Ethics at the Movies: Wall Street (1987) and The Corporation (2003)

Friedman (1970) inspired waves of financial (and other) deregulation in the 1970s and 1980s, with tumultuous downstream effects. This précis offers quick takes on ethical points made by two related cinematic offerings and looks to the deeper integration of corporate social responsibility in stakeholder capitalism.

Olivier Serrat 15/12/2022

A Friedman Doctrine: "The Essay Read Round the World"

September 13, 2020 was an important date in the world of business: exactly 50 years earlier, Milton Friedman an American economist and statistician had penned an epochal article in The New York Times Magazine titled A Friedman Doctrine: The Social Duty of Enterprise Is to Increase Its Earnings (Friedman, 1970). Friedman's (1970) manifesto extolled shareholder primacy and claimed there was no reason why business should exercise social responsibility by, say, "providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers" (para. 1) Quoting his own Capitalism and Freedom (Friedman, 1962), Friedman (1970) judged social responsibility "a fundamentally subversive doctrine [emphasis added]" (para. 33) and proclaimed: "[T]here is one and only one social responsibility of business to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud" (para. 33). Academics, businesspeople, and politicians around the world read Friedman (1970) and took note.

In keeping with his own doctrine, Friedman gave good reason to short-termism, downsizing to cut costs, and hostile acquisitions. "Friedman was hostile to the New Deal and European models of social democracy and urged business to use its muscle to reduce the effectiveness of unions, blunt environmental and consumer protection measures, and defang antitrust law", Meyer et al. (2020) explained on the fiftieth anniversary of Friedman (1970) Meyer et al. (2020) might have added that it takes two to tango: the parties involved in a situation (or argument) are responsible for it but the assertions in Friedman (1970) clearly fell on sympathetic ears. Thereafter, with regular media appearances and a job as President Reagan's (and Prime Minister Thatcher's) economic adviser, Friedman inspired waves of financial (and other) deregulation in the 1970s and especially the 1980s, with tumultuous downstream effects including financial instability and fraud (Serrat, 2021).1,2 The film industry never misses an opportunity and representations of corporate greed and misconduct are par for the course: quick takes on ethical points advanced by two cinematic offerings follow.3

Ethics at the Movies

1. Wall Street (1987)

Soon after Friedman's death in 1986, an American drama film, Wall Street (Stone, 1987) had Gordon Gekko an unscrupulous corporate raider declare: "The point is, ladies and gentlemen, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit" (01:18:00) Wall

1 "Success to the Successful": in 1976, Friedman was awarded The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel "for his achievements in the fields of consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilization policy" (NobelPrize.org, 1976, para. 1)

2 Deregulation is the removal of governmental regulations (or restrictions) in a specific industry, aiming to allow businesses to operate more freely and make decisions more efficiently Arguments for regulation typically cite the need to, say, create or maintain a level playing field, ensure adequate provision of and access to information, provide wide access to products and services, guarantee the quality of products and services, minimize disruptions in supply, protect consumers, prevent or minimize impacts on the environment, and avert financial instability (Cali et al., 2008).

3 Serrat (2020) reviewed Erin Brockovich (Soderbergh, 2000), an American drama film on corporate misbehavior leading to environmental pollution, for which business ought not bear social responsibility according to Friedman (1970)

Street (Stone, 1987) then had Gekko compare the United States to a "malfunctioning corporation" that greed would save. Put simply, Wall Street (1987) was about a young and ambitious stockbroker (Charlie Sheen) courting the said corporate raider (Michael Douglas) with inside information that threatens the livelihood of his scrupulous father and his colleagues Rotten Tomatoes (2022a) an American review-aggregation website for film and television deemed Wall Street (Stone, 1987) " a blunt but effective and thoroughly well-acted jeremiad against its era's veneration of greed as a means to its own end" (para. 1) and gave that drama film a Tomatometer of 79% (Certified Fresh) and an audience score of 81%

2. The Corporation (2003)

Wall Street (Stone, 1987) demonized ethical standards in the American financial services industry but The Corporation (Achbar & Abbott, 2003), a Canadian documentary film, upped the ante a short five years later by examining nothing less than the contemporary business corporation Bakan, a Canadian law professor and legal theorist, drafted the text of The Corporation (Achbar & Abbott, 2003), in which Friedman made a cameo appearance (41:35), and wrote the book, The Corporation: The Pathological Pursuit of Profit and Power (Bakan, 2004) during the filming of The Corporation (Achbar & Abbott, 2003). Bakan (2004) charged that:

• The corporation's legally defined mandate is to pursue, relentlessly and without exception, its own economic self-interest, regardless of the often-harmful consequences it might cause to others.

