While it is obvious that a
business or industry can affect and be affected by its environment, such as by
polluting a river and a hurricane, respectively, it is less well known that a
business or an entire industry can cause or facilitate a societal or global
crisis. Whereas polluting a river can be answered with government regulation,
the very legitimacy (and thus ongoing operations) of a company or even an
entire industry is arguably at risk in knowingly creating or significantly
worsening a societal/global crisis. The latter role goes beyond the scope of
government regulation and corporate social responsibility, although broadening
or just enforcing anti-trust laws may be sufficient to deal with the lost
legitimacy. That is to say, what I have in mind is another genre or type of
problem.
For instance, Exxon funded its own scientific studies on the effects of the oil industry on the Earth’s climate as early as in the 1950s. Certainly by the 1970s, the company’s management knew that the ongoing release of CO2 into the atmosphere would cause severe climatic problems, and yet the company’s public-relations lied to the public that the company’s studies were not decisive. Given the industry’s clout/money with members of Congress and even presidents, the company could keep the government from legislating and regulating geared to an expected crisis. Exxon (and the entire industry) played a major role in causing global warming, which could result in the extinction of our species, not to mention reduce the production of food-stuffs and trigger mass-migrations and even wars such as over water-rights.
Business ethicists can be expected focus on the ethical principles violated lying and the related willingness to be a major contributor to a planetary crisis as regards habitability. In other words, what should Exxon have done? Scholars of business and societal culture focus on the incompatibility of corporate and societal cultural norms and values. Within that field of business and society, advocates of corporate social responsibility design company charitable programs oriented to specific societal problems, especially if the company had contributed to the ongoing (rather than crisis) problems. Operating a food bank for the poor is not like saving the planet, or our species. Political economists cover the legislative and regulatory capture by an industry and the resulting muted regulations. Systems theorists can explain how all of these parts work together—an entire system with a fatal flaw in its basic design and operation. The ability of business to cause or even greatly facilitate a societal or global crisis is perhaps so new in the twenty-first century that this sort of problem has not yet been studied.
In 2007-2008, mortgage producers and investment banks created sub-prime mortgages and made high-risk bonds based on the risky mortgages. Investment banks even sold insurance for holders of the bonds. The financial derivative and insurance markets became so large that when they collapsed, a financial crisis occurred. An industry had put the world’s financial system itself at risk of collapse. Financial regulation was not sufficient; a gigantic financial infusion from the Congress and the Federal Reserve was necessary. Unlike the banking crisis of 1907, more than a socially responsible J.P. Morgan would be needed. Society, through its government, had to step in both for the U.S. economy and the global economy. The crisis was that large. That the financial sector was culpable and yet could receive federal money without strings (so even bonuses could be paid!) suggests that the notion of a few large companies or an industry creating a major societal-level (e.g., the economy) crisis was new. Wall Street money as electoral campaign contributions doubtless played a role in the refusal of Congress and the U.S. president to break up the big banks, but the larger question of what to do when a business or industry creates a societal crisis rather than localized typical problems had not been considered in its own right.
To be sure, a government can enable a company to create a societal crisis. Take, for example, the public-health crisis during the coronavirus pandemic that began in 2020. In Phoenix, Arizona, the regional transit authority and the two subcontractor companies ignored local law requiring that masks be worn on the buses and light-rail. A significant proportion of bus drivers went maskless and/or allowed passengers to ride without wearing masks even when federal law required masks even of operators behind a plexiglass shield. A representative of TransDev, one of the subcontracting companies, said that the law didn’t matter because of the company’s policy, which permitted masks and presumably overrules federal regulations. A representative of Metro Valley, the regional authority, refused to enforce the federal regulation on the light rail as well as against the willful bus drivers (and passengers). A transit supervisor on the police force told me that the chief of police had told police employees not to enforce the federal regulation even though, according to the FBI, local law enforcement is regularly relied on to enforce federal law. “They are federal; we are state,” the police supervisor told me. He also told me that the governor had told the chief not to enforce the federal regulation. That federal money goes into the mass transit system in the Phoenix metropolitan area is apparently no reason to follow federal law on mass transit. One police employee told me that “bus drivers are state employees (which is false) so they are not bound by federal regulations. A second police patrol supervisor had told me that the only real law in Arizona is that which “goes through the state legislature.” All three men were not only sure that they could not be wrong, but were extremely rude and dismissive towards me. I concluded that Arizona is in need of federal oversight.
