As an attorney, one of the things I have to constantly be concerned with is a conflict of interest. It's a term that you hear on the news every once in a while, but most folks don't really truly get it. This is mostly because it just doesn't come up in normal conversation if you're not an attorney, an accountant, or a public official.
In simple terms, a conflict of interest is when a person or organization benefits or has a relationship with a certain cause or outcome of a situation and is then approached to do something asking them to go in the opposite direction. For example: If I have shares of stock in a IBM, and someone pays me to sue IBM, I have a conflict of interest. My interest in the profitability of IBM and my interest in doing right by my client and taking money from IBM run counter to each other.
In simpler terms, if I'm on a diet and decide to order cake, I have a conflict of interest. My diet and the cake work counter to each other and it is questionable if I can serve both interests.
Corporations deal with conflict of interest issues all the time. A corporation's primary duty is to maximize gain for the stockholders. This interest is the one to which they are beholden first and foremost above all others. In fact corporate officers can be recalled or sometimes even criminally prosecuted for not maximizing stockholder gain. Now if you consider that salary comprises one of the largest expenses to the bottom line that any business will have, you understand where much of the tension between corporate America and labor resides.
The pressure to reduce the costs of operations by cutting the costs of labor is not immoral by itself, rather it is amoral. The larger the company becomes, the less direct the link is between changes to numbers and changes to people's lives. This makes it easier and easier to think you are doing the right thing in the board room while taking actions that appear outright awful on the floor.
As an example: In 2006, IBM was terminating jobs in Canada only to recreate those exact jobs in Brazil offering the recently laid off employee a chance to relocate and take salaries 70% less in salary. From the outside, this looked cruel to the point of savage. From the board room, it looked like smart business streamlining. The officers needed to cut costs to be competitive and serve the stockholders and thought it would be considerate to at least offer the new lower paying version of the job to the employee affected even though they were sure the employee would likely move on.
This kind of thing highlights the corporate tendency to do whatever is necessary to focus on market competition even if the actions taken are destructive to the public interest. Most companies don't think about 'society' much outside of the tax benefits of philanthropy. They aren't taking social constructionist ideas to heart as they make business decisions, they're doing what they have to do to remain competitive and to grow. The more tools they have, the more options they have, and so they tend to support politicians that open the toolbox, lift oversight, and get out of the way.
But time and time again we see that corporate America left alone with the toolbox eventually builds something incredibly destructive. It's not that they don't build great things too, it's simply a law of averages: Leave the ingredients to a bomb with an unending stream of ambitious, creative people and no matter how many good things some of them make, eventually the building will explode.
One upon a time, these explosions killed the business who created them, or after their effect was known they were shut down or legislated against with a slap on the wrist and a shift in the toolbox. But today our society is far more interconnected and the reach of these explosions has made our ability to tolerate or recover from them far less.
By example: The idea of a sub-prime mortgage to sell houses to a new body of customers that otherwise would not be able to afford them was not evil. It was reckless creativity, and opened up billions in sales that shot the economy upward at a staggering rate. But those mortgages were bundled into investment portfolios that were based on 30 year steady return mortgages of the past. These bundles were bought and sold on Wall Street and worked their way into the retirement packages of millions. When the idea was proven to be terrifyingly flawed just a few years later, it was too late. The cascade effect on the financial market created one of the worst economic free-falls in our history with factory workers in New Jersey losing their retirement because computer programmers in California foreclosed on their home in Silicon Valley.
Conflict of interest; Society's interests in growth and prosperity do not always track with corporate creativity and development or profit. This is why on some level, capitalism needs a referee. It needs oversight and bodies of people who stand up for and are interested in something else besides the bottom line. You want companies to be aggressive and competitive and successful and profitable. What you don't want is to turn the keys over to someone who you know at some point in the future will be forced to choose between serving their primary responsibility to profit and the good of the community and country in which they live. In those cases, we want our government to step in and say you MUST abdicate your profitability on this issue. There are thousands of tools left in the box, but on THIS issue, you MUST act in OUR interest, not the bottom line.
Right now Unions, Government, and liberals are under assault by pure corporate interests that want them all out of the toolbox and away from their ability to do business. We can admire their duty to their stockholders, but we cannot forget what happens to our country when capitalism runs unchecked. In Utah, they're trying to remove child labor laws. In Wisconsin, they're trying to crush public unions and remove competition from national elections in the process. In Ohio and New Jersey and state after state the corporate interests are trying to open the floodgates to corporate control just a few years after that control cost us the worst economic disaster since the depression.
Maybe it is time for a change in how corporations and the state relate to one another, but these kinds of unilateral attacks on the watchdogs and counterbalances of business are not the way to do it. We need to restore dialogue and talk again about how our nation will resume it's place as a world power, and not become a place rules by indiscriminate corporate power whose interests in America will NEVER be first.
