Evil inc

COLTRANE · (#1 (**permalink**))

Evil inc

If a corporation were a person, argues author and film-maker Joel Bakan, it would be a psychopath - cheating, lying, even killing to serve the interests of its shareholders. Here, he recounts how one car manufacturer calculated the cost of saving human lives as $6.19 per car - and decided it wasn't worth it

Saturday October 2, 2004
The Guardian

A still from Bakan's film, The Corporation
As a psychopathic creature, the corporation can neither recognise nor act upon moral reasons to refrain from harming others. Nothing in its legal make-up limits what it can do to others in pursuit of its selfish ends, and it is compelled to cause harm when the benefits of doing so outweigh the costs. Only pragmatic concern for its own interests and the laws of the land constrain the corporation's predatory instincts, and often that is not enough to stop it from destroying lives, damaging communities and endangering the planet as a whole. Enron's implosion, and the corporate scandals that followed, were, ironically, violations of corporations' own self-interest, as it was shareholders, the very people - indeed, the only people - corporations are legally obliged to serve, who were chief among its victims. Far less exceptional in the world of the corporation are the routine and regular harms caused to others - workers, consumers, communities, the environment - by corporations' psychopathic tendencies. These tend to be viewed as inevitable and acceptable consequences of corporate activity - "externalities" in the coolly technical jargon of economics.
"An externality," says economist Milton Friedman, "is the effect of a transaction ... on a third party who has not consented to or played any role in the carrying-out of that transaction." All the bad things that happen to people and the environment as a result of corporations' relentless and legally compelled pursuit of self-interest are thus neatly categorised by economists as externalities - other people's problems. Friedman cites as a mundane example the case of a person whose shirt is dirtied by the smoke from a power plant. That person pays a price - the cost of cleaning the dirty shirt and the inconvenience of wearing it - that flows directly from the power plant's operations. The corporation that owns the plant, in turn, gains benefits by saving money through not building higher smokestacks, installing better filters, finding a less populated location in which to operate, or taking other costly measures that might avoid dirtying people's shirts.