At the company level, TransDev has been knowingly misleading its bus drivers into thinking that they don’t have to wear a mask and that passengers need not either—in spite of the company’s own signs, “Per federal law, masks are required on the buses.” A representative from Metro Valley, the regional authority, told me to ignore the signs. This mentality within at least two organizations is itself a problem. In fact, with Arizona having the highest infection rate in the U.S. on at least November 3, 2021, the mentality and the resulting patchwork of masks on the local buses and light rail can be said to be a significant cause of the ongoing pandemic locally. At the very least, the positive correlation is troubling, though conveniently not to the governor, chief of police, regional transit authority, or TransDev company. The brazenness alone is enough for informed minds to question the legitimacy of at least the local police department (which was being investigated by the FBI for having intimidated and stopped peaceful political protesters) and the TransDev company. The matter of the higher officials, including the governor, the mayor of Phoenix, and the city manager, is of course more political. I had spoken with the mayor’s office manager and had sent an email to the manager’s office (my request to speak with a managerial-level staffer resulted in a call from an intern). Besides the sheer willfulness, lack of respect for federal law, and ignorance all around, the culpability of a company (TransDev) in giving the ok for bus drivers and passengers to go maskless, and another company (Allied Security, backed up by Metro Valley) to allow security employees to go maskless and allow passengers to go maskless on the light rail when the state ranks highest in the pandemic-danger in the U.S. suggests that companies can create or severely worsen a crisis with impunity both within the companies themselves and in a corrupt and ignorant political culture. The question of legitimacy is in this case broader than just for a few companies.
Company managements are not always above lying to the public. The case of Boeing involves a management lying to its pilots, customers, and the public, resulting in preventable deaths, a significant decrease in the company’s reputational capital, and arguably even a societal-level crisis at an early stage regarding aviation. The company installed new software that could be influence by a sensor that could malfunction. Saving the company the cost of training the pilots, the company’s management did not inform those employees of the addition. The ethical dimension is pretty clear (consider Kant’s dicta about lying). What is less clear is the matter of a company being of such size in a market and the latter being so salient in society that the company can unilaterally cause a crisis at the societal level. Announcing a program in corporate social responsibility, such that helps children to keep up in school, wouldn’t suffice; the harm in a societal crisis is so much greater than are the societal problems to which CSR is geared. At the very least, the board and upper management could have been replaced by a law; the company’s response was to replace the CEO with the “Plan B” insider on the board. That is, playing a significant role in causing a societal crisis could justify the intervention of a government, rather than leaving it up to a company’s shareholders. Where the government is itself corrupt, such as in Arizona, the needed intervention can come from a federal government (e.g., U.S. and E.U.) or even other countries against both the government and the particular company involved. Corporate social responsibility and business ethics are geared to a lesser scale of harm. Causing a societal or global crisis does not reduce to unethical business and is not redressed by corporate social responsibility. Instead, society has more legitimacy to intervene and in a more drastic way, given the nature of a crisis.
For instance, Exxon funded its own scientific studies on the effects of the oil industry on the Earth’s climate as early as in the 1950s. Certainly by the 1970s, the company’s management knew that the ongoing release of CO2 into the atmosphere would cause severe climatic problems, and yet the company’s public-relations lied to the public that the company’s studies were not decisive. Given the industry’s clout/money with members of Congress and even presidents, the company could keep the government from legislating and regulating geared to an expected crisis. Exxon (and the entire industry) played a major role in causing global warming, which could result in the extinction of our species, not to mention reduce the production of food-stuffs and trigger mass-migrations and even wars such as over water-rights.
Business ethicists can be expected focus on the ethical principles violated lying and the related willingness to be a major contributor to a planetary crisis as regards habitability. In other words, what should Exxon have done? Scholars of business and societal culture focus on the incompatibility of corporate and societal cultural norms and values. Within that field of business and society, advocates of corporate social responsibility design company charitable programs oriented to specific societal problems, especially if the company had contributed to the ongoing (rather than crisis) problems. Operating a food bank for the poor is not like saving the planet, or our species. Political economists cover the legislative and regulatory capture by an industry and the resulting muted regulations. Systems theorists can explain how all of these parts work together—an entire system with a fatal flaw in its basic design and operation. The ability of business to cause or even greatly facilitate a societal or global crisis is perhaps so new in the twenty-first century that this sort of problem has not yet been studied.
In 2007-2008, mortgage producers and investment banks created sub-prime mortgages and made high-risk bonds based on the risky mortgages. Investment banks even sold insurance for holders of the bonds. The financial derivative and insurance markets became so large that when they collapsed, a financial crisis occurred. An industry had put the world’s financial system itself at risk of collapse. Financial regulation was not sufficient; a gigantic financial infusion from the Congress and the Federal Reserve was necessary. Unlike the banking crisis of 1907, more than a socially responsible J.P. Morgan would be needed. Society, through its government, had to step in both for the U.S. economy and the global economy. The crisis was that large. That the financial sector was culpable and yet could receive federal money without strings (so even bonuses could be paid!) suggests that the notion of a few large companies or an industry creating a major societal-level (e.g., the economy) crisis was new. Wall Street money as electoral campaign contributions doubtless played a role in the refusal of Congress and the U.S. president to break up the big banks, but the larger question of what to do when a business or industry creates a societal crisis rather than localized typical problems had not been considered in its own right.
