Corporate Cosmopolitanism

:
Global Citizenry and White Collar Crime

Brent Cooper
University of British Columbia 2008

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“To whom much is given, much is required.”— John F. Kennedy.

How does the phrase “Think global, act local” apply to corporate actors? Can a corporation be a ‘global citizen’? To understand these questions and their daunting implications we must define two concepts: ‘global citizen’ and ‘white-collar crime.’ Broadly understood, a global citizen is somebody who can see through the arbitrary social constructions that divide us, identifies with greater humanity, and acts accordingly. White-collar crime, a more problematic concept, can be generally viewed as a social deviation in a professional framework that does not directly entail physical harm to others, but harm nonetheless. Surprisingly, these concepts are rarely recognized, yet both have large consequences for the world. The average citizen fails to comprehend how his/her actions reverberate throughout the world, and likewise the average white-collar criminal considers his/her actions as victimless crimes. When scaled to the level of multinational corporations (MNCs), the unintended consequences of this self-centered mentality constitute a new sociological challenge. Since a corporation is legally considered a person, we must find new ways to nurture the development of the corporation through a process of socialization. In this essay I will explore these two concepts and discuss the prospect of a corporate global citizen.

What is a Global Citizen A global citizen is someone who understands the world, who thinks on a global scale, and who recognizes their local role and acts responsibly. Global citizen is a new term, but expresses an old idea found in the ancient Greek ideals of cosmopolitanism,

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which sees all of humanity belonging to a single moral community. One of the oldest known accounts of a global citizen was Diogenes: when anyone asked him where he came from, he said, “I am a citizen of the world” (Nussbaum, 1994). Unfortunately, this was not the way all Greeks thought, but nor was it a tradition exclusive to Diogenes and the Greek Cynics. This concept was further refined by the virtuous Roman Stoics and preached by the eminent Marcus Aurelius. Despite its ubiquity, it has lived in the shadows of ethnic, class, and national warfare all throughout human history. In all regions, sectarian and partisan loyalties typically have prevailed in shaping the statusquo. In reality, until now it has never been possible to be a true global citizen. The reason is that prior to the 20th century the world was never globalized in the sense it is today; made possible by swift global communication and transportation. In the 21st century we are in the advanced stages of globalization and individuals are beginning to identify with transnational issues over national ones. In a similar fashion, corporations have recognized the interconnectedness of the world. Even though corporations, as always, are identifying primarily with profits they are finally beginning to capitalize on the changing trend by appealing to the demands for social and environmental responsibility.

Creating Global Citizenry Diogenes has also been known to contend that ‘the foundation of every state is the education of its youth.’ In her essay Patriotism and Cosmopolitanism, Martha Nussbaum brilliantly argues the character of a global citizen. She extols the Stoic philosophy that a good civic education is global citizenship education (Nussbaum, 1994). This position is based on three grounds: 1) the study of humanity on the macro scale is invaluable in

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gaining understanding of ourselves and our relations to others; 2) this way is the most effective form of problem solving, and factional and local allegiances undermine political deliberation; and 3) the cosmopolitan stance emphasizes that all persons fundamentally aspire to justice and goodness (Nussbaum, 1994). Nussbaum comments that Nobel laureate Rabindranath Tagore shares these sentiments in his literary work. They both observe how despite the reason behind this stoic philosophy, most people are nevertheless attracted to the ‘color’ of local traditions and identities and often spurn cosmopolitanism in favor of the seduction of nationalism (Nussbaum, 1994). Implicit in this education system is the transcendence of the socially constructed boundaries such as race, nationality, class, and religion. Our education system promotes the notion of tolerance, but it avoids the abstract idea of sameness. Nussbaum recognizes the potential for taking this philosophy to the extreme by denying individuality and infringing on fundamental personal liberties (Nussbaum, 1994). However, this philosophy should become the foundation for global citizenship education for its declaration of the preeminence of the notion of “interdependence of all human beings and communities” (Nussbaum, 1994). The basic theme is that concepts like nationalism continue to act as a matrix that prohibits individuals from becoming global citizens. In its extreme form, nationalism has more dangerous implications than extreme cosmopolitanism. In the United States, for instance, we see that its particular brand of patriotism is actually jingoism - extreme patriotism in the form of aggressive foreign policy. Global citizens are dedicated to rising above these challenges for the greater good.

