This week, the U.S. Supreme Court will hear arguments about whether or not corporations have the same rights to “personal privacy” that individuals do.
This is a good analysis of the case.
I signed on to a “friend of the court” brief put together by EPIC, arguing that they do not.
More background here. And an editorial from The Washington Post.
EDITED TO ADD (1/25): Here’s a much more entertaining take on the issue.
Ross Patterson • January 20, 2011 8:13 AM
It stands to reason that if corporations have Free Speech rights, they have privacy rights as well. This court’s opinion is probably very predictable, even if it’s likely to be historically wrong.
Eric • January 20, 2011 8:36 AM
I don’t think that corporations should have the right to privacy like people do, but I also think more and more we are living in a plutocracy. So I think in the end the supreme court will rule in favor of the corporations.
AppSec • January 20, 2011 8:43 AM
The tangled web we weave..
The reason for corporations is to protect the persons/assets of the individual. There was a time where attacking a corporation/business allowed on to attack the individuals that owned it. Thus, the corporation allowed monetary protection for the individual owner.
If that is the case, then while the corporation is not “human”, there has been a proven tie between those whom can attack the corporation and attacking those owners. Thus, it could be argued that there should be protection for the corporation in order to protect the embarassement of the owners of the corporation.
A stretch? Yes. Valid? Maybe.
Do I believe it? I might have convinced myself……….
DayOwl • January 20, 2011 9:05 AM
I can understand AT&T not wanting CompTel to have access to certain information. The FOIA should not be used as a work-around to obtain industry secrets, which is what it appears CompTel is attempting to do. This isn’t about disclosure and the public’s right to know. It’s about competitors using the law to gain information they otherwise wouldn’t be legally entitled to to get.
Tangential thought: It has been held by ethicists that corporations are not people, thus they aren’t subject to the same sorts of ethical considerations as people are. If the Supreme Court has bestowed personhood on them, does that mean we can now hold entire corporations accountable for ethical lapses?
Clive Robinson • January 20, 2011 9:27 AM
First of to set the European record straight, The European Union defines most rights as partaining to “any entity legal or natural”.
That is unless specificaly stated otherwise companies being “legal” entities and persons being “natural” entities have equivalent rights.
However in the UK Company law made some significant differences (that the ECH eventually stoped) whereby a director of a company had no right of silence when being interviewd by “Department of Trade Inspectors”. Which was a ploy used by the UK Gov to ellicit information out of Director’s prior to Criminal prosecutions. We see similar “Right’s Striping” get arounds in RIPA and POCA and other legislation the last bunch of encumbrents brought forth.
Otter • January 20, 2011 9:29 AM
RE: Dayowl
If it were trade secrets they wanted to protect, there are provisions already set in law to protect them. Thus we would expect them to argue from that foundation of protection.
However, their argument is entirely different, based on the fiction of a corporation as a person. Which is a ridiculous legal fiction – can a corporation serve on a jury, vote, be imprisoned?
Ben • January 20, 2011 9:56 AM
Certainly corporations need the right to speech – they are (or should be) speaking and lobbying on behalf of the interests of their shareholders collectively.
The same goes for the right against unreasonable searches and seizures.
And in this case, I certainly don’t think that the FBI should be allowed to turn over confidential AT&T documents which they gained in the course of an investigation, on FOI grounds. They aren’t the FBI’s documents to turn over, they are AT&Ts.
So yes, I find myself in favour of a privacy right for corporations. They may not have family matters or sick children to protect, but they do have other perfectly legitimately kept secrets.
dd • January 20, 2011 10:03 AM
encorporate yourself. form a corp or LLC whatever, then put your house and car and all property under ownership of a corp.
then when a cop shows up behind you on the road, hes running the liscence plate and sees that its registered to “lawsuits inc.” hes gonna treat the driver like one of the oligarchs whom he works for. It can be made a layer of ones personal protection, and I understand that corps taxes are much less than a persons because of the special loopholes put in the laws by hired/sold legislators.
gnut • January 20, 2011 10:08 AM
Esar’s Comic Dictionary (1943) described a corporation as
(1) Something which is neither flesh nor fish but often foul
(2) A group of persons formed for individual profit without individual responsibility
(3) A corporation cannot blush
Definition #2 is relevant here.
