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Point of View »Harris Sherline: Greedy Corporations

Harris Sherline: Greedy Corporations

By Harris R. Sherline | Posted on 11/09/2008

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Despite the rhetoric, a closer examination reveals political punching bags that look a lot like us.

The term “greedy corporations” or its equivalent seems to appear regularly in commentaries about oil and gas prices, pharmaceuticals, energy, minimum wage, housing, the mortgage crisis, tax policy, etc. — just about every economic or social issue. “Greedy corporations” and, by implication, their “greedy” owners are said to be responsible for many of the ills that befall our society. However, as Pogo famously said, “We have met the enemy and they is us.”

Harris Sherline
Harris Sherline
To begin with, corporations aren’t greedy or generous or socially conscious or anything else, for that matter. They are merely a legal fiction, entities created by the state for the purpose of facilitating the conduct of business. They can sue and be sued in the courts, but they do not eat, breathe, love or hate, vote, or any of the other things that people do. So, how can they exhibit such human characteristics as greed? And, if corporations can’t actually be greedy themselves, then perhaps it is their owners and managers who are.

And, who might these terrible people be? They are your friends, relatives, neighbors, church and community leaders, directors and executives of nonprofit entities, school administrators — just about any leader of any enterprise, perhaps you yourself. No doubt you may think some of them are greedy, but certainly not all, or even most of them. Who qualifies as greedy and who makes that determination? You? Or are others deciding for you?

Major corporations, such as the Fortune 500 companies, are generally owned by many thousands or millions of shareholders, often through union pension trusts, retirement plans, mutual funds and other investment entities, which assemble the power of numbers to make large investments on behalf of their individual investors — “Us.” However, for the most part, small corporations are businesses that don’t have enough economic power to influence anyone. They are usually just vehicles for managing the affairs of a business, providing a way for their owner-operators to make a living. Their profits are often not much more than wages, and not too great a wage at that. Are these the greedy corporations we read or hear about so often?

Out of a total of approximately 5.6 million corporate tax returns filed in 2004 (IRS Statistics: Number of Returns, Receipts, and Net Income by Type of Business), Free Republic reported that more than 3 million small businesses were “Subchapter S” (Sub S) corporations in that year. They pay little or no income tax on their earnings because they are treated like partnerships for tax reporting purposes. These are referred to as “pass through” entities, which means they simply pass their earnings through directly to the owners, who include them on their personal income tax returns and pay taxes on the corporate profits at individual rates.

Further demonstrating the extent to which “greedy corporations” are “Us,” in its “Outline of the U.S. economy,” the State Department noted, “Fully 99 percent of all independent enterprises in the country employ fewer than 500 people. These small enterprises account for 52 percent of all U.S. workers, according to the Small Business Administration ... By contrast, 47.7 million Americans work for firms with 500 or more employees.”

If corporations can’t actually be greedy, and if their owners are, for the most part, “Us,” where does the notion of “greedy corporations” come from, and why? The obvious answer is from the media and other special interest groups, including politicians, who want to influence the public’s view of various issues.

The public is continually duped into accepting broad brush character assassination that’s intended to influence their perceptions for political purposes. Just one example is the current situation with the financial crisis, which various politicians are using in an effort to burnish their own credentials as self-sacrificing crusaders for the public good who are trying to regulate the market for the benefit of their constituents.

No one ever seems to point out the fact that the very people who label someone else as greedy are, in fact, often guilty of the same behavior themselves. Taxpayers are called greedy if they want to keep their own money, but politicians who want to take it from them and spend it themselves are not. Or large corporations, such as drug, oil and energy companies, are labeled greedy when prices go up and their profits increase but not when prices go down and they lose money.

There are always individual examples of greed that are so extreme that they make headlines. In the final analysis, however, greed is not bad but good. It’s simply self-interest at work, which provides the lubricant that makes the wheels of commerce turn, not just in capitalist America but everywhere in every type of economic system, including socialism and communism.

Harris R. Sherline is a retired CPA and former chairman and CEO of Santa Ynez Valley Hospital who has lived in Santa Barbara County for more than 30 years. He stays active writing opinion columns and his own blog, Opinionfest.com.

