The development of the corporation within the context of a free-market system has allowed humanity to achieve an unprecedented level of productivity. It’s important to give credit where it’s due. Through Capitalism and the corporation, humans have harnessed our potential in a historically significant way.
Never before has humanity had such awesome power.
But for all the good it has brought with it, there is an undeniable ugly side to Capitalism and its fundamental drive to maximize profits at any cost. Even when constrained by the government through laws and regulation, corporations still often inflict harm on their employees, customers and society at large.
What Are the Consequences of Irresponsible Corporate Behavior?
The impact of irresponsible corporate behavior can be far-reaching and devastating. At its best, capitalism allows humanity to reward businesses that improve our collective quality of life. But at it’s worst, businesses are able to subvert our collective desires and employ the many for the benefit of the few.
Ways Businesses Can Be Irresponsible
Many corporations, in their relentless pursuit to maximize profits, are harming society. Businesses can act irresponsibly in a number of ways. They can impact the environment, society at large, the government, relations with other countries and more. For instance, they often produce harmful environmental effects, such as air and water pollution. Through lobbying, they create perverse incentives in government. They can exploit their workers, paying them low wages while demanding long hours, while the bulk of profits go to wealthy. They can create unsafe products that can injure or even kill consumers.
Environmental Harm
One of the most harmful ways businesses can impact the environment is through their production processes. They can release harmful pollutants into the air, water and soil, with devastating effects on the environment and human health. Businesses can also damage ecosystems by clearcutting forests, polluting waterways and more.
Influence on Government
Businesses can unduly influence government in a number of ways. They can donate money to political campaigns, hire lobbyists and more. This can give them undue influence over the government and result in the government not acting in the best interest of its citizens. Big business in particular has infiltrated all layers of the government to ensure that the laws benefit private stock holders above everyday citizens.
Societal Impact
They can also use their power and resources to influence the public. They can do this by funding research, spreading propaganda and more.
Societal Health
Corporate behavior is having a big impact on the overall health of the country. The insanely complex health care and insurance system promotes profits over health. Sugar consumption is the new tobacco, with excessive sugar consumption, particularly by the young, wreaking havoc across society.
Increasing Division
A lot of the division that has seemingly paralyzed the country is a result of cable news and social media. Because stories that divide us drive profits, corporate media owners promote divisive content at the expense of civil discourse. The media is exacerbating many of the major problems we are facing.
Exploiting workers
Corporations can act irresponsibly as it relates to their employees. Paying low wages, demanding long hours, racial or gender pay disparity, unsafe working conditions and more are all ways businesses can exploit their workers.
Increase Inequality
When companies pay those at the bottom as little as they can, while making sure top management and investors get as much as possible, it increases the growing wealth gap. Increasing inequality is perhaps the biggest problem we are facing. This giant and increasing gap between the wealthiest people and the rest of society isn’t only unfair, its potentially destabilizing.
Unethical business practices
There are a number of unethical business practices that corporations engage in. These include price gouging, false advertising, monopolies and more. Unethical business practices can have a negative impact on society, the economy and the environment.
Creating unsafe products
Unsafe products can injure or even kill consumers, leading to immense pain and suffering. In some cases, businesses may be aware of the risks associated with their products but choose to ignore them in order to save money or increase profits. This is completely unacceptable and creates a clear need for business accountability. It the responsibility of businesses to ensure that their products are safe for consumers.
What Sectors are Harming Society?
There are several business sectors that can harm society by operating irresponsibly. Here is a very brief, very limited look at some of the sectors that can have the most outsized negative impact on society.
- Energy Sector – Can damage the environment through air, ground and water pollution.
- Finance Sector – Can cause economic bubbles and financial crashes. Maximizes returns at the expense of the public good.
- Manufacturing Sector – Can produce harmful products that damage people’s health and affect the environment through externalities they don’t pay for.
- Agriculture Sector – Can use harmful pesticides that pollute the environment. Meat that is full of hormones. Unsanitary conditions at food production facilities.