Anon Bruce Poster • January 20, 2011 10:17 AM
My uneducated knee-jerk reaction to free speech and privacy rights for corps has always been negative and extreme. But, I have to admit, laws like these will be a fantastic boon when the first Real Artificial Intelligence is born.
Ben • January 20, 2011 10:17 AM
The point of a corporation as a legal person, is to allow it to engage with the law, and the law with it.
If a corporation is not a legal person, then the assets of the corporation would belong jointly to the shareholders, and the shareholder’s rights to privacy and free speech and so on will be engaged directly, instead of indirectly via the corporation. This would make things more difficult for law enforcement rather than less.
If the question is “why do we have this notion of a corporation as a person, instead of another notion”, the answer is “because that is the one we have always had”.
You could change it, but at this stage it would probably require a constitutional amendment to do so.
@Otter
Corporations can be sued, prosecuted, fined, have their assets seized, be subject to court orders, or be wound up and their assests confiscated by the courts. They can also be directors of other companies.
If you want them to be able to vote and serve on a jury, you could start a campaign I suppose? 🙂
gnut • January 20, 2011 10:45 AM
The reason for corporations is to protect the persons/assets of the individual.
Appsec,
This is not necessarily true.
There are about 300,000 corporations in the United States today whose assets are the largest personal investment of their 60,000,000 “members” (20% of the population).
See “HOA Corporations As A Defective Product” at http://paranoiatoday.com/index.php?option=com_content&view=article&id=87:hoa-corporations-as-a-defective-product&catid=27:organizations&Itemid=56 Long story simplified: if an HOA corporation’s assets are seized, the members’ homes are seized.
Related to the topic of corporate privacy:
Although most state laws, and probably even HOA governing documents, have open records requirements, there is no penalty for an HOA corporation which violates them. At most, a homeowner can go through the trouble and expense of suing an HOA corporation for access to records. Meanwhile, he is paying his own legal fees and the HOA’s legal fees via his dues. Best case scenario: prevail in court and maybe recover his legal fees and costs. It provides for a powerful disincentive for homeowners to litigate against the HOA corporation (but not the other way around).
As Professor Evan McKenzie ( privatopia.blogspot.com ) put it, “The transaction costs of enforcing an owner’s rights is so great they are hardly ever able to do it.” (full quote and source at http://www.schneier.com/blog/archives/2010/11/control_fraud.html#c473933 ).
But the corporate privacy implications are even more perverse than that.
The “client” of an HOA law firm is the HOA corporation, not the individual board members. Yet if an HOA corporation is involved in litigation against a homeowner, the Board of Directors will claim that any communication between them and the attorneys is protected by attorney-client privilege, even though the homeowner is a (1) a member of the client corporation, (2) entitled to the corporation’s records, and (3) paying the corporation’s attorney fees to be used against him.
EH • January 20, 2011 10:51 AM
If a corporation is not a legal person, then the assets of the corporation would belong jointly to the shareholders, and the shareholder’s rights to privacy and free speech and so on will be engaged directly, instead of indirectly via the corporation.
Indirectly how? Can a person really assign their rights to another entity like that? Can I thwart a deposition by claiming fifth amendment protection for the defendant I am being deposed against? “I can’t answer that, it would violate X’s privacy.”
Dirk Praet • January 20, 2011 11:27 AM
To me, it’s pretty clear where this is coming from. Corporations wish to protect themselves against revelations by whistleblowers (Wikileaks !), scrutiny by public entities and publication of incriminating or otherwise deemed unacceptable practices in the cause of a judicial enquiry. Ever since Sarbanes-Oxley was put in place – redefining for many the acronym ROI to Risk of Incarceration – they have been trying to come up with new ways to lower its accountability impact on both individual executives and the corporation as a whole.
