Monday, May 17, 2010

Post No. 146: Why Dumping on BP is a Bunch of BS


© 2010, the Institute for Applied Common Sense

Yesterday, C-Span aired Tuesday’s Senate hearings in connection with the Gulf of Mexico oil “spill,” which is still spilling.

It was interesting to watch the corporate representatives, including the CEO of BP America, perform mental and legal gymnastics in responding to the questions. The world watched as Senators, on both sides of the aisle, posed questions reflecting their incredulousness that this “disaster” even occurred.

While we were impressed with the tap dancing on the part of the spokespeople, we were more impressed with the political savvy of the Senators. President Obama was justifiably incensed at the multi-lateral finger pointing going on, but, we submit, for all the wrong reasons.

We’re willing to bet, and even invest some money in the derivative ultimately crafted, that in the years to come (be it 10, 50, or 100), (1) “accidents” of this type will continue to occur, (2) the companies involved will be no more prepared to deal with them and their consequences, and (3) Senators investigating future accidents will continue to fake their incredulousness that such “accidents” still occur.

Many things in life have less to do with people or the humans who happen to exist at any given point in time, and more to do with the structure or organization within which they function.

We here in America, for a variety of psychological, historical, legal, and systemic reasons, have a “perverted” sense of “corporate responsibility.”

First of all there really is no such thing as “corporate responsibility.” In America, if a corporation screws up, it’s generally going to pay. Being a responsible corporation or a good corporate citizen is only pursued to enhance the bottom line. The consequences of the screw up are generally based on the particular screw up, and even punitive damages can’t be avoided by a “good corporation.”

Second, those Senators asking questions are pretty savvy. They are well aware that a corporation is a legal fiction. They also know (although you might have difficulty believing it considering the way they run the government) that in conducting business, the goal of that entity is to generate profits and try to stay afloat.

Third, and most important, every corporate decision is made in an effort to maximize profits, and is theoretically an educated and calculated guess. However, the reality is that some of the guesses are going to be wrong. Corporate management knows, and the Senators should know, this dirty little secret.

The rest of society apparently does not.

And so we dump on corporations when there is a screw-up, accuse them of mismanagement and devious, under-handed activity, and then slap our jaws and open our mouths with our eyes all bugged (like the kid on “Home Alone”), when the 27th screw-up occurs.

A corporate entity does not have a mind or a conscience similar to that of a human.

Repeat: A corporate entity does not have a mind or a conscience similar to that of a human.

Even though humans run corporations, corporations are separate and apart from humans, somewhere between a human and an inanimate object.

Whereas a human will occasionally make a judgment call against his or her personal interests in pursuit of other goals (like unprotected sex with a stranger), rarely will a corporate entity do so because it is not really its money. It's not even the money of the folks managing the company, at least in the case of a publicly traded corporation.

It is the money and interests of others, the shareholders, which are at risk, not that of the decision makers.

It makes for a unique dynamic.

As a result, fines, penalties, and lawsuits (which are quantifiable and really only about money, not lives) have to be figured into the economic mix as necessary evils.

An entity may try to minimize them, or even delay them if possible, but they know that they are always just around the corner. Corporate management recognizes this for what it is.

They keep this in mind when they're engaged, and then walk away from it and try to live a human life.

Speeches, press conferences, hearings, investigations, fines, and lawsuits, are all perversions designed to distract us from really getting to the root of the matter. Talk about irresponsibility.

If you really want to know what’s going on, talk to the bean counters. It’s all about probabilities and risk management. It’s not about humans, wild life, or the environment.

It’s about time that we recognize that, and then get on with the business of trying to reduce, not eliminate, such “accidents” from happening in the future.

Corporations are not human. They can't be. It's an inherent conflict of interest.

If they don’t make enough in the way of profits, they will not have any put away for a rainy day, or to respond to the fickle changes in consumer tastes.

And as they pass through St. Peter’s bankruptcy gates, we’ll accuse them of mismanagement and sleeping at the switch.

And that ain’t no BS.

