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Sunday, August 18, 2002

Corporations and Social Justice-This is a good piece from Michael Novak(thanks, Spuds), given at the recent Waco economic summit. Few people have a better take on free markets as they fit into a godly political economy than Novak. I submit to y'all this Novak statement
The business corporation is the strategically central institution of social justice. If the business corporation fails to meet its moral responsibilities, the odds against the rest of society doing so shrink to next to zero. Take one obvious example: the business corporation is strategically central to the creation of new wealth — and new industries — and new jobs; no other institution even comes close. The workers of a corporation depend on its success for their jobs, their career opportunities, their job training, their pensions, and their health care — even their friendships. When women and men enjoy their work, grow as human beings in it, prosper from it, they are happier in the rest of their lives.
Novak's dead on from the second sentence in this quote, but his hypothesis of the corporation as the focal point of social justice takes some skull-sweat to agree with. It's the focal point of economic prosperity, as it allows large, complex endeavors to take place in ways that are much harder for partnerships or sole proprietorships to do. It might also be the focal point of social prosperity, as people can pursue their spiritual lives better if they are economically secure; the corporation aids in the development of a thriving economy which fights poverty better than a socialist economy. But are corporations the strategically central institution of social justice? Novak does make a case that the ethical shortcomings of some big company CEOs give lots of ammo to the enemies of a free economy. Shooting down a free economy may strive to achieve social equality, but it does so at the cost of social justice. Is it just to take away the fruits of people's labor to aid groups that are politically well-connected or popular? Whoa, I'm channeling Walter Williams. To keep people's trust in institutions, a certain amount of moral behavior is required. When institutions are questioned, the society stagnates; the stagflation of the 70s was partly due to a queasiness about institutions brought about by Watergate and other corruptions of the era. When such institutional trust deteriorates, the siren song of the statist is stronger and the cries of "There oughta be a law" are acted upon, restricting economic and other freedoms. If CEOs are seen thoughtful engineers of the future, the society is more inclined to allow the market to do its wealth-generating thing; if they are seen as money-grubbing shysters, big government starts to sound good. Thus, businesses need to keep an eye on their collective PR, not to make themselves look good but to maintain the confidence of the public. The perception of corporate honesty is as important to a thriving economy than the actual level or honesty. Somehow, the Fernando SNL line comes to mind-"it is better to look good than to be good." I don't think the US boardrooms are collectively more corrupt then they were a decade ago or five years ago, but they do not look mah-vel-ous today. Part of the solution is to place a larger emphasis on ethics in business. As a business school prof, I need to try to put such practical morals into the skull of my students, for they don't pick up those application of moral principals by osmosis. Just because you go to church or attended a Christian college doesn't make you immune to temptation; quite a few of those Enron guys were Baptist churchmen. The job will be harder in secular settings, as you don't have as much of the fear of God to motivate people. Rewarding ethical behavior will help generate more ethical behavior; punishing unethical activity will eventually discourage it. The other part of the solution is to show people what you are doing on the ethical front. It's one thing to say that your company's not Enron, it's another to prove it. Once people see that the Enron and WorldComs of the world are ethical aborations and that the typical company's books are by-and-large honest, confidence will return to the system. However, we're whistling past the graveyard if we think it will happen on its own; bad PR takes a long time to repair. If this scandal will make the difference of pushing Congress to the left or taking a point off of GDP growth, it will be the negative catalyst of social justice of Novak's fears.

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