Intellectual property, trade secrets and the like IMHO are sufficiently protected under current legislation and regulation. If the Supreme Court upholds AT&T’s vision on the issue, it’s going to be yet another formidable weapon in the hands of corporate lawyers to be used and abused against public and government interference in what they see as their business only. Corporations are not individuals, just like a piano is not a guitar.
Fred P • January 20, 2011 11:31 AM
Some more links on this case:
Oral argument transcript:
http://www.supremecourt.gov/oral_arguments/argument_transcripts/09-1279.pdf
Commentary:
http://www.scotusblog.com/?p=112356
My summary: if you’re advancing a Conservative argument before the Supreme Court, and one of the two most Conservative justices responds with :
JUSTICE SCALIA: Well, but if you’re asking the government to show that the — there was an intent to exclude corporations, I don’t think that’s their burden. I think it’s your burden to show that this exemption was intended to include corporations.
And the third most Conservative justice responds with:
CHIEF
JUSTICE ROBERTS: Counsel, your central argument is that because “person” is defined to include corporation, “personal” in the same statute must include corporate.
I tried to sit down and come up with other examples where the adjective was very different from the root noun. It turns out it is not hard at all. You have craft and crafty. Totally different. Crafty doesn’t have much to do with craft. Squirrel, squirrely. Right? I mean, pastor — you have a pastor and pastoral. Same root, totally different.
So I don’t understand — I don’t think there’s much to the argument that because “person” means one thing, “personal” has to be the same relation.
You’re not very likely to win.
Civil Libertarian • January 20, 2011 11:59 AM
Should be interesting. Yesterday the Court ruled against individual privacy, and Scalia wanted its decision to go even further.
http://www.nytimes.com/2011/01/20/us/20scotus.html
“I would simply hold that there is no constitutional right to ‘informational privacy,’ ” Justice Scalia wrote.
Something tells me he might have a different opinion when it comes to protecting corporations.
kashmaek • January 20, 2011 12:28 PM
NO.
Fred P • January 20, 2011 12:33 PM
@Civil Libertarian-
I read this case http://www.supremecourt.gov/opinions/10pdf/09-530.pdf differently than you do. The 6-2 majority is trying to balance government interests with those of personal privacy. Scalia’s minority opinion is that the government interest is reasonable, but there is no Constitutional right to personal privacy, which the majority opinion suggests, but does not decide.
In FCC v. AT&T, AT&T is arguing that “person” includes corporations in the relevant law, therefore “personal” (in the same law) must include corporations, regardless of the context. Scalia said “I cannot imagine somebody using the phrase like that.” Roberts made, as I quoted above, a long joke about their argument. I don’t think that AT&T is likely to win this one.
Shane • January 20, 2011 12:38 PM
I can’t believe I still live in a place where folks still believe in fairy tales, and little ambiguous paper trails can turn into real boys.
If you wish upon a Justice…
It wasn’t enough to send common sense packing, we also had to book it a one-way interstellar rocket and personally launch it the $@%# out to space.
John • January 20, 2011 12:59 PM
Corporations have privileges, not rights.
Jon • January 20, 2011 2:09 PM
Just to throw in a monkey-wrench… Rights of privacy of individuals are very poorly defined at the moment.
Perhaps it would be best for the Supreme Court to come down with a ringing decision in favour of privacy that then individuals can use to defend themselves against unwarranted searches.
After all, if a corporation has a fundamental right to privacy, and a corporation is a person, doesn’t a person have their own too?
J.
Bob Roberts • January 20, 2011 2:53 PM
Is it irony or just hypocrisy that the corporation that did the most to enable illegal across the board violation of the privacy of it’s customers by enabling illegal wiretaps now asserts it’s own privacy rights?
Stuart Haber • January 20, 2011 2:58 PM
For an enjoyable version of the proceedings yesterday at the Supreme Court, see Dahlia Litwick’s account on Slate, at http://www.slate.com/id/2281715/ (enjoyable, that is, if you find the notion of ATT’s tender personal feelings to be somewhat ridiculous).