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What is White-collar Crime? The traditional conceptualization of white-collar crime was layed out by Edwin Sutherland as “a crime committed by a person of respectability and high social status in the course of his occupation” (Chirayath and De Zolt, 2004). Over the years, the definition has been modified to include the acquisition of property through deception (Chirayath and De Zolt, 2004). Other key characteristics identified by scholars are difficulty of detection, rare prosecution, and are often committed by trusted people in large organizations (Meloff and Pierce, 1994). Part of the challenge of white-collar deviance is in establishing wrong-doing. Historically, many deviants like Socrates, Louis Riel, Mohandis Ghandi, and Nelson Mandela were labelled criminals (Lecture 35, 2008). Although they were not technically white-collar criminals, by some categorizations they were, since they were not engaged in blue-collar crime. Unlike social deviance however, there is seldom benefit from corporate crime. These heroes, as history remembers them, in a way are exemplars of global citizenry. But in actual white-collar crime the negative social consequences are not realized immediately. Under our working definition of whitecollar crime typical examples are tax evasion, fraud, money laundering, insider trading, corporate espionage, corruption, and bribery (Lecture 35, 2008). White-collar crimes such as these do not necessarily victimize others directly, and are usually neglected in crime statistics, although they do in fact place higher costs and cause more harm to society than regular crime (Meloff and Pierce, 1994). According to W. Steve Albrecht, associate dean at the Marriott School of Management at Brigham Young University, people commit fraud for three reasons: “financial pressure, the perception of an opportunity, and rationalizing it as O.K.”

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(Labaton, 2002). This is an adaptation of the popular cultural interpretation of the criteria for conviction under U.S. Criminal Law; that of means, motive, opportunity. According to him and others, fraud is also becoming more common. The Association of Certified Fraud Examiners lists two reasons for this increase: age and education (Labaton, 2002). First, fraud is the preferred crime of the older perpetrator and a rise in fraud should be expected with an aging population. Second, an educated person is more likely to see the rational incentive to pursuing fraud. Rationality drives a white-collar criminal because the reward is greater, and the punishment is less significant; in other words, the benefits outweigh the costs. The cost/benefit analysis is the hallmark of a rational decision maker.

Theories Sociologists have explained crime as a symptom of “the gap between culturally prescribed aspirations and the socially structured avenues for realizing those aspirations” (Meloff and Pierce, 1994). This is not just the gap between what you want and what you have relative to others. It is the rift between the American dream and the narrow possibility of its realistic achievement. Therefore, this strain theory observes that whitecollar criminals will resort to innovative or illegitimate strategies when the frustrations of this gap reach a critical level (Meloff and Pierce, 1994; Lecture 35, 2008). But what is the critical level? Why do some people manage to cope with life’s challenges and others do not? It depends on the level of integration of an individual within society. Control theory emphasizes the bond between society and the individual (Meloff and Pierce, 1994; Lecture 35, 2008). As that relationship weakens, deviance is more probable. Furthermore, some individuals have different beliefs than law-abiding citizens

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and are freer to deviate from the socially constructed norms (Meloff and Pierce, 1994). In the positive sense, this means unjust laws can be challenged by progressive individuals. On the other hand, it means white-collar criminals will have fewer scruples about their dishonest activities. Education and high social status inevitably dissociate individuals from the general public, which is relatively poor and uneducated. In the context of highprofile white-collar crime, the fact that individuals can be abnormally distanced from society by their unequaled knowledge, wealth, and power, predicts that their attachment to society will be weak. Evidently, corporations are virtually never engaged in nonfinancially motivated acts of altruism, whereas true global citizens are. When strain theory and control theory are applied together with the rationality of white-collar crime there is little incentive for corporate actors to act as global citizens.