Beyond the dirty shirt example, however, corporate externalities have "enormous effects on the world at large", as Friedman points out. Though they can be positive - jobs are created and useful products developed by corporations in pursuit of their self-interest - it is no exaggeration to say that the corporation's built-in compulsion to externalise its costs is at the root of many of the world's social and environmental ills. That makes the corporation a profoundly dangerous institution, as Patricia Anderson painfully learned.
In the dark early hours of Christmas Day 1993, Anderson was driving home from midnight mass in Los Angeles, her four children in the back seat of her 1979 Chevrolet Malibu car, the youngest six years old and the eldest 15. She stopped at a red light, and as she waited for it to change, a car slammed into the back of her car, causing it to burst into flames. Anderson and her children suffered disfiguring second- and third-degree burns (the driver of the other car, who was drunk at the time, got away with minor injuries). Three of the children were burned over 60% of their bodies, and one had to have a hand amputated. Anderson, though thankful no one was killed - "I just thank God that me and my kids survived," she said - sued General Motors, blaming the company for the explosion and fire. The fuel tank on her Malibu, her lawyers argued, had been insufficiently protected from the impact of the collision.
After a lengthy trial, the jury found that GM had dangerously positioned the fuel tank to save costs, and Los Angeles Superior Court Judge Ernest G Williams later upheld its verdict (though he reduced the damages). "The court finds that clear and convincing evidence demonstrated that the defendant's fuel tank was placed behind the axle on automobiles of the make and model here in order to maximise profits - to the disregard of public safety," he wrote, which put GM in breach of applicable laws. The fuel tank on Anderson's 1979 Malibu was 11in from the rear bumper. The fuel tank on the previous year's Malibu, a larger vehicle, had been 20in from the rear bumper. A 1969 directive at the company had recommended fuel tanks be at least 17in from the rear bumper. Also, on the 1979 model there was no metal brace to separate the fuel tank from the rear of the car, a standard feature on the previous year's model.
The evidence in the trial showed that General Motors had been aware of the possibility of fuel-fed fires when it had designed the Malibu and some of its other models as well. Six fuel-fed fire suits had been filed against the company in the late 1960s, 25 more in the early 1970s, and in May 1972 a GM analyst predicted that there would be another 60 by the mid-1970s. On June 6 1973, around the time GM began planning the new, smaller Malibu that Patricia Anderson was driving, GM management asked an engineer from the company's Advance Design department, Edward C Ivey, to analyse fuel-fed fires in GM vehicles. He submitted his report, entitled Value Analysis Of Auto Fuel Fed Fire Related Fatalities, shortly thereafter.
In the report, Ivey multiplied the 500 fuel-fed fire fatalities that occurred each year in GM vehicles by $200,000, his estimate of the cost to GM in legal damages for each potential fatality, and then divided that figure by 41m, the number of GM vehicles operating on US highways at the time. He concluded that each fuel-fed fatality cost GM $2.40 per automobile. The calculation appeared like this in the memorandum:
500 fatalities x $200,000/fatality ÷ 41,000,000 automobiles = $2.40/automobile
The cost to General Motors of ensuring that fuel tanks did not explode in crashes, estimated by the company to be $8.59 per automobile, meant the company could save $6.19 ($8.59 minus $2.40) per automobile if it allowed people to die in fuel-fed fires rather than alter the design of vehicles to avoid such fires.
The jury, as the judge indicated, found General Motors' behaviour to be morally reprehensible and against applicable laws because it had put profits above public safety. It awarded Armstrong and her children (and a friend who had also been riding in the car) compensatory damages totalling $107m and punitive damages of $4.8bn, an unprecedented amount in a product-liability case. The total amount of the award was reduced to $1.2bn in a later settlement, and General Motors filed an appeal of the lower court's decision in the California Court of Appeals. In support of that appeal, the US Chamber of Commerce, a representative and leading voice of big business, weighed in with a brief that reflected the general acceptance of cost-benefit analysis in corporate decision-making. The jury's decision, according to the chamber, was an "illegitimate result", one that is "deeply troubling" for its message "that manufacturers should not engage in cost-benefit analyses when they design products" and for its implication that cost-benefit analysis is "'despicable' in itself". Cost-benefit analysis, the chamber said, is a "hallmark of corporate good behaviour"; "the logic underlying it is unimpeachable".
The Chamber of Commerce is right that cost-benefit analyses are at the heart of corporate decision-making. "The manufacturer [in a case like Anderson versus General Motors] may defend its decision by showing that the net increase in safety would be outweighed by the increase in cost and/or loss of utility of the alternative design," one legal scholar has stated. The corporation's institutional make-up, its compulsion to serve its own financial interests above everything else, requires executives to make only those decisions that create greater benefits than costs for their corporations. Executives have no authority to consider what harmful effects a decision might have on other people, such as Patricia Anderson and her children, or upon the natural environment, unless those effects might have negative consequences for the corporation itself. "Once the executive is at work," according to philosopher Alisdair MacIntyre, "the aims of the ... corporation must be taken as a given ... Tasks characteristically appear to him as merely technical. He has to calculate the most efficient, the most economical way of mobilising the existing resources to produce the benefits ... at the lowest costs. The weighing of costs against benefits is not just his business, it is business."
Though Edward Ivey acknowledged in his report that "a human fatality is really beyond value, subjectively", that "it is really impossible to put a value on human life", he knew it was equally impossible for him not to put a value on a human life for the purpose of his analysis. As an analyst who had been asked to provide useful information for a corporate decision about the costs and benefits associated with placement of fuel tanks, his task was to value human life in "an objective manner", as he put it in the report, and that meant assessing its dollar value.
The jury in Patricia Anderson's case, on the other hand, refused to operate by the corporation's institutional presumptions. It chose, instead, to judge General Motors from the standpoint of human moral decency. That was its mistake, according to the Chamber of Commerce in its submission to the California appeals court. Jurors, it says, are "not well positioned to make accurate risk-utility assessments in cases involving complex engineering issues"; they are "sometimes led astray by the fact that they see before them the injured plaintiff"; they "tend to balk at any attempt to put a dollar value on human life"; they are too easily led by skilful plaintiffs' lawyers to feel the "traditional public sense of the sanctity of life" and to view "risk-utility balancing as unspeakable callousness". The jurors in the case, in other words, mistakenly valued life for its own sake - for reasons of family, love, friendship, joy, and all the other intangibles that make life worthwhile. They were, the Chamber of Commerce implies, all too human in judging General Motors as inhuman and for refusing to turn life into a numbers game.
General Motors is not unique, however. In all corporate decision-making, life's intangible richness and fragility are made invisible by the abstract calculations of cost-benefit analyses.
© Joel Bakan, 2004.
· This is an edited extract from The Corporation, by Joel Bakan, published by Constable. The Corporation, a film based on the book, is released on October 29.