Economics: New Ethical Era? I Doubt It

TORONTO, ONTARIO - In the past few weeks, the mainstream media (what we used to call "the press" even though most didn't use printing presses) seems to have taken renewed attention in changes toward progressive policies in the business world. Two aspects of this supposed trend, both well-covered by the Christian Science Monitor, are the "B Corporation" and the "MBA Oath." Put all this together, and it might sound like North America business climate is headed for a new era of ethics, an ethics redefined beyond human interactions to integrity in interactions with the planet as well. However, I'm not expecting any of it to take hold--outside of very limited situations, there's no way to make money off being a "B Corporation" or living up to the "MBA Oath", and in the United States, if you can't make money off it, it probably isn't going to happen.

The "B Corporation" concept is particularly intriguing, as on the surface it seems to resolve the recognized problem that the modern corporation by law cannot make decisions based on anything other than shareholder return. If a corporation were to decide to do some environmental mitigation just because its CEO decided it was the right thing to do, if it impacted profit at all (as it would), he could be removed by the board for not living up to fiduciary responsibility--and this has happened. One analyst last week pointed out that Google probably didn't want to take legal action against Yahoo and Microsoft for their recent marketing agreement, but would be forced to legally--their own shareholders would sue them if they didn't at least try, in a case in which it probably would even be most profitable for Google to just keep improving and promoting their own products. "B Corporations" are supposed to resolve the issue by including in their charters that they will make decisions based not only on the interests of their shareholders but also their employees, business partners, and even the environment.

That sounds good, but the article points out that the concept is legally untested--shareholders may still sue a "B Corporation" for following its charter, or even having the charter in the first place, and conceivably win. Even if it stands up legally, the article points out that some of the few hundred companies with such a charter did it in part to help raise money. If "B Corporations" prove to be less profitable than traditional corporations, as seems likely, then there's the distinct possibility that such money will not be there in the future, and that investors will avoid "B Corporations" because they don't have a good enough return on investment. In a climate in which profitable radio stations are letting go employees because investors aren't getting a 15% return at the parent company, it seems incredible to believe that the same investors would tolerate a "B Corporation." At best, it seems like a possible arrangement for niche and quasi-public sectors.

The "MBA oath" offers a solution at the individual, rather than corporate level. In the wake of MBA's being blamed for everything from Enron to bundled mortgages to the actions of the Bush presidency, it was felt by some MBA candidates that some concrete action was needed to rehabilitate the meaning of the degree. Their solution was to pledge to "act with utmost integrity" and to "strive to create sustainable economic, social, and environmental prosperity worldwide." That sounds good, but as one critic put it, "Those who are morally strong don’t need the oath, those that are not won’t honor it." In the article, it is pointed out that some taking the pledge have been accused of doing it strictly to help them find a job in a difficult job market. I have a hard time seeing past those criticisms--for a supposed "accountability" measure there doesn't seem to be any consequence to violating the pledge, not losing one's degree or anything else. It seems to be the ultimate in the kind of substance-less promise that caused the MBA degree to get its current reputation in the first place. Then, there's the whole issue of profitability again--how does one make more money for a company by following the pledge? It doesn't seem possible.

I hate to be one to discourage any steps toward more holistic and broad thinking in the business world, but neither the "B Corporation" nor the "MBA Oath" seems to be an effective measure. To get real change, it will need to happen at a much more fundamental level in laws affecting all companies and individuals within them. That takes political will, and I don't see that happening when the United States Senate can't even reach consensus on a Supreme Court nominee. Some may think a new ethical era is starting, but I'm afraid that I just don't see any evidence.