Corporations as (Unethical) People
Skip to content
Apr 7, 2014

Corporations as (Unethical) People

By Jessica Love

Last week, Mary Barra, CEO of General Motors, trekked to Capital Hill to explain just why her company waited so long before disclosing problems with some of its car ignition switches. GM began recalling vehicles equipped with the faulty switches, which have linked to over a dozen fatalities, earlier this year—but the company has been aware of the problem since 2001.

GM is not the only car company currently under scrutiny for failing to disclose important information to the public. The Department of Justice recently fined Toyota over a billion dollars for concealing safety problems in its models. These incidents pose troubling questions about the ability of corporations to govern themselves. It’s natural to ask, for instance, why not a single person at either GM or Toyota spoke up sooner.

But Paul Hirsch, a professor of management and organizations at the Kellogg School, points out that individual employees may well have spoken up. “They may have not been heeded,” he says. This is, after all, what happened in the mortgage banking industry, when lenders knowingly handed out loans to borrowers who couldn’t afford them. “There are examples where someone who was asked to sign off or approve the loans reported to higher ups that [the loans] were not legitimate,” says Hirsch. “But that doesn’t mean that the company changed its activities.”

Sometimes a few bad actors at a company are responsible for fraudulent behavior. Other times, company culture—“what gets rewarded”—pushes otherwise ethical individuals to make bad choices. But in the cases of GM, Toyota, and the subprime lending market, it is probably more accurate to say that the companies themselves behaved unethically. GM “looks exactly like the case we teach about the Ford Pinto,” says Hirsch. “Their lawyers or accountants may have told them it was cheaper to avoid the [safety issues] and pay on individual accidents than to undertake the recall.”

This raises some interesting policy questions, says Hirsch. Right now, companies may have it both ways. They enjoy many of the constitutional protections of being “legal persons,” but may pass along the blame for improper actions to their employees. The big fine levied against the Toyota company, for example, may be more an exception than the rule. “Cars getting into accidents—people can relate to that,” says Hirsch. But explaining derivatives to juries is far more difficult.

Photo credit: Yavno at Wikimedia.

Editor’s Picks

A mentor puts capes on proteges.
Careers

Podcast: How to Be a Great Mentor

Plus, some valuable career advice that applies to just about everyone.

Kids decide whether to buy water or soda.
Marketing

A New Way to Persuade Kids to Drink More Water and Less Soda

Getting children to make healthy choices is tricky—and the wrong message can backfire.

Computational Social Scientists discuss solutions.
Innovation

How Can Social Science Become More Solutions-Oriented?

A conversation between researchers at Kellogg and Microsoft explores how behavioral science can best be applied.

An entrepreneur enters an established company.
Innovation

Buying a Company for Its Talent? Beware of Hidden Legal Risks.

Acquiring another firm’s trade secrets—even unintentionally—could prove costly.

Careers

Take 5: Tips for Widening—and Improving—Your Candidate Pool

Common biases can cause companies to overlook a wealth of top talent.

Drug innovation at a pharmaceutical company
Innovation

Everyone Wants Pharmaceutical Breakthroughs. What Drives Drug Companies to Pursue Them?

A new study suggests that firms are at their most innovative after a financial windfall.

Careers

4 Key Steps to Preparing for a Business Presentation

Don’t let a lack of prep work sabotage your great ideas.

Healthcare workers meet in a hospital corridor.
Healthcare

Video: How Open Lines of Communication Can Improve Healthcare Outcomes

Training physicians to be better communicators builds trust with patients and their loved ones.

A man tries to improve OR scheduling.
Operations

Here’s a Better Way to Schedule Surgeries

A new tool could drive savings of 20 percent while still keeping surgeons happy.

Voters who do not trust each other.
Politics & Elections

Why Economic Crises Trigger Political Turnover in Some Countries but Not Others

The fallout can hinge on how much a country’s people trust each other.

A clerk scans brand trademarks.
Marketing

Building Strong Brands: The Inside Scoop on Branding in the Real World

Tim Calkins’s blog draws lessons from brand missteps and triumphs.

two coffee growers harvest beans
Economics

How the Coffee Industry Is Building a Sustainable Supply Chain in an Unstable Region

Three experts discuss the challenges and rewards of sourcing coffee from the Democratic Republic of Congo.