24 comments:

  1. Nicely said. But you could have just written this sentence:

    "It’s all about probabilities and risk management."

    And that is the same whether it is one human being or a corporation. Though, as you imply, a corporation tries to make an intelligent decision based on facts and knowledge and not on emotion.

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  2. I'm just glad that I'm not particularly fond of seafood.

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  3. Society conveniently chooses to apply different standards to humans versus corporations at times, and at other times not.

    We permit lawsuits against corporations for their purported failings, and argue that they are run by humans. Why do we not permit lawsuits against parents, schools, and churches for their failings, when the products they produce fail to live up to our expectations, or cause damage in society?

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  4. @annonymous - of course corporations are run by humans, and society allows them to have one motive only - profit. sadly they are seldom taxed or fined enough to do real damage, well, they employ ordinary people don't they. How can you fine parents,schools etc.? What have they got?

    @ Douglas. Your comment is nonsense. This is a clear and erudite post on a vastly huge and important subject.

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  5. Corfubob: While there may be little money or assets which could be used to satisfy judgments against parents and schools, churches are probably in a different category financially. Additionally, some parents, like some businesses, have the resources to pay while others may not.

    The reason to allow lawsuits and impose fines on parents, churches, and schools, is because they generate "defective products" which negatively impact society. Why shouldn't they be held accountable and responsible?

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  6. The ironic thing in this whole horror show is that political conservatives, whose shrill mantra is always "Government hands off business!" are now deriding the Obama administration for not somehow "fixing" this problem, and for "allowing" it to happen in the first place. The hypocrisy on the right is deeper than the oil leak and wider than the oil slick.

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  7. CorfuBob sayeth:
    @ Douglas. Your comment is nonsense. This is a clear and erudite post on a vastly huge and important subject.

    What, kind sire, exactly was "nonsense" in my comment? That it was "nicely written"? My quote of the one very important point in the article?
    Or my offering that he implied that:
    "a corporation tries to make an intelligent decision based on facts and knowledge and not on emotion."

    One wonders...

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  8. I felt a need to add yet another comment... I noted that one of the major complaints about BP (and Big Oil and most large corporations, for that matter) is that it "put profits over safety". Considering just how much this is going to cost BP in cleanup efforts and in lost revenues from the spilled oil, how is that putting "profits over safety?"

    I once, in the early 70's, argued that corporations (any large business, for that matter) was not racist or sexist. My argument was this:

    A corporation wants to survive and prosper. To do so, it needs people who can do the job. It does not particularly care what sex or ethnicity these people are so long as they are qualified to do the jobs for which they are hired.

    However, the people who do the hiring, assignment, and promotion may be racist and/or sexist. At most, the corporation may be considered to be complicit by being passive and allowing its employees to practice discrimination.

    It can, however, create and enforce policies against discrimination. Which virtually all corporations did when served notice of a need.

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  9. They did it when they were served notice of a couple of constitutional amendments, you mean...

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  10. rodak, actually, I'd say it was after they were sued under the 1964 (et al) Civil Rights Act. Nothing like a good lawsuit to get the corporate heads to wake up. There are no Constitutional Amendments that apply to private corporations.

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  11. Later today, at 7:00 pm and 11:30 pm Eastern, C-Span2 Book TV will air a book discussion featuring the author of "Why We Hate the Oil Companies." The author is a former president of Shell Oil Company. For further information, click here.

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  12. Once upon a time (and this is no fairytale) there was a nation in North America where in much of the tap water was unsafe to drink. Those of us in the New York Metro area weren't affected by this unless we traveled outside our area. We fortunate few (10 million or so)were blessed to have our water come to us from the Catskills as pure as any bottle of Perrier. Once the clean water act was passed companies found out that if they spewed unbelievable amounts of contaminants into our water it was going to cost them a lot of money, maybe even so much that they might go out of business. Did all or most go under? NO. What they did was clean up their act...more or less. Granted that some choose bankrupcy in order to pass the cost of cleaning up the mess they made to the taxpayers and the Superfund has been exhausted trying to stem the rising tide of pollutants but we are as a nation doing better than many Asian countries and even many European countries. I see no problem with the idea of holding people responsible for what they have done. They reaped the profits, now they reap the loss. Having a Plan B would have cost them far less than not having one. They are hurting. I do not enjoy them hurting but neither do I believe I am even in part responsible for their lack of planning.