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» Jay Ballou wrote on 11/09/08 @ 09:41 AM

Harris “greed is not bad but good” Sherline strikes out again with his transparently foolish sophistry.

» David Agnew wrote on 11/09/08 @ 10:18 AM

“We have met the enemy and he is us” - Pogo (aka Walt Kelly) Well said, Mr Sherline

» M. Gilbert wrote on 11/09/08 @ 10:38 AM

Mr. Sherline has some good points to make, however, he is totally mistaken if he things that “greed is not bad but good.” The recent shocked expression on Mr. Greenspan’s face when he admitted to his error in thinking that banks and mortgage companies would work best if left alone (in their own self-interest) proves the error of this thinking.  Greed is never “good”.  Making decent profits and returning some to their investors is indeed “good” - but taking all the profit to themselves is never “good.”

I wish America would follow the Japanese example where presidents of companies sit at a desk in the working room of their employees.  We don’t need to adopt everything which works in another country, but we could at least think of the things that work well.

» sbnative wrote on 11/09/08 @ 12:55 PM

“Far more than Senator McCain, you have received enormous,
unprecedented contributions from corporate interests, Wall
Street interests and, most interestingly, big corporate law firm
attorneys. Never before has a Democratic nominee for President
achieved this supremacy over his Republican counterpart. Why,
apart from your unconditional vote for the $700 billion Wall
Street bailout, are these large corporate interests investing so
much in Senator Obama? Could it be that… you have shown that you are their man?”

Ralph Nadar - http://www.votenader.org/blog/2008/11/08/in-public-interest-between-hope-and-reality/

» Part Right wrote on 11/09/08 @ 01:37 PM

Harris,

Congratulations!  You hit upon the key element to help find solutions to the balance between government control and the benefits of the free market system.  The recognition that corporations don’t in themselves make decisions, just like government in itself doesn’t make decisions appears to overlooked by way too many people trying to figure out what when wrong or how to make things smoother.  Greenspan himself admitted he was surprised that banks and financial institutions wouldn’t act in their own best interests.  Proof to me that your insight that corporations or governments aren’t the bad guys.

However, to say greed is good, goes way to far.  Greed is not good.  Greed is not about self-interest.  Greed is a vice that misunderstands self-interest for the pursuit of short-term pleasure.

When corporations or government makes poor decisions, we must remember that it’s individuals or groups of individuals making those decisions.  And although Harris may have lots of greedy friends and neighbors, most of the people I know look out for the welfare of many, not just themselves. 

But not everyone does, just as Greenspan belatedly realizes.  Hmmm, a $10 million dollar bonus and raising the risk of the solvency of the bank at which I work, or just my puny $1m salary and less risk to my bank?  Hmmm which should I take.  It’s not illegal, so it must be okay!  I’ll take the $10mm...it’s been decades since any bank of our size went bankrupt anyway.  It will never happen.

The narrow view that greed is the lubricant that makes the wheels of commerce turn is the viewpoint that has sown what we are reaping today.  Unfortunately humans make decisions and *surprise* some do not make decisions with the rest of us in mind or even themselves in the long term.

Greed is not good.  Self interest and self restraint are good.

If your world is really that small and your friends so morally corrupt that greed is good, then you need to get out and make friends with more people.

If this isn’t your world, then stop spreading this self-serving crap....unless you believe that making this stuff up is the lubricant that makes the wheels of journalism turn.

You’d still be wrong, but you’d at least be more rational.

» occasional reader getting bored wrote on 11/09/08 @ 03:18 PM

I guess this might be the best the local Republicans to offer these days. At first I thought Noozhawk put this guy in as a joke.  He makes Joe the Plumber sound like George Will.  So legal fictions can’t be greedy--tell that to Enron. Isn’t there someone from the right who lives around here and who can craft an intelligent argument? Or are we stuck with Harris the Dumber?

» Publius wrote on 11/09/08 @ 04:04 PM

Sherline’s glib sophistry erects a verbal scarecrow for readers, then attributes all
manner of bad stuff to it. A shadow-boxing exercise.

