In Defense of Corporate America

To say “Corporate America” today is almost to say a dirty word. Corporations are viewed as organizations that systematically abuse consumers, fleece taxpayers, exploit employees, deceive investors, disrupt communities and poison the environment. CEOs and board members are portrayed as faceless men huddled in dark boardrooms, smoking cigars while colluding about how to redirect money into their own pockets. Employees in the corporate world are characterized as hapless drones mindlessly chasing raises and promotions in cramped cubicles. Corporations themselves are often spoken of not as organizations of individuals, but almost as entities with minds of their own.

Absent from these criticisms is any acknowledgement of the ways Corporate America has benefited our lives—for example, by making possible our abundant supplies of food and energy, efficient transportation, ubiquitous digital communication, comfortable clothing, effective painkillers, and an entire entertainment industry. Indeed, it’s difficult to find any valuable product or service that has not been made possible in some form by the existence of a corporation.

It is the corporate form that provides the means to transform the genius of a few into the convenience of many. The inventor alone, while deserving credit for his insight, cannot turn his lab prototype into a product on store shelves. To do so requires one further essential ingredient: enough money in the hands of that inventor to transform his invention into a marketable product. Things like oil wells and iPods cannot be created without both human ingenuity and material resources.

But these two ingredients rarely exist together. Those with creative ideas and skills often lack enough money to put their ideas into action, while many people with savings lack the ability to put their money to productive use.

This is precisely the problem the corporate form was created to solve. A corporation provides the framework to allow one group of people (investors) to provide the money for a business goal, and another group (management and employees) to provide the time and skill necessary to use the money to realize that goal. By separating ownership and control, the corporation allows two groups of people to do together what neither could do separately. Provided the business is a success, both gain; the investors receive a return on their money while those who work for the corporation make a living.

The value of the corporate form cannot be overstated. It is only because corporations exist on a large scale that the comforts of modern life are made possible. Even the availability of a pack of gum in a convenience store—let alone a text message on a mountaintop—requires the convergence of a vast array of people and capital. Without the advent of the corporation, the existence of such things would not be merely unlikely, but impossible.

Given that corporations represent an enormous benefit to our lives, what then explains the hostility they are confronted with on a daily basis? Why do so many people despise and distrust all things corporate?

The common objections are not economic—that the corporate form is economically efficient is rarely debated. Rather, the complaint is a moral one, all centered on a single word—profit. The corporation was explicitly created to achieve a single goal: making a return on investment. Those who create and manage a corporation openly seek to turn their ideas into profits, and the investors they attract are openly motivated by the same purpose. Hence the common refrain of the critics: “all they care about is making money.”

In an important sense, the statement is true—the central goal of any (for-profit) corporation is to create a return for investors. It is the unspoken conclusion of that statement—“and that’s wrong”—that is fundamentally flawed. Those who condemn a corporation for seeking profits ignore the distinction between a businessman and a thief, not recognizing the fact that making money is far different and far more difficult than fooling one’s victim and making a getaway. The success of prosperous corporations is ultimately built on quality, trust, long term planning, sound decision-making, and most importantly, on offering honest value to customers. It is virtue, not vice, that drives the profitability of successful businesses.

Contrary to common denunciations, making money is a rational, moral pursuit. It is the means by which we attain the material values necessary to sustain our lives and make possible the pursuit of happiness in whatever form we choose. For the rational individual, money is not an end in itself, but the means to making other values possible. This fact is crucial in defending the goodness of corporations, because while the corporate form itself holds profit as its fundamental goal, the people who make it up do not. Every individual involved, from the CEO to an entry-level employee and from the smallest stockholder to the wealthiest investment banker, is participating voluntarily in pursuit of what he judges to be in the interest of his own life and happiness—whether that means a love for his job, a need for temporary income, or a means for retirement savings.

As such, the corporation is the quintessentially American institution. It makes possible the collaborative pursuit of goals and dreams by thousands of individuals, all expressing their right to freedom of association. This is the ultimate, inescapable justification for the existence of corporations. Corporations, like individual men, do not exist for the sake of consumers or society or the public good—they exist by right, not by permission.

Unfortunately, the tremendous value of Corporate America has been forgotten in a sea of ridicule. CEOs have been castigated for receiving “obscene” salaries—neglecting the magnitude of the decisions they face and the immense value they create by making the right ones. Some companies have been threatened with having their profits taken away because they made “too much”—disregarding the owners’ right to their property and the effort it takes to achieve such a feat. Companies have been shackled with oppressive restrictions like Sarbanes-Oxley, which mandates corporations to comply with a slew of inefficient and costly requirements; such restrictions are advocated on the premise that all corporations should be held guilty until they prove themselves innocent—trampling freedom and flouting proper principles of justice.

This is not to say that no corporation has ever done wrong. There are clearly cases where corporate leaders have been guilty of offenses like fraud or negligence, and such crimes can and should be punished accordingly. But the degree of criticism does not match the degree of offense. The actions of a few dishonest, irrational men in cases like Enron and WorldCom have been inflated to cast the businessman as conniving and immoral—ignoring the vast majority of honest and rational corporate leaders.

If we want to continue to enjoy the benefits that corporations offer us, we need to come to their defense and reverse the hostility that is unjustly directed towards them. We must remember that a corporation is nothing more—or less—than an ingeniously effective way of voluntarily bringing people with common goals together. We must remember how much Corporate America has created and what we enjoy as a result. And most importantly, we must remember why the corporation is good—because it epitomizes the American ideal of free individuals working cooperatively in pursuit of their values and happiness.

Noah Stahl, a recent graduate of Iowa State University, works as a software engineer in St. Petersburg, Florida.

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