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  13. Ah Ruach, what an alien concept, "planning." Welcome to our forum and thanks for your contribution.

    Out of curiosity, assuming that a corporation generates a profit in any given time frame, say a month, quarter, year, or even a decade, what is an "acceptable" level or percentage of that profit which should be designated for "planning" or reinvestment in R&D, as opposed to distribution to shareholders?

    Should the government, in anticipation of mega-disasters or accidents, through regulation or otherwise, be involved in such decisions?

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  14. Here is a link to an article from the July 3, 2010 edition of the New York Times regarding the oil industry's fight to avoid the imposition of a new tax, while continuing to enjoy one of the highest levels of government subsidies in our nation.

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  15. In response to our tweet on Twitter providing a link to this article, someone replied that responsibility requires that a corporation tell the truth. Out of curiosity, should a corporation tell the truth when it would help plaintiffs in lawsuits recover more damages which would adversely affect the corporation´s bottom line? Is this another instance where lying is justified?

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  16. Inspector Clouseau:

    This gets back to the issue of the special nature of the legal fiction or entity known as a corporation. It arguably presents a conflict of interest for the corporation not to focus on doing what is necessary to ensure a profit and stay afloat. Telling the truth when it works against the corporation's financial interests is arguably not even risk management, or even a gamble, but rather clear death, or in the eyes of some, a case of irresponsibility to the shareholders.

    Having worked in corporate America for many years, I will tell you that lying goes on regularly, to save our financial hides.

    While many might deny it, it has always been suggested to corporate employees that corporate management's first responsibility is to its shareholders, not to the public or to society.

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  17. In response to our tweet on Twitter providing a link to this article, someone replied that responsibility requires that a corporation tell the truth. Out of curiosity, should a corporation tell the truth when it would help plaintiffs in lawsuits recover more damages which would adversely affect the corporation´s bottom line? Is this another instance where lying is justified?

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  18. I'm just glad that I'm not particularly fond of seafood.

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  19. rodak, actually, I'd say it was after they were sued under the 1964 (et al) Civil Rights Act. Nothing like a good lawsuit to get the corporate heads to wake up. There are no Constitutional Amendments that apply to private corporations.

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  20. I disagree with one point in the post. Most of the general public knows that corporations are driven by profit. Not human welfare.

    We are waiting for our government to drop the hammer on bad actors so hard that in the future, the corporation will chose preventative actions over damaging the environment and/or killing people.

    If this happens in my lifetime, I'll be shocked.

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  21. Depends on your value system. Since corporations are amoral, telling a lie is an alternate option. Not some soul searing decision.

    For the most part, people who act on behalf of a multinational corporate get to avoid taking personal responsibility or living with the repercussions. That's the point of the concept of "corporation".

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  22. Thanks much devans00 for visiting our forum. Please participate again.

    We actually agree with you that most of the general public knows that corporations are driven by profit. However, they also feel that corporations should have some type of social conscience, which is (and this distinction is important) a mutually exclusive existence the majority of the time. If 100% of a corporation's efforts focused on profit generation, then there is no % left for social involvement. If 10% is spent on social involvement, it is spent to enhance the bottom line.

    All we'll suggesting that is that we in society be more realistic about corporate behavior and conduct, and not act like corporations are "bad people."



    The other reality is that big corporations are in the same bed as politicians. The probability of politicians lowering the hammer on big corporations is very low.


    Thanks again for sharing your thoughts.

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  23. The value system of a corporation is to make as much of a profit as it "reasonably can." Human leaders (executives) are theoretically different, but are placed in a very difficult, ethical position when responding to corporate screw-ups. At a minimum, they are less than forthcoming, provide as little helpful information and possible, and engage in confusing, public relations campaigns to "preserve" the corporation chest, and thus their jobs.

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