Yes, corporations are legal creatures created to transact business, and make money for their owners-investors. But the term “greedy corporations” is a euphemism for the general Culture of Greed that’s permeated American business and government, since before Clinton, and which Sherline has repeatedly celebrated.

The checks and balances which evolved over the last two centuries to protect the
nation and the people (i.e. “Promote the general welfare") have been consciously eroded or subverted by well paid lobbyists in the employ of “greedy corporations” to the detriment of the commonweal.

The total economic and financial meltdown we’re witnessing as Bush’s legacy move
on a straight line from Tom DeLay and the “K Street boys” back to those for whom usurious greed is a way of life.

Capitalism’s founding philsopher, Adam Smith, did NOT envision or endorse that
kind of un-regulated greed. Monetarist Milton Friedman didn’t either.

During the Enron-BearStearns-WorldCom-AIG-LehmanBrothers-FannieMae orgy of greed, profits were privatized, but now those private shareholders are asking that their gigantic debts be socialized - borne by the American people. That’s not right any more than the ridiculous mark-ups Big Pharma puts on drugs essential for the terminally ill, Big Oil put on energy prices earlier this year (when “demand” was falling), or fly-by-night Chinese wholesalers who sold adulterated, injurious, falsely labeled products ... all of which passed directly on to American markets by going past the “regulatory agencies” who napped, or who had been suborned by Sherline’s
corporate and administration leaders.

The issue is not that corporations try to make as much for their investors as they can but that Sherline and his friends have repeatedly push to break the decent bonds that leaders from Lincoln to Sherman to TR to FDR to Ike had erected to
constrain their most licentious behavior. Had a single alert SEC chair or Attorney
General gone after some of this misbehavior instead of delegating it to the Elliot
Spitzers of the world, this meltdown might not have happened.

This is not new. Two thousand years ago, someone wrote for the New Testament
that “the love of money is the root of all evil.” Mr. Sherline should re-read that book
before submitting his next essay.

» Wayne B. Norris wrote on 11/09/08 @ 08:01 PM

Good show, Harris!  I love it.
Keep ‘em rollin’, Big Guy!

» Greedy Civil servants wrote on 11/10/08 @ 10:48 PM

Greedy Civil servants thats the real problem in America-- especially California--too many making too much............

» Jay Ballou wrote on 11/11/08 @ 08:56 AM

“The recognition that corporations don’t in themselves make decisions”

Corporations are legal persons. Decisions made by the employees of corporations are made in the interests of the corporation, not their own (unless they are high-level executives who set their own pay and bonuses, or shuffle money to those who do—that’s unregulated greed). The interests of the corporation are—by law—to maximize the fiduciary benefit of their shareholders. That in effect means unbridled greed by a fictional entity, a voracious entity much as a hive of army ants is voracious, even if each individual ant is fairly harmless. These group entities are real “emergent phenomena” with their own properties independent of the individuals that make them up, much as water is wet even though no water molecule is wet, or brains think even though no neuron thinks. Thus, Sherline’s argument fallacious from the get-go. And Adam Smith’s “invisible hand”, where the ambitions of the baker and the butcher lead to good outcomes for society, only works on the small scales of his examples from the 1700’s—it does not work at the scale of corporate fictional entities.

» Jay Ballou wrote on 11/11/08 @ 09:08 AM

“Greenspan himself admitted he was surprised that banks and financial institutions wouldn’t act in their own best interests.”

That’s not what Greenspan said. What he said was “I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms”. In addition, he said “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.”

What was that flaw in? As Henry Waxman characterized it, “In other words, you found that your view of the world, your ideology, was not right, it was not working.” And Greenspan replied “Absolutely, precisely. You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”

Greenspan is like the farmer who discovered that he could save money by replacing some of his horse’s oats with sawdust. The more he replaced, the more he saved. But, “Dagnabit, just when I had that horse eating nothing but sawdust, it went and died on me”.

The banking system collapsed because the regulations that were essential to its proper functioning were eroded at the direction of Alan Greenspan and his ilk.


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