Roger • January 20, 2011 3:08 PM
Hi Bruce,
since corporations shouldn’t have a right to privacy, could you please send me a list of Counterpane’s clients? I would also like a login to your intranet — read only is fine — and also your read only SNMP community strings.
Thx bye.
Dirk Praet • January 20, 2011 5:01 PM
@ Bob Roberts
10+
@ Roger
Which may be obtained through a court order if these data are in any way relevant in an ongoing investigation, civil or criminal case against Bruce Inc. It’s exactly the kind of thing AT&T and the like are trying to prevent from happening in the future. I think you’re not entirely getting it.
Imperfect Citizen • January 20, 2011 5:06 PM
Good for you Bruce!
@Roger, I think that’s unfair.
I guess ATT and the corporations will never know how creepy it is to hear a man who is following you into a voter precinct talk about what a bummer it was that your cell phone battery was dead during your OBGYN appt in another city and they couldn’t get anything.
I did learn today that my FBI funded observation isn’t deliberate fraud, but a “long stupid story” that he would tell the cashier after he followed me out of the building. (Guess a judge doesn’t get to hear it but the butcher, the baker, and the candlestick maker will).
Unix Ronin • January 20, 2011 6:09 PM
I personally contend that a corporation should not have any of the rights or privileges of a person. The legal fiction of the “corporate person” has done enormous harm.
Thomas • January 20, 2011 6:47 PM
“Do Corporations Have a Right to Privacy?”
No
“Will they get it?”
Yes
RIP George Carlin • January 20, 2011 7:26 PM
“There’s a reason for this, there’s a reason education sucks, and it’s the same reason it will never ever ever be fixed. It’s never going to get any better. Don’t look for it. Be happy with what you’ve got… because the owners of this country don’t want that. I’m talking about the real owners now… the real owners. The big wealthy business interests that control things and make all the important decisions.
Forget the politicians. The politicians are put there to give you the idea that you have freedom of choice. You don’t. You have no choice. You have owners. They own you. They own everything. They own all the important land. They own and control the corporations. They’ve long since bought and paid for the Senate, the Congress, the state houses, the city halls. They got the judges in their back pockets and they own all the big media companies, so they control just about all of the news and information you get to hear. They got you by the balls. They spend billions of dollars every year lobbying. Lobbying to get what they want. Well, we know what they want.
They want more for themselves and less for everybody else, but I’ll tell you what they don’t want. They don’t want a population of citizens capable of critical thinking. They don’t want well-informed, well-educated people capable of critical thinking. They’re not interested in that. That doesn’t help them. That’s against their interests. That’s right. They don’t want people who are smart enough to sit around a kitchen table and think about how badly they’re getting fucked by a system that threw them overboard 30 fuckin’ years ago. They don’t want that. You know what they want?
They want obedient workers. Obedient workers, people who are just smart enough to run the machines and do the paperwork. And just dumb enough to passively accept all these increasingly shittier jobs with the lower pay, the longer hours, the reduced benefits, the end of overtime and vanishing pension that disappears the minute you go to collect it. And now they’re coming for your Social Security money. They want your fuckin’ retirement money. They want it back so they can give it to their criminal friends on Wall Street. And you know something? They’ll get it.
They’ll get it all from you sooner or later ’cause they own this fuckin’ place. It’s a big club and you ain’t in it. You and I are not in the big club. By the way, it’s the same big club they use to beat you over the head with all day long when they tell you what to believe. All day long beating you over the head with their media telling you what to believe, what to think and what to buy. The table is tilted, folks. The game is rigged and nobody seems to notice. Nobody seems to care. Good, honest, hard-working people: white collar, blue collar, it doesn’t matter what color shirt you have on. Good, honest, hard-working people continue — these are people of modest means — continue to elect these rich cocksuckers who don’t give a fuck about them. They don’t give a fuck about you.