To be sure, a government can enable a company to create a societal crisis. Take, for example, the public-health crisis during the coronavirus pandemic that began in 2020. In Phoenix, Arizona, the regional transit authority and the two subcontractor companies ignored local law requiring that masks be worn on the buses and light-rail. A significant proportion of bus drivers went maskless and/or allowed passengers to ride without wearing masks even when federal law required masks even of operators behind a plexiglass shield. A representative of TransDev, one of the subcontracting companies, said that the law didn’t matter because of the company’s policy, which permitted masks and presumably overrules federal regulations. A representative of Metro Valley, the regional authority, refused to enforce the federal regulation on the light rail as well as against the willful bus drivers (and passengers). A transit supervisor on the police force told me that the chief of police had told police employees not to enforce the federal regulation even though, according to the FBI, local law enforcement is regularly relied on to enforce federal law. “They are federal; we are state,” the police supervisor told me. He also told me that the governor had told the chief not to enforce the federal regulation. That federal money goes into the mass transit system in the Phoenix metropolitan area is apparently no reason to follow federal law on mass transit. One police employee told me that “bus drivers are state employees (which is false) so they are not bound by federal regulations. A second police patrol supervisor had told me that the only real law in Arizona is that which “goes through the state legislature.” All three men were not only sure that they could not be wrong, but were extremely rude and dismissive towards me. I concluded that Arizona is in need of federal oversight.
At the company level, TransDev has been knowingly misleading its bus drivers into thinking that they don’t have to wear a mask and that passengers need not either—in spite of the company’s own signs, “Per federal law, masks are required on the buses.” A representative from Metro Valley, the regional authority, told me to ignore the signs. This mentality within at least two organizations is itself a problem. In fact, with Arizona having the highest infection rate in the U.S. on at least November 3, 2021, the mentality and the resulting patchwork of masks on the local buses and light rail can be said to be a significant cause of the ongoing pandemic locally. At the very least, the positive correlation is troubling, though conveniently not to the governor, chief of police, regional transit authority, or TransDev company. The brazenness alone is enough for informed minds to question the legitimacy of at least the local police department (which was being investigated by the FBI for having intimidated and stopped peaceful political protesters) and the TransDev company. The matter of the higher officials, including the governor, the mayor of Phoenix, and the city manager, is of course more political. I had spoken with the mayor’s office manager and had sent an email to the manager’s office (my request to speak with a managerial-level staffer resulted in a call from an intern). Besides the sheer willfulness, lack of respect for federal law, and ignorance all around, the culpability of a company (TransDev) in giving the ok for bus drivers and passengers to go maskless, and another company (Allied Security, backed up by Metro Valley) to allow security employees to go maskless and allow passengers to go maskless on the light rail when the state ranks highest in the pandemic-danger in the U.S. suggests that companies can create or severely worsen a crisis with impunity both within the companies themselves and in a corrupt and ignorant political culture. The question of legitimacy is in this case broader than just for a few companies.
Company managements are not always above lying to the public. The case of Boeing involves a management lying to its pilots, customers, and the public, resulting in preventable deaths, a significant decrease in the company’s reputational capital, and arguably even a societal-level crisis at an early stage regarding aviation. The company installed new software that could be influence by a sensor that could malfunction. Saving the company the cost of training the pilots, the company’s management did not inform those employees of the addition. The ethical dimension is pretty clear (consider Kant’s dicta about lying). What is less clear is the matter of a company being of such size in a market and the latter being so salient in society that the company can unilaterally cause a crisis at the societal level. Announcing a program in corporate social responsibility, such that helps children to keep up in school, wouldn’t suffice; the harm in a societal crisis is so much greater than are the societal problems to which CSR is geared. At the very least, the board and upper management could have been replaced by a law; the company’s response was to replace the CEO with the “Plan B” insider on the board. That is, playing a significant role in causing a societal crisis could justify the intervention of a government, rather than leaving it up to a company’s shareholders. Where the government is itself corrupt, such as in Arizona, the needed intervention can come from a federal government (e.g., U.S. and E.U.) or even other countries against both the government and the particular company involved. Corporate social responsibility and business ethics are geared to a lesser scale of harm. Causing a societal or global crisis does not reduce to unethical business and is not redressed by corporate social responsibility. Instead, society has more legitimacy to intervene and in a more drastic way, given the nature of a crisis.