• The corporation's unbridled self-interest victimizes individuals, society, and, when it goes awry, even shareholders and can cause corporations to self-destruct, as Wall Street scandals have revealed.

• Governments have freed the corporation, despite its flawed character, from legal constraints through deregulation and granted it ever greater authority over society through privatization. (Bakan, 2004, abstract)

Provocatively, The Corporation (Achbar & Abbott, 2003) listed features of psychopathic personality disorder and contended that they apply to corporations, to wit, "(a) callous unconcern for the feelings of others, (b) incapacity to maintain enduring relationships, (c) reckless disregard for the safety of others, (d) deceitfulness: repeated lying and conning others for profit, (e) incapacity to experience guilt, and (f) failure to conform to social norms with respect to lawful behaviors" (40:42) Rotten Tomatoes (2022b) deemed The Corporation (Achbar & Abbott, 2003) " a satisfyingly dense, thought-provoking rebuttal to some of capitalism's central arguments" (para. 1) and gave that documentary film a Tomatometer of 89% (Certified Fresh) and an audience score of 90%

The Reckoning

Born of the Cold War and fear that corporate social responsibility might undermine free society, the Friedman Doctrine was not seriously challenged by academics, businesspeople, and politicians until the Global Financial Crisis of 2008–2009, aka the Great Recession, despite the Savings and Loan Crisis of 1989 and recurring business scandals (e.g., Enron, WorldCom) [The Global Financial Crisis of 2008–2009] began with a housing market bubble, created by an overwhelming load of mortgage-backed securities that bundled high-risk loans. Reckless lending led to unprecedented numbers of loans in default Bundled together, the losses led many financial institutions to fail and required a governmental bailout. (Corporate Finance Institute, para. 3)

In 2011, the United States Senate Permanent Subcommittee on Investigations released Wall Street and the Financial Crisis: Anatomy of a Financial Collapse (Levin & Coburn, 2011). Levin and Coburn (2011) concluded that " [T]he crisis was not a natural disaster, but the result of high risk, complex financial products; undisclosed conflicts of interest; and the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street" (p. 1). Friedman's (1970) economic, political, and technical assumptions, viz., free markets, isolated economic goals pursued by private enterprises, and shareholder control, had finally been proved unsound (Mintzberg, 1983, 2022).

From the field of organizational behavior and industrial relations, the pathological approach of The Corporation (Achbar & Abbott, 2003) brought to mind Morgan's (1998) earlier images of organization: (a) machines, (b) organisms, (c) brains, (d) cultures, (e) political systems, (f) psychic prisons, (g) flux and transformation, and (h) instruments of domination. The image of organizations as instruments of domination that, citing Morgan (1998), " exploit their employees, the natural environment, and the global economy for their own ends" (p. 259) characterized The Corporation (Achbar & Abbott, 2003) The metaphor of the organization as a machine is the most deeply ingrained understanding of organizations and how they operate. (To note, the Greek term "organon" means "tool" or "instrument".) And so, the critical psychology framework that underpins The Corporation (Achbar & Abbott, 2003) recasts the image of the organization as a machine to be admired for its efficiency into something that is much more malevolent, hence the villainy but also intrinsic hope depicted in Wall Street (Stone, 1987)

The Next Movie?