In simple terms, a conflict of interest is when a person or organization benefits or has a relationship with a certain cause or outcome of a situation and is then approached to do something asking them to go in the opposite direction. For example: If I have shares of stock in a IBM, and someone pays me to sue IBM, I have a conflict of interest. My interest in the profitability of IBM and my interest in doing right by my client and taking money from IBM run counter to each other.
In simpler terms, if I'm on a diet and decide to order cake, I have a conflict of interest. My diet and the cake work counter to each other and it is questionable if I can serve both interests.
Corporations deal with conflict of interest issues all the time. A corporation's primary duty is to maximize gain for the stockholders. This interest is the one to which they are beholden first and foremost above all others. In fact corporate officers can be recalled or sometimes even criminally prosecuted for not maximizing stockholder gain. Now if you consider that salary comprises one of the largest expenses to the bottom line that any business will have, you understand where much of the tension between corporate America and labor resides.
The pressure to reduce the costs of operations by cutting the costs of labor is not immoral by itself, rather it is amoral. The larger the company becomes, the less direct the link is between changes to numbers and changes to people's lives. This makes it easier and easier to think you are doing the right thing in the board room while taking actions that appear outright awful on the floor.
As an example: In 2006, IBM was terminating jobs in Canada only to recreate those exact jobs in Brazil offering the recently laid off employee a chance to relocate and take salaries 70% less in salary. From the outside, this looked cruel to the point of savage. From the board room, it looked like smart business streamlining. The officers needed to cut costs to be competitive and serve the stockholders and thought it would be considerate to at least offer the new lower paying version of the job to the employee affected even though they were sure the employee would likely move on.
This kind of thing highlights the corporate tendency to do whatever is necessary to focus on market competition even if the actions taken are destructive to the public interest. Most companies don't think about 'society' much outside of the tax benefits of philanthropy. They aren't taking social constructionist ideas to heart as they make business decisions, they're doing what they have to do to remain competitive and to grow. The more tools they have, the more options they have, and so they tend to support politicians that open the toolbox, lift oversight, and get out of the way.
But time and time again we see that corporate America left alone with the toolbox eventually builds something incredibly destructive. It's not that they don't build great things too, it's simply a law of averages: Leave the ingredients to a bomb with an unending stream of ambitious, creative people and no matter how many good things some of them make, eventually the building will explode.
One upon a time, these explosions killed the business who created them, or after their effect was known they were shut down or legislated against with a slap on the wrist and a shift in the toolbox. But today our society is far more interconnected and the reach of these explosions has made our ability to tolerate or recover from them far less.
By example: The idea of a sub-prime mortgage to sell houses to a new body of customers that otherwise would not be able to afford them was not evil. It was reckless creativity, and opened up billions in sales that shot the economy upward at a staggering rate. But those mortgages were bundled into investment portfolios that were based on 30 year steady return mortgages of the past. These bundles were bought and sold on Wall Street and worked their way into the retirement packages of millions. When the idea was proven to be terrifyingly flawed just a few years later, it was too late. The cascade effect on the financial market created one of the worst economic free-falls in our history with factory workers in New Jersey losing their retirement because computer programmers in California foreclosed on their home in Silicon Valley.
Conflict of interest; Society's interests in growth and prosperity do not always track with corporate creativity and development or profit. This is why on some level, capitalism needs a referee. It needs oversight and bodies of people who stand up for and are interested in something else besides the bottom line. You want companies to be aggressive and competitive and successful and profitable. What you don't want is to turn the keys over to someone who you know at some point in the future will be forced to choose between serving their primary responsibility to profit and the good of the community and country in which they live. In those cases, we want our government to step in and say you MUST abdicate your profitability on this issue. There are thousands of tools left in the box, but on THIS issue, you MUST act in OUR interest, not the bottom line.
Right now Unions, Government, and liberals are under assault by pure corporate interests that want them all out of the toolbox and away from their ability to do business. We can admire their duty to their stockholders, but we cannot forget what happens to our country when capitalism runs unchecked. In Utah, they're trying to remove child labor laws. In Wisconsin, they're trying to crush public unions and remove competition from national elections in the process. In Ohio and New Jersey and state after state the corporate interests are trying to open the floodgates to corporate control just a few years after that control cost us the worst economic disaster since the depression.
Maybe it is time for a change in how corporations and the state relate to one another, but these kinds of unilateral attacks on the watchdogs and counterbalances of business are not the way to do it. We need to restore dialogue and talk again about how our nation will resume it's place as a world power, and not become a place rules by indiscriminate corporate power whose interests in America will NEVER be first.
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