They don’t give a fuck about you. They don’t care about you at all! At all! At all! And nobody seems to notice. Nobody seems to care. That’s what the owners count on. The fact that Americans will probably remain willfully ignorant of the big red, white and blue dick that’s being jammed up their assholes every day, because the owners of this country know the truth. It’s called the American Dream, ’cause you have to be asleep to believe it.” – George Carlin
it’s not that corporations have a “right” to privacy, just that the government can’t get willy-nilly any info it wants without a warrant or court order. If the government comes to me and says give us all the docs you have on X. There are already laws for handling proprietary info for govt officers. If they mishandle and it gets out, that person is in big trouble. Anyways, corporations will protect their data anyways regardless of the verdict. I can see it now…
Govt: “we need documents concerning X”
Corp. X: “where’s your court order?”
Govt: ummm?…wait a sec..
…the next day,
Gov’t; “here’s the court order.”
Corp X: “here’s the docs’
Gov’t: “this is encrypted, where’s the key?”
Corp X: “where’s that key, i know i have it somewhere around here…”
“oh, yeah, our office in switzerland has it, you’ll have to talk with them”
CorpX (under breath): “good luck with that”…
france also • January 21, 2011 3:06 AM
France is also going in the same wrong direction: http://eco.rue89.com/2011/01/20/secret-des-affaires-le-droit-a-linformation-menace-186457
Any critic on a corporation might face 6 years of jail and 750 000 euros.
🙁
anon2342 • January 21, 2011 7:09 AM
If corporations are granted rights of an individual, then they should be subjected to the same responsibilities and punishments as well.
So, jail time for corporations!
(And think of all the tax revenue we will get when corporations are subjected to progressive personal taxation..)
JM, the court order also covers the access to those documents and the information they contain. Sure, you can do what you describe, but it won’t be legal.
corpirates never die. they live on in the hands of succssor oligarchs,
a person needs the first 20 years to get intigrated and educated, but a corp that ran railroads in the last century can live forever and seldom change their rules of operation though the society changes around them. thats why they basicly want to return the people to 19th century poverty,
Unemployment is a way of lowering wages.
El Salvador had 50 percent unemployment in the 1980’s when I last heard the statistic.
Capitalism is a game in which like monopoly, the board game where the winner takes everything and the losers get nothing to live on.
JUst look in the republicans parrty platform and see how they hate unions.
really • January 21, 2011 9:20 AM
What is next, corporations get the right to vote?
reallt • January 21, 2011 9:59 AM
The more I think about this the more I feel that if the real concern is that someone would file a FOIA request against the government for data the government obtained (ie was given by) from AT&T, then they should probably not have given them the embarrassing emails if they did not apply to the specific request. That is the whole point of e-discovery laws, turn over anything you have that is related to the suit. It is not easy, and there is no magical product with a 100% effectiveness rating. But, if you cannot filter your information and simply turn over everything you have, then you are asking for public scrutiny, are you not?
Historian • January 21, 2011 10:42 AM
From EPIC’s website:
“AT&T alleges that the file (which the group, which includes AT&T’s competitors, want released under the Freedom of Information Act) includes confidential commercial information about costs and pricing, as well as internal information about the company’s systems, processes, and operations.”
People may be reacting to giving corporations the same rights as an individual, but corporations have to be able to protect their private and competitive information in some manner. Corporations can’t be competitive if every document that might be picked up in some legal action is open for the world to see. If “personal privacy” is not the best mechanism for that, another one has to be created. Deciding against AT&T in this case would take some power from corporations, yes, but a lot of that power would go straight to the government due to the fact that a subpoena would be so much more powerful in the future. That’s hardly is the direction we want to go.
@DD et.al. Going with a “screw the corporations” approach without thinking about the ramifications is short-sighted at best.
really • January 21, 2011 10:50 AM
@Historian
I think the thing the justices are trying to point out is that the release of trade secrets, etc, is already restricted by other statutes and thus further regulation of privacy is not needed.
JM • January 21, 2011 12:29 PM
@anon2342,
“JM, the court order also covers the access to those documents and the information they contain. Sure, you can do what you describe, but it won’t be legal.”
won’t be Legal: hahaha, as if that stopped any corporations from doing it anyways.