- Food Industry – Can produce unhealthy foods that contribute to obesity and other health problems.
- Technology Sector – Can create addictive products that Harm people’s mental health.
- Lobbying Companies – Can influence government policy in harmful ways. Can incentivize business leaders to make decisions that benefit their business, but harm society.
- Media companies – Can disseminate false or misleading information. They can drive division or obfuscate important issues.
- Lawyers – Result in a legal system that is slow, inefficient, and unfair. Those with the deepest pockets can often manipulate the legal system to drive profits at our expense.
- Pharmaceutical Industry – Can produce drugs that are addictive and harmful. They can also price gouge consumers and exploit monopoly power.
- Insurance Companies – Can deny coverage to those who need it the most. Their charge more and more for deteriorating results.
- Health Care providers – Can provide substandard care. They can also charge exorbitant prices for basic services.
- Military Industrias Complex – Can use political influence to secure contracts that are wasteful, misallocating our tax dollars.
- Private Prisons – Can lobby for harsher sentencing laws. They can also provide substandard care and conditions for prisoners.
The list goes on…
These are only some examples of business sectors that can have harmful impacts on society.
All of these corporations have one thing in common. They are motivated by one thing and one thing only: profit. We only do things that make money. This single-minded focus on profit comes at the expense of everything else, including the well-being of society.
A Private Sector that Extracts more Than It Creates is Not Sustainable
We can’t have a just society if the wealth created by the economic system continues to accrue at the top, with the bottom getting less and less.
In the complicated, inter-woven system we find ourselves in, one that seems to be marching inexorably toward chaos, we need to employ the productivity of the private sector to advance the common good.
It’s clear that as a country and global society we are facing potentially existential threats. There are trends underway that many fear could destroy the relatively stable and productive system we’ve had since the end of the second Word War.
If we want corporations to act responsibly at the minimum, and even take an active positive role, we need to understand why they act in counter-productive manner.
Why Do Corporations Act Irresponsibly?
There are a number of reasons why corporations may act irresponsibly, often to the detriment of society as a whole. Some of the most common causes of irresponsible corporate behavior include:
- A focus on short-term profits over long-term sustainability: Many corporations are driven by a need to generate quarterly profits for shareholders, which can incentivize them to take actions that may be harmful in the long run. For example, they may engage in environmentally destructive practices or slash costs in ways that hurt employees or the quality of their products.
- A lack of accountability: Corporations are often able to get away with irresponsible behavior because they are not held accountable for their actions. They can get away with pollution, unethical practices, exploitation and more because there is no one holding them accountable. This can be due to lax regulation, a lack of transparency, or simply a lack of public awareness.
- Profits at any cost: One of the issues with the private sector is its unrelenting pursuit of profit at any costs. Some might say that is a strength, that it promotes efficiency, but no doubt it sometimes hurts us. The omnipresent focus on profits above all else creates situations where what is good for the bottom line is at times in opposition to the general good.
- A culture of greed: In some cases, irresponsible corporate behavior may be the result of a culture of greed and self-interest. This can lead to executives making decisions that benefit themselves or their shareholders at the expense of other stakeholders, such as employees, customers and society.
- Relentless competition: The competitive pressure that many corporations face in free markets can also lead to irresponsible behavior. In an effort to gain an edge over their rivals, they may take shortcuts or engage in practices that are harmful. When a business sees competitors taking shortcuts, it can lead to a “race to the bottom” where a sector acts more and more recklessly with big implications for the rest of us (see the Great Financial Crisis).
- A lack of oversight or regulation: Often, corporations are able to act irresponsibly because there is no one checking in on their behavior. This can be due to a lack of government oversight, as well as a lack of transparency on the part of corporations themselves.
- The pursuit of short-term gains: The financial system and stock market can cause corporations to act irresponsibly in pursuit of short-term gains, such as higher profits or share price. This can lead to them taking actions that are harmful to the long-term health of the company, such as cutting corners on safety or environmental regulations.
