Technology & Finance
BP and Goldman -- Greed as a common factor -- William Cohan
William Cohan sounds almost old fashioned in his op-ed piece in The Times, and then you realize how old-fashioned it is to talk morals in business.
“BP made $16.7 billion; ExxonMobil made $19.3 billion (Goldman made $13.4 billion). And that’s what mattered most, right? But thanks to BP’s extraordinary level of incompetence — and an apparent failure to anticipate or plan for a well blowout — the American people now have been handed not only the senseless deaths of 11 men working on the BP rig but also the worst environmental disaster in our nation’s history. It is both heartbreaking and sickening.”
The corporate structure, and the nature of global business, remove executives from the results of their work. BP, and some of the British press, are annoyed that American politicians and publications refer to the company by its old name, British Petroleum. And perhaps it wouldn’t have acted any differently drilling in the North Sea, closer to home. Look at the West Virginia coal mining disaster—the man in charge of the mine was active, very active, in the state, including funding the election of a judge who would be favorable to him.
Would Goldman bankers have been less enthusiastic pushing toxic investments if they had to face the buyers at a local restaurant or health club? Maybe. Maybe not.
“But the corporate structure these days rewards bad behavior. The problem is that the corporate veil protects the decision makers from the consequences of their decisions and, accordingly, they are encouraged to take asymmetrical risks — huge paydays for them if everything works out; huge consequences for us if they don’t.”
Cohan quotes Senator Christopher Dodd orrectly said in April 2008, during the first Senate hearing about the unfolding financial crisis, “We’ve socialized risk and we’ve privatized reward.”
But that’s hardly new. John Kenneth Galbraith was saying the nearly same thing at least 20 years ago—privatizing the gains and socializing the losses. The environmental movement was partly built on trying to stop this among manufacturers and refiners. (Forcing BP to pay the full cost of its drilling disaster—into the billions—would be a nice start in correcting this situation.)
The current financial reform legislation doesn’t address this adequately, says Cohan.
“Nowhere in the approximately 1,500 pages of the proposed bill is there anything about making Wall Street executives financially and legally liable for their decisions, as they once were when Wall Street was a series of private partnerships and a partner’s entire net worth was on the line every day. Talk about accountability!”
Perhaps it is time to take on the issues of corporate structure, revise the treatment of corporations as persons, which the Supreme Court relied on to overturn legislation restricting their political donations. Time to think big?
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