equal) than those that don’t.

It is interesting that, often the man or woman on the shop floor gets this.  Bakan does distinguish between the (often decent) people who work for corporations and the unique structure of imperatives that direct the actions of every person within them.  (For example, only yesterday, I drove into my local garage, Bristol Street Motors, Stroud, to book an appointment for a small job to be done on the car.  “Hang on”, said Steve, “we’ll do it now.”  And they did.)

Often some or most of the lower and middle management get it but, in many corporations, enlightenment fades as you go up the hierarchy.

I am saying that, paradoxically, the shareholders’ interests can be put above all others by making the customer the most important person.

And, actually, this isn’t a paradox at all.  Interests are not customer service.

So, I argue that all corporations can escape from the psychopathy trap but most won’t (because they believe they are right) or can’t (because they believe external pressures are too great) or simply they don’t get it.

Related material:
>  Purpose and outcomes
>  search on purpose for more articles
>  blog:  The one about Tesco (case study)
>  blog:  Thomas Cook.  Don’t book it (case study)
>  blog:  Talk talk.  Don’t bother (case study)
>  blog:  Why call centres can’t, won’t and don’t help you 
>  The corporation:  the pathological pursuit of profit and power (Joel Bakan, Constable, new edition 2005)
>  review:  Striking thesis convincingly presented (Dennis Littrell, review of The corporation, Amazon)

by Jeremy Marchant . © 2016 Jeremy Marchant Limited . uploaded 31 january 2016. image: Free images
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