Co-founder and CEO, Progressive Strategies
It was very big of Richard Parsons to admit that the repeal of Glass-Steagall (the law that had kept traditional commercial banking walled off from Wall Street speculators for more than 60 years) was part of the reason for the financial collapse of 2008 two days after he retired as head of Citigroup. Given that Citigroup never would have been created in its current elephantine form, and that Parsons never would have made many of the millions of dollars he had earned from being CEO without that repeal, it was quite a concession. I hope his conscience is eased. And I certainly hope his words open up a discussion about Glass-Steagall, which desperately needs to be reinstituted. What Parsons said in public is being talked about “in quiet rooms,” as Mitt Romney would put it, all over Wall Street right now. Most people who understand our financial system know it is true, but don’t want to change anything because they are making too much money the way things are now.
But this post is not about breaking up our banking monstrosities, the six conglomerates that control assets equivalent to two-thirds of America’s GDP. I have written about that many times before, and no doubt will again. But this post is about an even more fundamental issue to our nation’s future.
Since 48 hours isn’t generally enough time to rethink your life’s work and transform your entire philosophy, Parsons’ dramatic admission immediately upon retiring does raise some important questions about not only public policy, but about corporate morality — which some people would argue is a contradiction in terms, but I think is worth exploring a little. Parsons’ defenders will argue that he couldn’t speak out while representing his corporation, since the corporation as a whole certainly would not be in favor of raising questions about the very act of Congress that allowed them to come into existence in their current overgrown form. In fact, this line of thinking is explicit: Parsons only moral duty was to benefit his corporation’s shareholders — and all else, certainly including his own conscience as well as whatever random thoughts about public policy that might hurt the company’s bottom line, was not to be spoken.
This line of defense in regard to Parsons is the dominant morality in big business today. This ethic, if you can call it that, is very explicit: your only moral duty as an officer of the corporation is to the shareholders and the quarterly profit line of your company. But this ethos does not represent the way business leaders, let alone the rest of society, have always thought. The core idea of a social contract between business, government, workers, and the rest of society was for many decades a central ethic ascribed to by much of the business community. A wide variety of business leaders throughout American history have felt a responsibility for society. My friend Leo Hindery, formerly CEO of several major corporations, in his book It Takes a CEO and in his other writings, outlines very clearly that good CEOs and boards of directors have often taken a broader view. The view he advocates for is, as Hindery puts it, “that a responsible CEO has equal and concurrent responsibility to his employees, shareholders, customers, communities, and nation.” The notion of a business completely unconnected in its ethos from its workers and customers, along with the community and country in which it operates, is in fact a recipe for disaster — especially when companies are as large and powerful as these companies have become. What worshipers of the free market usually forget is that Adam Smith himself, the author of the “invisible hand of the market” idea, was a thoughtful and nuanced moral philosopher as well as economic theorist, and that his moral philosophy was quite different from the Ayn Rand-style “selfishness is a virtue” ideology. (more…)