Are Corporations Inherently Psychopathic?

Scoundrels, sinners, or saints?

Posted May 23, 2016

The “corporations are evil” meme has been around for a long time.  It has been said that they have “neither bodies to kick nor souls to damn.”  (That quotation has been attributed to several sources, including Andrew Jackson in the 19th century and the Lord Chancellor of England, Baron Thurlow in the 18th.)  The Corporation, a documentary produced in 2003, presents several examples of corporate malfeasance and asks whether these antisocial behaviors match the criteria for diagnosing psychopathy in individuals. 

The film makes a compelling case that corporations are psychopathic entities.  Dr. Robert Hare, arguably the world’s foremost expert on psychoathy, served as a consultant to the The Corporation’s producers.  Would it surprise you to learn that he rejects the film’s conclusions?  More about Dr.Hare later.

I’m a business professor and a former business owner, so as the saying goes, I have a dog in this fight.  Some corporations, as you’ve probably noticed, engage in persistent antisocial – even criminal – behavior (“Scoundrels”).  Other corporations transgress occasionally, but mostly try to conduct business honorably (“Sinners”).  And there are corporations which are not only ethical and reputable, but praiseworthy (“Saints”).  Here are some examples of each:

  • Scoundrels:  According to attorney Jim Walker, who represents victims of crime, injury, and death occurring on cruise ships, several cruise lines have been convicted of felonies for serial criminal offenses.  (You can visit his website if you’d like to know the names of the cruise lines he names as felons.)  Walker also states that, whenever a crime is committed against a passenger during a cruise, “everyone on the cruise ship begins to work against the victim, to look for ways to make certain that the victim's case never sees the light of day. It is a dirty business. Cruise lines thrive on it.”
  • Sinners:  Dillard’s and Lowe’s are reputable companies.  However, the Equal Employment Opportunity Commission (EEOC) has charged both companies with violations of the Americans with Disabilities Act, including firing employees with disabilities rather than making “reasonable accommodations,” as the law requires.  Both companies paid millions of dollars to settle the charges.
  • Saints:  Tom’s Shoes is a praiseworthy company that donates a pair of shoes to a child in an under-developed country for every pair of shoes that a customer purchases.  New Belgium Brewery is an employee-owned company, where important decisions are made in a town hall forum, and which provides employees with open access to all its financial records.

One might say that Scoundrels are antisocial but not psychopathic; Sinners are (take your pick) ethically-challenged, short-sighted, exclusively profit-driven, and/or mismanaged; and Saints are exemplary and commendable – at least as long as they remain saints.  But why do I say that Scoundrels are antisocial, not psychopathic?

I’m using the term “antisocial” colloquially, to mean behavior that is socially deviant and detrimental.  It may be fun to apply a checklist of psychopathic characteristics to corrupt corporations, but that doesn’t necessarily lead to a sound conclusion.  The fact is, no clinical criteria and no test of psychopathy have been developed or tested for use in diagnosing corporate behavior.  Criteria and tests have only been validated for use on individuals – and even then there is a small chance of reaching either a false positive or false negative conclusion.

The most famous and widely-used test of psychopathy is the PCL-R, developed by Dr. Robert Hare.  When he agreed to serve as a consultant to the producers of The Corporation, Dr. Hare said he was assured that the film would use “psychopath” to mean egregious corporate wrongdoing.  Instead, the film portrays corporations in general as amoral, incapable of remorse, dismissive of legal or social norms, and therefore psychopathic in the clinical sense.  In response, Dr. Hare has written this:

"To refer to the corporation as psychopathic because of the behaviors of a carefully selected group of companies is like using the traits and behaviors of the most serious high-risk criminals to conclude that the criminal (that is, all criminals) is a psychopath. If [common diagnostic criteria] were applied to a random set of corporations, some might apply for the diagnosis of psychopathy, but most would not."

In economics, one learns that all businesses generate externalities.  An externality is a side effect of  business activity.  A new store opens in a mall, resulting in more selection and greater price competition for consumers.  Increased selection and price competition are positive externalities, or side effects, of the new store.  Several new stores open in the mall, and as a result shoplifting increases.  Calls to the local police increase.  Police officers work more hours per week at a higher payroll cost to the city and taxpayers.  This is a negative externality. 

Most externalities are negative (i.e., bad for society).  Why?  Because positive externalities cost companies money.  Negative externalities are either cost-neutral or cost-saving for companies.  So why not let others bear the cost or the consequences?  Given this incentive to produce negative externalities, it takes a remarkable effort and ethical, visionary leaders to achieve and maintain a corporation’s status as a “Saint.”