Corporation is a Person Joel Bakan, a law professor at UBC, keenly observes that a corporation, when legally viewed as a person, exhibits the behavior of a destructive and heartless sociopath (Bakan, 2004). The average citizen can constantly monitor their own relationship to society, whereas a corporation is an entity made up of individuals incapable of reining in character of the greater being. Corporations stop at virtually nothing to achieve their goals, including manipulating public opinion (Bakan, 2004). This is reminiscent of the anecdote that ‘advertising/marketing is the science of arresting a person’s intelligence long enough to get money from them.’ Corporations also conveniently absolve themselves from responsibility and feelings of remorse (Bakan, 2004). In a sense, a corporation has the morality of an infant. Since they are not properly punished when they

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are caught, they do not perceive an act as right or wrong; they see everything that rewards them with money as right. Because of this, there is a high probability of recidivism; they will continue to break the law so long as the rewards outweigh the risks (Murphy and Harris, 2007). If a corporation continues to act like an infant, it must be treated like an infant, until it matures, figuratively speaking. Between an insatiable drive and cold calculating psyche, a corporation is able to shape a public image drastically different from its real operations. Enron is the infamous example of a corporation that was a “paragon of social responsibility and corporate philanthropy… [that] collapsed under the weight of its executives’ greed, hubris, and criminality” (Bakan, 2004). Two scholars, Verghese Chirayath and Ernest De Zolt, comment on the impact of white-collar crime in transitional economies. They argue that globalization opens doors for MNCs to developing nations where the financial prospects are lucrative and the business, environmental, and labor regulations are weak (Chirayath, 2004). This type of situation is precisely where a corporate actor must act as a global citizen. Unfortunately, they do not, and consequently these arrangements encourage the worst type of whitecollar crime; they exacerbate global inequality by exploiting societies desperately trying to catch up to the Western world. Coming back to Enron, their bankruptcy (due to multiple counts of fraud), caused serious repercussions in India when the Dhabol power plant project was abandoned and the Indian government had to suffer the losses. Developing countries are also competing with each other for business with MNCs so they have to further weaken regulations or potentially lose out (Chirayath, 2004). As a person, the corporation manages to exculpate itself by pretending that because it is in a foreign land, a degree of corruption is acceptable.

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Challenge of Sentencing and Deterrence Sentencing white-collar crime is a challenge. Often, an individual’s rank on the corporate ladder is not taken into account in determining their culpability in the act (Podgor, 2007). Furthermore, courts discount motivations for such crimes and any individual profit gained as a result (Podgor, 2007). Implicit in these observations is that the higher the individual is on the corporate ladder, usually the more money they have and the better lawyer they can hire. Thus, in the real world, there is a correlation between corporate rank and perceived culpability. Some scholars are studying shaming theory – the idea that the stigma of criminality is a powerful deterrent – as it applies to white-collar crime. Shaming theory is popular in combating blue-collar crime and is successful in some approaches to whitecollar crime. In the context of a corporation, corrupt businessmen are more deterred by jeopardized financial prospects and opportunities than from shaming (Murphy and Harris, 2007). In general, researchers conclude that understanding social and emotional factors can help deter white-collar crime shaming (Murphy and Harris, 2007), but ultimately we must rely on something that has proven far more valuable: whistleblowers.

Whistleblowers In 2002, Time magazine selected three whistleblowers as “Persons of the Year.” Statistics say that 75% of cases of fraud are perpetrated by men (Wells, 2002) so it may not come as a surprise that these three whistleblowers were women. One of these individuals was responsible for blowing the whistle on Enron. The other two ignominious crimes were WorldCom’s accounting fraud and the FBI’s failure to investigate

