May 24, 2010

With the Financial Reform bill passing the senate it seems appropriate to frame the debate with a diagnosis of causal relationships for the financial crisis that go beyond the merely technical. Major banks and financial services companies on Wall Street must understand their relationship to the broader community. Their decisions strategically and tactically, or quarterly and even transaction by transaction must be rationalized from a perspective of a broader goal of what is in the best interest of their employees and society as a whole, not just their individual shareholders.

The important and appropriate move in corporate America to emphasize the duty of management and the corporate board to the shareholder has led to several unintended consequences. This movement in the corporate sphere extended beyond an emphasis of a duty to the shareholder to an exclusive mantra fails to include the appropriate duties of the corporation to their workers and to society as a whole. The lexicon of corporate America almost completely eliminated the discussion of duty to anyone other than the shareholder. This is a gross generalization, but in large corporations this clearly seems to have been the case, particularly on Wall Street where there was no discussion of responsibility to the society in which the Wall Street firms operated and employees were merely viewed as consumable items.

Corporate boards and management have an immediate and direct duty towards their shareholder. Their duty to society is participatory and in general is not determinative of society’s welfare by their corporation’s individual actions or collectively by their industry. Benedict XVI in Caritas in Veritate refers to man's darkened reason that clouded the ability of the individual to see their responsibility to their coworkers and to the broader society or the common good of the polis. Their reason was darkened by their own selfishness and greed. The reasonable man would understand that they have a clear obligation to the society in which they live as well as to their coworker when they are given positions of responsibility. The canard of "the sole duty to the shareholder" serves as a helpful excuse as to why they can look to their own self-interest and greed yet still fulfill a duty to a higher purpose than themselves. Other estimable duties are discussed such as to the environment, to which every major corporation at the very least pays lip service. Yet in the hierarchy of goods the polis in which they exist and operate must be at the top of those goods to which they owe a duty ... read the full article

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