The Model Corporation: Introduction

Part One of a Six Part Series

If there were no corrupt corporations, there would be no corpocracy, or the collusion between big corporations and big government. But corrupt corporations  in every industry are the norm, not the exception.

It has been said that corporations are inherently pathological and corrupt. That is absolutely not true. Despite the U.S. Supreme Court’s infamous, totally incorrect and absurd ruling that corporations are persons, corporations start out as a legal piece of paper chartered by a state, more often than not the state of Delaware.

It is both conceivable and possible therefore that there can be a truly great corporation, one that is both financially successful and that is also morally scrupulous and puts people before profit.

Are there any truly great corporations doing business that could be role models? Can you name me one?

I once looked at over 100 reports from several years of websites of corporations that had been identified as financially successful for a long time. To the extent that the reports are valid (websites are hardly foolproof sources of information), it seems that all but one of the companies may have been cutting ethical corners at least occasionally while doing business and may sometimes have also run afoul of the law. In Table 1.1 are abbreviated descriptions of what I found in the reports. One of the cases even spiraled up to the US Supreme Court, which barely overturned an appellate court decision in favor of the plaintiff rather than the corporation.

Table 1.1

Are Great Corporations Really Like This?

Involved in antitrust lawsuits and settlements
Accused of breach of contract and fraud in dealing with retailers
Violated securities laws
“Cookie jar” accounting practices
Infringement of copyrights and patents
Disbarred from further government contracts
Employment discrimination lawsuits
False advertising consent decrees
Filing lawsuits against public complaints
Forcing applicants to sign dispute resolution agreements
Hiring illegal aliens
Implanting “spy” chips in products
Privacy violation lawsuit settlements
Serious malpractice lawsuits
Serious product failures and liability settlements
Racial profiling and redlining
Selling returned merchandise as new
Sexual harassment suits
Stonewalling investigations
Union busting

Can I name a great corporation today? I’m not about to try and then some day get egg on my face, like the pundits who touted Enron before its colossal fall and afterwards found their faces and stories displayed in Business Week. ((Zellner, W., et al.  “Everyone Loved Enron”,  Business Week, December 17, 2001, p34))  Or like the now defunct Business Ethics journal that published its five-year list of “best corporate citizens”. At the top of it was Fannie Mae, charged at about the same time by the SEC of having violated its rules for years, and Fannie Mae was not the only undeserving company on the list.  ((Asmus, P. “100 Best Corporate Citizens: Companies that Serve a Variety of Stakeholders Well”. Business Ethics, 2004, 18, (1), 4-12; Labaton, S. “S.E.C. Says Fannie Mae Violated Accounting Rules”, New York December 16, 2004))  Or, like GE that kept emerging as “the most admired company,” yet “has a long history of unethical and illegal practices.” ((Klinger, S. “Harmful Enron Practices Widespread: Awards to Most Enron-Like Companies; GE is No. 1” ))

Greatness is More than Money Deep – The Essence of Corporate Greatness

The list of unscrupulous corporate activities shown in Table 1.1 clearly shows us what common sense already tells us; namely, that greatness is more than money deep, to paraphrase a classical adage.

A model corporation would be a great corporation, but just what is corporate greatness? Even if we can’t find it, we can still describe it.

Consistently Positive Behavior + Consistently Positive Results

The Gold Standard for corporate greatness is to do business consistently in a positive manner in consistently producing positive results. It may not read like an ideal standard but it is. I challenge any corporation to meet it. I doubt if it will ever become the norm. Yet, I argue that it is every corporation’s obligation to itself and to all of its stakeholders, including the environment and to society at large to do no harm and to seek greatness whether it ever reaches the ideal. Doing no harm yet failing to reach greatness, no small achievement itself, ought to be considered a grand “consolation prize”.

An Unconventional Bottom Line

The conventional bottom line of business we all know about, the bottom line of results, the profit-revealing line. The unconventional bottom line, which I call the “bottom line of behavior,” is not so familiar. Try to picture it as three-in-one bottom lines. One divides competent from incompetent behavior. Another divides motivated from unmotivated behavior. The third divides ethical from unethical behavior. All behavior below any one or more of these lines falls far short of what ought to be expected of any corporation and automatically rules out its being considered great regardless of how great its conventional bottom line might look.

Positive results can never be reflected in any set of financial measures. Achieving positive results does not require achieving double-digit growth in financial returns every year or maximizing shareholder wealth. Both of these goals are a sure invitation to corporate wrongdoing. Positive results are those that create a positive, multi-faceted, and multi-directional value. The value is positive because good benefits have been provided without knowingly causing harm. The value is multi-faceted because the benefits aren’t just financial ones. And the value is multi-directional because the benefits are not just limited to shareholders and bonus recipients within the corporation.

Nature of Corporate Success and Failure

One way to think of the conventional and unconventional bottom lines is to think of the difference they make when combined in how success and failure are managed. From the perspective of the conventional bottom line a success is a success because the desired results are gotten, and a failure is a failure because the desired results are not gotten. All successes are rewarded. All failures are penalized. That’s how the notion of success and failure is usually treated in corporations.

Since corporations obviously cannot survive on just their good behavior (nor can Broadway survive on just good acting without enough paying audiences) the practical implications of the unconventional bottom line are mostly in its merger with the conventional one so that the positive and negative dimensions of corporate behavior are taken into account in considering the extent to which corporate goals are met. Adding the two bottom lines together gives a totally different picture of success and failure and allows for the total management and accountability of corporate performance.

An Old Truth

The merger of the two bottom lines conveys an old truth learned in childhood and often neglected in adulthood. Not all success is good, particularly ill-gotten success, where the ends justify the means. Not all failure is bad, particularly failure where all three kinds of behavior behind it were well above their own respective bottom lines.

This old truth needs to be revived and made a prevailing creed and practice throughout the corporate world. It is obviously a truth hard to honor in practice. It requires not only the acceptance of positive failures but also the willingness sometimes to reward major risk taking efforts that fail despite plenty of competence, motivation, and integrity that went in to the efforts. While positive failures do not reflect greatness, they can help set the stage for it. Consider, for instance, a company that rewards the members of a project team that spent millions, their talent, and their energy on a worthy gamble that failed due to totally unforeseen circumstances. Such a company wisely knows that the same positive efforts, not being dampened, may very well succeed the next time.

This old truth also requires intolerance of all negative successes and the additional moral courage to penalize the ill-gotten ones, which helps to explain why this old truth is not seen in the corporate world. Can you imagine in it, for example, a manager of a leading sales division being fired because he was unscrupulous?

• Coming Next – Part Two: Shorter and Smaller are Better

Gary Brumback, PhD, is a retired psychologist and Fellow of both the American Psychological Association and the Association for Psychological Science. Read other articles by Gary.