Good Corporatist Citizens

By Doug French
  • Monday, February 9, 2004

The term “good corporate citizen” was thrown about frequently during last year’s tax tussle in Nevada.

Those in government—both politicians and bureaucrats—as well as union bosses, environmentalists and some working in the non-profit sector used the term to describe businesses that backed the proposed broad-based business tax. The implication being of course, that those business owners who did not come forward willingly to suggest how the state might take more money from their businesses and others were not good corporate citizens.

For example, in a February 5 Las Vegas Review-Journal letter to the editor entitled “New taxes needed for our social safety net,” Jean Nickell wrote; “Right now, Nevada is one of only four states with no business tax. Businesses that operate in other states pay almost no taxes here, though they do in 46 other states. This means businesses such as Target, Bank of America, Wal-Mart and Payless are not doing their share here in Nevada. Business should act like good corporate citizens.”

Speaking about the tax deduction businesses receive for healthcare premiums paid, Christina Dugan, who serves as director of government affairs for the Las Vegas Chamber of Commerce told the Review-Journal’s Hubble Smith: “We went up there (to Carson City) and advocated for that because good corporate citizens who do offer health benefits should be rewarded with a reduction on taxes.”

So, to be a good corporate citizen, a business must pay a suitable amount of taxes and pay for some or all employee heath-care premiums.

However, the concept of “corporate citizenship” is intrinsically false. As Richard Teather, senior lecturer in tax law at Bournemouth University, U.K. wrote in an article for published last summer, “A company is a legal entity not a natural person, and cannot have the beliefs or morals to make it a citizen in any meaningful sense.”

Only real people can be citizens—good or otherwise. This means that a company’s shareholders, employees, and senior management can have the beliefs or morals to be good citizens, but the company itself—Bank of America or Wal-Mart, say—lacks this capacity.

Of course, those who bandy about the moniker of “good corporate citizen” are not really talking about ethics or moral behavior anyway. Ethics and morality presuppose voluntary behavior. To take money via taxation or require companies to provide healthcare benefits is, as Teather calls it, “enforced Corporate Social Responsibility.”

Teather points out that one of the problems with this so-called social responsibility agenda is that it is economically inefficient. In an unfettered market, businesses maximize profits by turning basic resources into higher order goods that consumers want. “In contrast,” Teather wrote, “if action has to be forced by regulation then governments mandate that resources be spent on services that the public does not value, or does not value highly enough to voluntarily pay the full cost.” (Emphasis added.)

The ultimate result is that the overall welfare of society is diminished as resources are directed to lower-value outputs. And as Teather notes, “This is done for the benefit of politicians, bureaucrats or their supporting pressure groups.”

In a free market, on the other hand, consumers are in control. The public decides what it wants and what it will pay. Businesses providing goods and services that consumers want stay in business and thrive. Businesses are appropriately deemed good or bad by whether the companies attract capital, make money and stay in business. Bad companies lose money, squander resources and go out of business. Good companies earn a return for shareholders, serve customers and employ people.

In contrast to the free market where consumers rule, government is controlled by a minority of the population—politicians and bureaucrats. Necessarily, because this group gets what it wants through force, rather than voluntary exchange, governments squander resources: Again and again they come back for more resources to pay for services that consumers are not interested in purchasing.

Thus, if business owners and managers advocate that government be allowed to take more in taxes from their business and other business, those people are advocates for increased government force, to the detriment of society.

Business owners who advocate for taxes are not “good corporate citizens.” The greatest benefit that businesses can provide society is to serve customers as efficiently as possible. This means maximizing resources to provide customers with the best products and services they can.

Anything that stands in the way of that pursuit diminishes the wealth of civilization.

Doug French is executive vice president of a Southern Nevada bank and a policy fellow of the Nevada Policy Research Institute.

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