It was very big of Richard Parsons to admit that the repeal of Glass-Steagall (the law that had kept traditional commercial banking walled off from Wall Street speculators for more than 60 years) was part of the reason for the financial collapse of 2008 two days after he retired as head of Citigroup. Given that Citigroup never would have been created in its current elephantine form, and that Parsons never would have made many of the millions of dollars he had earned from being CEO without that repeal, it was quite a concession. I hope his conscience is eased. And I certainly hope his words open up a discussion about Glass-Steagall, which desperately needs to be reinstituted. What Parsons said in public is being talked about "in quiet rooms," as Mitt Romney would put it, all over Wall Street right now. Most people who understand our financial system know it is true, but don't want to change anything because they are making too much money the way things are now.
But this post is not about breaking up our banking monstrosities, the six conglomerates that control assets equivalent to two-thirds of America's GDP. I have written about that many times before, and no doubt will again. But this post is about an even more fundamental issue to our nation's future.
Since 48 hours isn't generally enough time to rethink your life's work and transform your entire philosophy, Parsons' dramatic admission immediately upon retiring does raise some important questions about not only public policy, but about corporate morality -- which some people would argue is a contradiction in terms, but I think is worth exploring a little. Parsons' defenders will argue that he couldn't speak out while representing his corporation, since the corporation as a whole certainly would not be in favor of raising questions about the very act of Congress that allowed them to come into existence in their current overgrown form. In fact, this line of thinking is explicit: Parsons only moral duty was to benefit his corporation's shareholders -- and all else, certainly including his own conscience as well as whatever random thoughts about public policy that might hurt the company's bottom line, was not to be spoken.
This line of defense in regard to Parsons is the dominant morality in big business today. This ethic, if you can call it that, is very explicit: your only moral duty as an officer of the corporation is to the shareholders and the quarterly profit line of your company. But this ethos does not represent the way business leaders, let alone the rest of society, have always thought. The core idea of a social contract between business, government, workers, and the rest of society was for many decades a central ethic ascribed to by much of the business community. A wide variety of business leaders throughout American history have felt a responsibility for society. My friend Leo Hindery, formerly CEO of several major corporations, in his book It Takes a CEO and in his other writings, outlines very clearly that good CEOs and boards of directors have often taken a broader view. The view he advocates for is, as Hindery puts it, "that a responsible CEO has equal and concurrent responsibility to his employees, shareholders, customers, communities, and nation." The notion of a business completely unconnected in its ethos from its workers and customers, along with the community and country in which it operates, is in fact a recipe for disaster -- especially when companies are as large and powerful as these companies have become. What worshipers of the free market usually forget is that Adam Smith himself, the author of the "invisible hand of the market" idea, was a thoughtful and nuanced moral philosopher as well as economic theorist, and that his moral philosophy was quite different from the Ayn Rand-style "selfishness is a virtue" ideology.
In fact, in the business community and our entire society, we need a broader rebirth of a morality grounded in community spirit and the idea of treating each other as we would want to be treated. Businesspeople would not be in business if they didn't want to make some money, but they have a choice about how to do it.
You can make money by focusing entirely on short-term profit taking, by cheating your customers and squeezing your workers, by trying to be big enough to manipulate the market and abuse your power, or by using political connections that give you insider sweetheart deals. That certainly can work for a while -- you can make a lot of money that way, at least in the short term, and it is in fact the path for many modern business leaders. But it has a cost, to society, of course, but also to your business. You can put off the day of reckoning sometimes by clever PR, or market and political muscle, but eventually the costs starting adding up: customers go elsewhere, trashing your company's reputation as they go; your brand suffers; some of your best employees start to leave; your political allies start to shy away because the sleaze gets too thick; the door is opened for other competitors and innovators to take more and more market share; and the community you operate in gets hollowed out, which means less-educated and -qualified workers and a poorer customer base.
But there really is a choice. As successful businesses throughout history have shown, you can actually make money by innovating and producing products that are useful to society; by having a loyal, high-quality, high-morale workforce; by treating your customers with honesty and dignity so that they want to do business with you and tell their friends to shop there, too; by being a pillar of the community so your good reputation spreads; by creating networks of loyal people who value and believe in your product and your brand.
This isn't just about business strategy -- it has huge societal implications. What our government ought to be doing is shaping market conditions to make it easier for the latter kinds of businesses to succeed. While the dystopian free-market-worshiping ideologues of the right would disagree, it actually does matter to our country's prosperity and success as a whole to help the businesses that make our nation a better place to live. Government ought to be on the side of making sure the good-guy-businesses, at the very least, have a chance to succeed against their ruthless, amoral short-term competitors: antitrust laws ought to be more vigorously enforced; companies that cheat by breaking the law ought to punished, and not just with the slaps on the wrist that always seem to be the first choice of the SEC and other regulators; and companies that are hiring American workers at decent wages ought to be favored for government contracts and in the tax laws over the ones who repeatedly violate labor and environmental laws, or who constantly outsource workers to places with slave labor, like China.
We also need a new consumer movement in this country where we organize ourselves to look for not just which product is cheapest, most convenient, or has the best-known brand name, but where we take advantage of online tools to look at which companies are doing right by their country, community and workers. Progressives can work together to create these kinds of crowd-sourced tools where people are teaching each other which companies have good business practices and an ethic for serving the community beyond their shareholders.
Just like there are choices for businesses and consumers and government, there is a choice as a society as a whole of which of two golden rules to follow. One of those golden rules says simply that "he with the gold, rules." The other one, both more ancient and more wise, says that we should all treat each other as we would want to be treated. I believe that latter golden rule is the ethic around which society should be organized, because a society organized solely around the former becomes corrupt and corroded very quickly. With the challenges in front of this nation, we need to get focused on choosing the correct golden rule.
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