Legal has no meaning when it can be bought and paid for with cold hard cash.
John VI • January 21, 2011 1:29 PM
I went and read the whole thing and I took away a different message than most of these posters, I believe.
Company A reported a problem with thier billing to the appropriate government agency. Agency did an investigation, as they were authorized to do, using proper and legal information collection methods, warrants, etc. Company A complied, was found in error, paid a fine, complied with government conditions, and went on its merry way.
ATT bought Company A.
Company B, ATT’s Competitor, has filed a FOIA request to get the information that was collected by law enforcement, legally, via warrant, in the course of thier investigation. Company B is trying to get information that is protected and would require a warrant from investigators to access, via a FOIA request to bypass the legal protections that ATT and company A would normally fall under, and get it from the government claiming that since its in the governments hands, its a valid target for FOIA requests.
The FCC originally agreed with Company B and ordered the release of the documents. This is a the supreme court because ATT is trying to stop that original request. They are trying any argument they can think of to stop it from happening.
I am sure you all can think of all kinds of negative consequences that could occur if ATT loses.
@ John VI,
Not sure why it hasn’t been thrown out yet. I would assume it falls under FOIA exemption 4 (trade secrets, commercial or financial inforamtion) or 7 (investigatory records compiled for Law enforcement purposes).
Roger • January 23, 2011 4:04 AM
@Imperfect Citizen:
Your post is a non-sequitur. I don’t disagree that your right to privacy is important. I just also think that joining together with other citizens to work together shouldn’t mean that you lose those rights.
@Dirk Praet:
Which may be obtained through a court order if these data are in any way relevant in an ongoing investigation, civil or criminal case against Bruce Inc. It’s exactly the kind of thing AT&T and the like are trying to prevent from happening in the future. I think you’re not entirely getting it.
Umm, sorry, that’s not remotely correct. The current case in no way concerns immunity from court ordered or otherwise legal disclosure.
What it concerns is what subsequently happens to corporate data provided to the US government for any reason (whether due to a court order, an investigation, routinely, or otherwise.) The anti-corporate-privacy argument is that the FOIA means that once any corporate data has been given to the Feds, for any reason whatsoever, then it must be revealed to anyone who demands it.
The contrary view is that the FOIA exemption that applies to personal data should also apply to private data of other “legal persons”.
When thinking about this, you should realise that under law, “legal persons” are not just multinational for-profit corporations. It includes small businesses, universities, human rights organisations, charities and community groups. In fact in almost any time that citizens band together for a common cause — whether to work together, for profit or otherwise — the group forms a legal person.
To pick an illustrative example, Amnesty International is a legal person. So is Greenpeace, and FNP (publishers of Mother Jones magazine). Even your book club is a legal person; it doesn’t have to be a registered corporation. If one of those organisations was subject to some sort of investigation — or even if they weren’t and just had to provide data routinely — a hostile party might try to use FOIA to snoop on their activities. At present, that request could be denied under exemption 7(C):
“Records or information compiled for law enforcement purposes, but only to the extent that the production of
such law enforcement records or information … could reasonably be expected to constitute an unwarranted invasion of personal privacy; …”
Under the current case, that exemption could be removed from organisation like this because they are only “legal persons”, not “real persons.”
Roger • January 23, 2011 5:04 AM
@anon2342:
If corporations are granted rights of an individual, then they should be subjected to the same responsibilities and punishments as well.
Erm, they already are, so far as it makes physical sense. Of course you can’t put a corporation in prison because it is a legal abstraction and hence cannot be held by bars, so they are principally subject to fines instead. These fines are usually much, much larger than the fines applied to a real person in lieu of a prison sentence.
(And think of all the tax revenue we will get when corporations are subjected to progressive personal taxation..)
Once again, this already happens! Corporations are subject to income tax on a progressive scale. The set points aren’t the same as for personal income, but for all but the tiniest corporations it works out to about 35%, the same as the maximum personal rate. Except that corporations then pay payroll tax as well.
To complicate matters further, some US states also charge a state income tax. In most states this is about the same for corporations and personal income, but in a few cases, it is much higher for corporations.
