Wednesday, April 6, 2011

Profit motive + limited liability == lack of empathy == psychopathic corporations

In yesterday's post, I talked about the three design principles behind the invention of the corporation-- the profit motive, limited liability, and centralization of existing person-to-person relations. In today's post, I'm going to further examine the implications of the first two.

Profit Motive

The desire to make money in and of itself is not a bad thing. It's a fact of life in our industrialized, urbanized lifestyle that we operate on a currency-based economy. Besides, who wouldn't want lots of money to spend on a big house, fancy vacations, and a top-of-the-line iPad 2. When money becomes the highest or even the only priority, the profit motive becomes problematic.  Some words that we would use to describe a person driven only by the profit motive include: greedy, materialistic, shallow, miserly. I, for one, wouldn't be eager to make friends with someone like this.

The situation is the same for corporations. The profit motive is not necessarily bad, but when coupled with an insensitivity to all other priorities it becomes downright evil.

Limited Liability

The intent of limited liability is to encourage new enterprise and innovation. The scheme helps corporations to locate capital, because the liability of the shareholders are limited to the amount that they contributed. In other words, members of the corporation can lose their initial stake, but they won't lose their other assets. This not entirely unreasonable, because large projects can have large risks, but are nonetheless worthwhile undertaking.

The problem with limited liability is it further exacerbates the negative consequences of the unfettered profit motive and further shields the corporation pressures to be more empathic to people. Limited liability is essentially a license for "one person to damage another person with impunity." Consequently, corporations can make as much profit as possible, with no regard for harm. To my knowledge, no such license is granted anywhere else in society. Even police, the military, and intelligence services are granted such license on an exceptional basis and under civilian oversight. Shareholders could provide similar oversight, but limited liability means that they don't have to. The worst thing that could happen (losing their initial investment) is not that bad, and best thing that could happen (limitless wealth) is pretty fabulous.

Lack of Empathy

The combination of profit motive and limited liability means that corporations are largely insensitive to priorities other than making money. Without pesky shareholders to keep corporate feet to the fire of a human conscience, corporations have no pressure to be socially responsible or do more than the bare minimum to be in compliance with environmental or product safety regulations. 

In "The Story of Citizens United vs. FEC," Annie Leonard described the lack of empathy this way:
Unlike people, who are driven by all kinds of motivations doing the right thing, love for family their country, the planet, publicly traded corporations are required by law and markets to do one thing above all others: maximize value to shareholders, make as much profit as possible. That's it. ...Yes, it is people running these corporations. But their human motivations come second. If they prioritize anything at all above making profits, they're out of there. Can corporate leaders do good things like give to charities or try be more green? Sure, but not if it conflicts with maximum profits.
When people act without regard to the feelings and needs of other people, we hear terms like  insensitive, callous, and remorseless. Yet when corporations do this, we hear terms like job creation, economic boost, fiscally responsible, and fiduciary duty.

But to be completely accurate, the lack of empathy doesn't extend to all human beings. Last year in the US, CEO pay increased 27%, while worker's wages rose only 2.1%, barely keeping pace with inflation. The median CEO pay is $9 million, which is more than 280 times the approximately $32 000 earned by the average worker last year.


In psychiatry, there is a term for people who don't feel empathy and that's "psychopath," sometimes referred to as intraspecies predators. Yes, this is the same label that they apply to serial killers. Not all psychopaths become serial killers. For that matter, not all become violent offenders. About 1-3% of adult males and 0.5-1% of adult females are estimated to be psychopaths. Both figures are believed to be underestimates. Some researchers have pointed out that corporations are also psychopaths, because they lack empathy.

Psychopathy is a psychological defect with a biological basis. The part of the brain responsible for empathy is absent or badly malformed. In contrast, mental illness, such as depression, is like a cold, meaning that it's transient and someone can get over it. Psychopathy is permanent and possibly not treatable. I once dated a psychopath and a professional told me that the only thing to do was to stay away from him. Wikipedia characterizes psychopathy as follows:
Psychopaths gain satisfaction through antisocial behavior, and do not experience shame, guilt, or remorse for their actions.[12][13][14] Psychopaths lack a sense of guilt or remorse for any harm they may have caused others, instead rationalizing the behavior, blaming someone else, or denying it outright.[15] Psychopaths also lack empathy towards others in general, resulting in tactlessness, insensitivity, and contemptuousness. All of this hampers their tendency to make a likable first impression; psychopaths have a superficial charm about them, enabled by a willingness to say anything to anyone without concern for accuracy or truth.
Currently, we have psychopathic corporations tell us who we should be electing (unprincipled politicians), what is valuable (knick-knacks at gift shops), and how we should be spending our time (watching TV, where they show ads). This is crazypants.


Anonymous said...

This is relevant to your point, in terms of a weapon that can be leveraged against a population (against itself).

Executive Summary:

Gandhi once wrote that "a certain degree of physical harmony and comfort is necessary, but above a certain level it becomes a hindrance instead of a help." This observation raises interesting questions for psychologists regarding the effects of luxury. What psychological consequences do luxury goods have on people? In this paper, the authors argue that luxury goods can activate the concept of self-interest and affect subsequent cognition. The argument involves two key premises: Luxury is intrinsically linked to self-interest, and exposure to luxury can activate related mental representations affecting cognition and decision-making. Two experiments showed that exposure to luxury led people to think more about themselves than others. Key concepts include:

* Luxury does not necessarily induce people to be "nasty" toward others but rather causes them to be less concerned about or considerate toward others.
* Experiment 1 showed that when primed with luxury, people are more likely to endorse self-interested business decisions (profit maximization), even at the expense of others.
* Experiment 2 further demonstrated that exposure to luxury is likely to activate self-interest but not the tendency to harm others.
* Exposure to luxury goods may activate a social norm that it is appropriate to pursue interests beyond a basic comfort level, even at the expense of others. It may be this activated social norm that affects people's judgment and decision-making.
* Alternatively, exposure to luxury may directly increase people's personal desire, causing them to focus on their own benefits such as prioritizing profits over social responsibilities.pp

Benevolentprof said...

Love it! This explains why corporate executives receive so many perqs, like private jets, yachts, membership in a exclusive country clubs... It leads to better business decisions.