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information pertaining to the 9/11 attacks. Not only is blowing the whistle on corruption incredibly effective, there is a positive feedback mechanism: the public awareness of this large scale fraud lowers public confidence in business and government institutions and in turn encourages more whistleblowers to come forward (Banisar, 2006). Despite the obviousness of this solution there is little framework to provide incentives or protection for people to come forward. Whistleblowers take huge personal and professional risks and have little to gain. According to one report, whistle-blowing is still in its infancy (Banisar, 2006). If this is the case, then now is the time to begin nurturing the practice of whistle-blowing into maturity. In a way, whistleblowers are global citizens and they are exactly what are needed in high-level corporate positions if a MNC is to act like a global citizen. The same report notes the curiosity that the corporate sector favors whistleblowers more than the government does (Banisar, 2006). This has dangerous implications for white-collar crime because the government has to be responsible for creating, and also enforcing, legislation against corporate criminality.

“Think Global, Act Global” Can a MNC be a global citizen? The nature of a corporation causes it to exemplify the inverse of the global citizen catchphrase: “think local, act global.” The corporation is designed to think of itself only, but in the process it unavoidably leaves its footprint wherever it does business (Bakan, 2004). On the other hand, corporations are made up of individuals. If the executives themselves are global citizens, then the corporation can embody corporate global citizenship. The good corporate global citizen must think global and act global. It must realize that any corruption in its system is a

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spreading poison that will eventually destroy the organization, harming or infecting many others along the way. A corporate global citizen must be engaged in philanthropic endeavors geared towards the creation of a global social environment that is complimentary to ethical business operations. These mythical global citizens do exist. Multibillionaires Warren Buffet, Bill Gates, and George Soros dominate a long list of U.S. philanthropists. Their leadership in social progress and ethical business (anti-trust lawsuits notwithstanding) sets an example for the rest of the world. Unlike average citizens, corporate global actors such as these have the privilege and responsibility of being able to affect real change in a short period of time. Despite these individuals prospering from the stratification of society, they understand that patterned social inequality is dangerous and systemic (Lecture 43, 2008) and leads to conflict within society. Corporate global citizens need not be multi-billionaires to effect large change; our heroic whistleblowers deserve just as much praise, for they often risk much more. The common denominator, whether you are an individual in middle management or the head of a global corporation, is to think globally.

What can we do? One way that has proven effective is adopting an organic and holistic approach to constructing society. As Marcus Aurelius advises, we should engage in the exercise of conceiving the whole world as a single body (Nussbaum, 1994). Modern global citizen Carl Sagan has agreed with this conception and added that “an organism at war with itself is doomed” (Sagan, 1980). Until it is safe to eliminate the boundaries that divide us, it is necessary to learn how to deconstruct them. By acknowledging that a morally arbitrary

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boundary such as a border plays a decisive role in our deliberations, we set an example of hypocrisy for citizens by obscuring the fact that people should reach across the other barriers the separate us (Nussbaum, 1994). Charities like Oxfam carry out global citizenship education programs for children. Higher education institutions also need to emphasize to future CEOs the rational economic incentives for global civility. The practical strategy is to learn how to apply the traditional techniques of law enforcement in new ways. Retributive justice is the idea that an equal amount of damage should be inflicted on the offender as was caused by them (Lecture 39, 2008). In whitecollar crime this can be applied in the form of remuneration of the amount of money lost. In practice, settlements are often mere fractions of what is truly owed (Bakan, 2004). Rehabilitation can be more complicated for individuals engaged in white-collar criminal acts, but if a corporation is seen as a person this concept can be applied in the sense of reforming corporate structure. Deterrence is the most popular tool. It assumes people who commit crimes exercise rational decision making (Lecture 39, 2008). We know this is especially true in these cases as white-collar criminals follow rational patterns. When an individual finally is convicted a heavy sentence is often handed down. Jeffrey Skilling, the Enron CEO, was sentenced to 24 years and 4 months in prison. Other high-profile incarcerations include the cases of Martha Stewart and Conrad Black. The amount of psychological pressure these individuals face also acts as a powerful deterrent. Skilling confessed he had been driven to the brink of suicide. Unable to cope like Skilling, his colleague J. Clifford Baxter allegedly took his own life. However, police later cast doubt on his

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apparent suicide, insinuating it was murder (CBS, 2002). Regrettably, murder can be a powerful deterrent of whistle-blowing. A dynamic lobbying campaign must be directed at both government and business if white-collar crime is to be thwarted and corporations are to be socialized into global citizens. Decisions made at the global level will become truly inclusive and participatory only when macro-scale organizations change their internal incentives, rewards, decision making structures, and knowledge systems (Gaventa, 2001).