- A lack of long-term planning: Often, corporations are focused on the here and now and may not consider the long-term implications of their actions. This can lead them to make decisions that may be harmful in the long run, such as investing in environmentally destructive practices or cutting costs in ways that hurt employees or the quality of their products.
- A lack of social conscience: In some cases, corporations may simply not care about the negative consequences of their actions. They may be more interested in making a quick buck than in contributing to society or acting responsibly. While there may be people within the corporation advocating for responsibility, their voices are drowned out by managers focused on maximizing returns.
What is the Responsibility of Business
The concept of corporate responsibility, while certainly receiving fresh attention in recent years, is not new. In fact, it has been around for centuries, with philosophers like John Locke and Adam Smith advocating for businesses to be accountable to society. The idea is that irresponsible corporations can have a harmful impact on society, and that businesses need to take responsibility for their actions in order to create a better world.
While the concept of corporate responsibility is not new, the recent increase in irresponsible financial corporate behavior has brought it back into the spotlight. From the BP oil spill and Boeing’s 737 MAX Crisis, to the Volkswagen emissions scandal, there have been a number of high-profile cases of corporate irresponsibility in recent years. This has led to a renewed focus on the responsibility of businesses, and how they can be held accountable for their actions.
To Avoid Disaster, Today’s Society Requires Corporations to be Responsible Partners
US Consumers are aware that our government and non-profit sectors alone are not up to the challenges we face. In order to keep and increase their customer base, the next leap businesses will have to make is to sell themselves as part of the solution, and not the problem. Given the unprecedented power of today’s consumer, business in many sectors will simply not be able to gain customers if they are seen as overly greedy or exploitative.
Business Has to Help
We are facing too many problems that are getting worse for corporations and their resources to stay on the sidelines. Currently, elected government isn’t working, there are many reasons but likely the biggest (outside of humans tendency toward laziness and incompetence) is probably business. Traditionally, business is not supposed to steer the public good.
Government is slow, business is better at utilization
If you can get business to work toward our shared common goals of human happiness, a sustainable planet, elimination of hunger, etc., you can let business (steered by the public via the company’s stock price) steer progress toward better outcomes. Ideally the government should play a part but until government starts working, businesses will have to carry more of the load than they might otherwise.
It’s just the reality we are facing. There’s not really anywhere else to turn.
This is why it is so important for businesses to be accountable for their actions.
How to Hold Businesses Accountable
There are all kins of ways we can move toward a more accountable, socially productive private sector. A world where the incentives of business are aligned with the general public. Exploring those strategies as a big part of the site. While it’s a work in progress, here are some ways we can move toward a more responsible business environment.
A Four-Day Workweek
AI – The Path To Sentience
Aligning Incentives: Using the Free Market to Create a Better World
America’s Biggest Ports
Artificial Intelligence – Is It the Answer?
Build on What Exists
Champion Honest Pay
Cooperation: The Way to Go
Demand Transparency: We Can’t Make Progress if We Don’t Know What’s Going On
DNA Sequencing: Unlocking the Secrets of Life
Eliminating Dark Money
Embrace Innovation
Energy Storage
ESG Claims Need Transparency: Lobbying Disclosure is the First Step
Fixing the World: The Ultimate Guide
Force Multipliers: Turbo-charging Societal Progress:
How to Solve Problems in Society
Impact Consumerism
Include True Costs in Prices
Increasing Accountability: How to Hold the Powerful Responsible
Making Progress: The Only Way
Measuring Twice and Collapsing Superposition
Pigovian Taxes
Project: Fix Everything
Reduce Health Care Cost
Reduce Traffic
Reform the Finance Industry
Reform the FIRE Sector
Reform the Jones Act
Reward “Good” Work
Systems Thinking: Navigating Complexity
The Humanity Index
The Rise of Impact Consumersim
The Secondhand Economy
The Simple Solution to All Our Problems
Value-Based Care Can Remake the Health Care System
