Ex-Corporate Lawyer’s Idea: Rein In ‘Sociopaths’ in the Boardroom – NY Times – By Andrew Ross Sorkin – July 2019
This “reformed” lawyer points out a fundamental flaw of our capitalist system that is responsible for increasing income inequality (rich getting richer, poor getting poorer), dysfunctional government (gridlock), and social decay (deaths of despair).
These troubles stem from a particular aspect of corporate law, and he proposes a relatively simple solution to change how corporations operate.
Jamie Gamble, a retired corporate lawyer, has had an epiphany in recent years: The executives who hired him and that his firm sought to protect, he said, “are legally obligated to act like sociopaths.”
Jamie Gamble spent most of his career as a partner at the law firm Simpson Thacher & Bartlett, which counts virtually every major company in the United States — including Facebook, General Motors, Google and JPMorgan Chase — among its clients.
Mr. Gamble has had an epiphany since retiring nearly a decade ago that is so damning of his former life that it is likely to give his ex-partners a case of agita.
He has concluded that corporate executives — the people who hired him and that his firm sought to protect — “are legally obligated to act like sociopaths.”
He made that determination about five years ago when he started to work on a novel that recently inspired him to compose a provocative essay elucidating what he calls, based on his firsthand experience, a “complex network of horribles” in corporate America. [subject of another blog post]
“The corporate entity is obligated to care only about itself and to define what is good as what makes it more money,” he writes in the essay. “Pretty close to a textbook case of antisocial personality disorder.
And corporate persons are the most powerful people in our world.”
This was the result of the “Citizens United” case when the US Supreme Court ruled that corporations are “people”, with all the rights and freedoms that human people have.
The Citizens United ruling “opened the door” for unlimited election spending by corporations, but most of this spending has “ended up being funneled through the groups that have become known as super PACs.”
Critics predicted that the ruling would “bring about a new era of corporate influence in politics,” allowing companies and businesspeople to “buy elections” to promote their financial interests.
Mr. Gamble’s change of heart will not exactly come as a revelation to the increasingly vocal group of investors, politicians and even chief executives who are pushing companies to be more responsible and to focus on metrics like environmental sustainability and corporate governance rather than on simply maximizing profits.
He doesn’t blame his former clients, exactly. He blames the law.
Perhaps most significantly, he has devised a provocative new governance rule that he believes will fix what ails corporate America, although he acknowledges in his essay that his idea “is likely to seem insane to senior corporate executives and boards of directors.”
Mr. Gamble’s proposal is this:
that every company devise a set of ethical rules to be part of their bylaws, a move that would potentially open them up to shareholder lawsuits should they fail to stick to those rules.
Companies, he suggests, should “adopt a binding set of ethical rules, approved by stockholders and addressing the key ethical dimensions of corporate life” including:
- Their “relationships with employees.”
- Their “relationships with the communities in which they produce and sell.
- Their “relationships with customers.”
- Their “effects on the environment.”
- Their “effects on future generations.”
Today, corporate directors’ decisions are measured — at least from a legal perspective — on whether they maximize shareholder value.
Nowhere in their responsibilities are they expected to consider any stakeholder but the company.
He said that so far he had received mostly positive feedback, with some people, including law students at Harvard and Stanford, telling him the ethics rule did not go far enough.
Ultimately, Mr. Gamble’s proposal is a call to action, to persuade companies to behave not as sociopaths and have a bit more empathy.