Conclusion In this essay I have explored the concepts of global citizenry, white-collar crime, and the prospect of a new globally responsible corporation. We see the popular slogan “think global, act local” is adopted by many citizens in their small sphere of influence but that this philosophy becomes complicated with an increase in power. We see that whitecollar crime in its various forms is as wide-spread as blue-collar crime, but more concealed, more expensive, and more seductive to those in power. Personal acts of deviance by white-collar individuals can occur on the micro scale, but have consequences on the macro scale. On the other hand, we have found that there are individuals who exude the character of corporate global citizenship in the form of philanthropy. By incorporating the cosmopolitan ethic into the larger sphere of influence of white-collar workers, they enact new institutions that foster social justice. Lastly, global citizens, whether small or large, understand that those who can give back, must.

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Works Cited Bakan, Joel. Excerpt from The Corporation. 2004. Word and World: A Critical Thinking Reader.Ed. Kent Lewis. Toronto, Ont: Nelson, 2007. 84-92. Banisar, David. Whistleblowing International Standards and Developments. Primera Conferencia Internacional Sobre Corrupcion Y Transparencia. Mexico City: Instituto De Investigaciones Sociales, UNAM, 2006. 1-115. 01 Mar. 2008 <http://www.corrupcion.unam.mx/documentos/investigaciones/banisar_paper.pdf>. CBS. "The Mysterious Death of an Enron Exec." CBS News 10 Apr. 2002. 09 Mar. 2008 <www.cbsnews.com/stories/2002/04/10/eveningnews/main505845.shtml>. Chirayath, Verghese, and De Zolt, Ernest. Globalization, Multinational Corporations, and WhiteCollar Crime: Cases and Consequences for Transitional Economies. The Changing Face of Globalization. Ed. Samir Dasgupta. Thousand Oaks, CA: Sage, 2004. 151-65. [2] Gaventa, John. Global Citizen Action. Boulder, CO: Lynne Rienner, 2001. 275-287. Labaton, Stephen. "Downturn and Shift in Population Feed Boom in White-Collar Crime." NY Times 2 June 2002. 08 Mar. 2008 <http://query.nytimes.com/gst/fullpage.html? res=980DE7DD123AF931A35755C0A9649C8B63>. Meloff, William, and David Pierce. An Introduction to Sociology. Scarborough, Ontario: Nelson Canada, 1994. 176-188. Murphy, Kristina, and Nathan Harris. "SHAMING, SHAME AND RECIDIVISM: a Test of Reintegrative Shaming Theory in the White-Collar Crime Context." British Journal of Criminology (2007). 1 Mar. 2008 <http://bjc.oxfordjournals.org/cgi/content/abstract/azm037v1>.

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Nussbaum, Martha. "Patriotism & Cosmopolitanism." Boston Review 29 (1994). 06 Mar. 2008 <http://bostonreview.net/BR19.5/nussbaum.html>. Podgor, Ellen. "The Challenge of White Collar Sentencing." Journal of Criminal Law and Criminology 93 (2007). 25 Feb. 2008 <http://papers.ssrn.com/sol3/papers.cfm? abstract_id=1031832>. Sagan, Carl. Who Speaks for Earth? Dir. Adrian Malone. Perf. Carl Sagan. 1980. 9 Mar. 2008 <http://www.cooperativeindividualism.org/sagan_cosmos_who_speaks_for_earth.html>. Wells, Joseph T. Report to the Nation. Association of Certified Fraud Examiners (ACFE). Austin, TX, 2002. 08 Mar. 2008 <http://www.diogenesllc.com/2002RttN.pdf>.

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