Are companies psychopathic?

friedmanI think it’s fair to say that big businesses are not very popular at the moment. Many of them are held responsible for the current state of the economy. Others are resented for their cost-cutting and job-shedding response to it. But we may have been deceived into expecting anything better from corporations.

A couple of years ago, Joel Bakan created a bit of a stir with his film and book The Corporation. His central premise was that, while large companies have been enshrined as entities in company law, with their own set of rights and responsibilities, they are entirely self-serving in the way they behave, focussed on a small number of goals and ultimately only answerable to shareholders. In short – psychopaths.

So even when companies talk about issues such as corporate social responsibility and refer to employees as their ‘greatest asset’ they are doing so not because they mean it, but because it helps them to achieve their selfish goals. This would be described as psychopathic in individuals but is the rational thing to do according to people like free market guru Milton Friedman who argues that while companies do good for society by creating jobs and wealth they should not actively pursue altruistic ends unless that pursuit is ultimately in the interest of their shareholders. As Friedman puts it: ‘Hypocrisy is virtuous when it serves the bottom line. Moral virtue is immoral when it does not’.

If you accept this, it means that the real failure is one of government (in its literal sense). It means that one of the failures in the way western economies have been run is that governments have failed to provide the altruistic counter-balance to the essentially selfish nature of the corporation. And it means that, in the context of current developments, Friedman is forming an argument against his own championing of the free market.

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