In the 2020s, corporations now focus more, not less, on sustainable and socially responsible business at local, national, and international levels. Over the last 50 years, the world has become more volatile, uncertain, complex, and ambiguous: corporations have become ever more complicated enterprises that must balance many different priorities and pay close attention to the application of ethical values to business behavior.4 "Stakeholder capitalism" is the buzzword du jour: Tellingly, Business Roundtable an association of chief executive officers of America's leading companies signified on August 19, 2019 in a new Statement on the Purpose of a Corporation that, in addition to "generating long-term value for shareholders", its member companies should also commit themselves to "delivering value to … customers", "investing in … employees", "dealing fairly and ethically with suppliers", and "supporting the communities in which [they] work" (Business Roundtable, 2019, p. 1). Hope springs eternal, even in the Anthropocene: what with climate change, environmental degradation, pollution, and resource depletion, it has turned out pace Friedman (1962, 1970) that corporate social responsibility is good for business. Abjuring the overriding concern for individual prosperity and success of the Baby Boomers (1946–1964) and Generation X (1965–1980), the Millennials (1981–1996) and Generation Z (1997–2012) mean to reduce impacts on the environment.

References

Achbar, M., & Abbott, J. (Directors). (2003). The corporation [Film] Zeitgeist Films. Retrieved from https://www.youtube.com/watch?v=Y888wVY5hzw

Balkan, J. (2004). The corporation: The pathological pursuit of profit and power. Simon & Schuster.

4 Basic ethical principles in business have to do with accountability, compassion, compliance, environmental and social consciousness, fairness, honesty, integrity, loyalty, respect for others, responsibility, trustworthiness, and transparency (Investopedia, 2022

Business Roundtable. (August 19, 2019). Statement on the purpose of a corporation. Retrieved from https://purpose.businessroundtable.org/

Cali, M., Karen, E., &; te Velde, D (2008). The contribution of services to development and the role of trade liberalization and regulation. London: Overseas Development Institute. Retrieved from https://odi.org/en/publications/the-contribution-of-services-todevelopment-and-the-role-of-trade-liberalisation-and-regulation/ Corporate Finance Institute. (2022). 2008-2009 Global Financial Crisis. Retrieved from https://corporatefinanceinstitute.com/resources/economics/2008-2009-global-financialcrisis/

Friedman, M. (1962). Capitalism and freedom Chicago, IL: University of Chicago Press. Friedman, M. (September 13, 1970). A Friedman doctrine: The social duty of enterprise is to increase its earnings. The New York Times Magazine Retrieved from https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-socialresponsibility-of-business-is-to.html

Investopedia. (2022). Business ethics: Definition, principles, why they're important. Retrieved from https://www.investopedia.com/terms/b/business-ethics.asp

Levin, C., & Coburn, T. (2011) Wall Street and the financial crisis: Anatomy of a financial collapse. United States Senate Permanent Subcommittee on Investigations, Washington DC.

Mayer, C., Strine, L., & Winter, J (September 13, 2020). 50 years later, Milton Friedman's shareholder doctrine is dead Fortune Magazine. Retrieved from https://fortune.com/2020/09/13/milton-friedman-anniversary-business-purpose/ Mintzberg, H. (1983). Power in and around organizations. Englewood Cliffs, N.J.: Prentice-Hall. Mintzberg, H. (December 5, 2022). Winding down the Friedman doctrine. Retrieved from https://mintzberg.org/blog/winding-friedman-down

Morgan, G. (1998). Images of organization. Thousand Oaks, CA: Sage Publications. NobelPrize.org. (1976). The Sveriges Riksbank prize in economic sciences in memory of Alfred Nobel 1976: Milton Friedman. Retrieved from https://www.nobelprize.org/prizes/economic-sciences/1976/summary/ Rotten Tomatoes. (2022a). Wall street. Retrieved from https://www.rottentomatoes.com/m/wall_street Rotten Tomatoes. (2022b). The corporation. Retrieved from https://www.rottentomatoes.com/m/the_corporation_2004

Serrat, O. (2020). Ethics at the movies: Erin Brockovich (2000) [PowerPoint slides]. Retrieved from https://www.researchgate.net/publication/340351181_Ethics_at_the_Movies_Erin_Brock ovich_2000

Serrat, O. (2021). Reflections on four case studies in ethics. In O. Serrat, Leading solutions: Essays in business psychology (pp. 57–67). Springer, Singapore. Soderbergh, S. (Director). (2000). Erin Brockovich [Film]. Universal Pictures Stone, O. (Director). (1987). Wall street [Film]. 20th Century Studios, Inc.