Roger • January 23, 2011 6:40 AM
@dd:
corpirates never die.
Nope. Assuming you mean for-profit corporations, the average life expectancy at birth of a new corporation is just 13 years. If it eventually makes it into the “Fortune 500” that rises to an unimpressive 40 years (or it used to; apparently that figure is constantly declining.)
This distribution is highly skewed, by the way; a significant fraction of new companies go broke in their first 2 or 3 years, while a tiny minority last centuries. (There are few common factors to the few Methuselah corporations: some are big, some small; some are family businesses, some are public; and they occur in a wide range of sectors. But one factor is that are flexible; most of them are now doing business in a very different way to how they started.)
they live on in the hands of succssor oligarchs,
Nope. When a company folds, some of the asserts may be acquired by other companies, but a significant fraction is just totally lost. On average, only about 35% of the accumulated worth is salvaged. The rest might as well be burned. This is why so much effort is often spent to prevent a company folding: it is a highly destructive event that does great harm to the community.
a person needs the first 20 years to get intigrated and educated, but a corp that ran railroads in the last century can live forever and seldom change their rules of operation though the society changes around them.
Nope again. Corporations that don’t adapt to changing society don’t make it onto the Methuselah list. Back in the 80s, Shell did a big study of long-lived corporations (in order to try to become one!) They found one of the most important criteria for longevity is that a company has to be sensitive to the changing values and expectations of society. If it isn’t, it can’t last.
Unemployment is a way of lowering wages.
Corporations hate unemployment. Sure, it can lower wages, but it reduces sales much more. For example, suppose that in a major recession, unemployment increased by 30% of the labour force. For many companies, this would translate into a lot more than 30% in lost sales because all the jobless aren’t buying at all, while the remaining wage earners are spending much more conservatively.
Now, suppose you had $100 million in sales, at a margin of 35%, and you’ve just lost 40% of sales due to the recession. To maintain the same profit of $35 million from your now $60 million in sales, you would need to cut costs to $25 million instead of $65. That’s 38% of the costs with 60% of the effort; it can’t be done, no-one stands for a pay cut that deep (37%.) Maybe 15%, but there’ll be some horrible confrontations to get that far.
So you have 40% lay-offs (which 90% of managers hate, albeit probably not as much as the guys getting laid off), followed by an agonising 15% pay-cut all round (including to management — you won’t get away with not sharing that one), and then the shareholders are still unhappy because profits are still node diving.
No, corporations do not like unemployment. They hate it. What corporations like is growth.
Clive Robinson • January 23, 2011 8:56 AM
@ Roger,
“Corporations hate unemployment. Sure, it can lower wages, but it reduces sales much more.”
In the longterm yes, in the short term no, employment being one of the largest costs to a company ditching 50% of your workforce (especialy middle managment) can give you a 100% increase in short term profit.
Likewise outsourcing work abroad. However this is actually worse, because it takes employment out of the home market reducing potential sales but worse it also strengthans another economy where future sales may be extramly unlikley for many reasons.
In both cases it is short term profit -v- longterm growth.
It is why when I am aware of a company outsourcing I withdraw my support of the company by not buying their products in any shape or form.
From an investment point of view I likewise would not place any money into a company that has performed BPR or any one of a similar short term “profit maximisation” techniques.
This brings up the question of why do execs do these sorts of things that harm if not destroy the future prospects of the companies they manage in exchange for very short term gain.
The simple answer is investor stupidity by share holders who want fast returns for no apparent risk. The life of a coperate exec in any company is usually very very short (less than a year in many cases). They know that their next job depends on how brightly they have increased the light of the company shares or profit (but not often sales) on the stock exchange.
Thus as we know if you poor enough fule on a fire it will burn very brightly but, you won’t have fuel to keep you warm through the winter.
The exec however has absolutly no intention of staying for the winter they are going to be off looking for their next fuel rich company to perform the same old trick.
They get away with it based on fine timing, if they get out whilst the company is burning brightly they can get the next company to start to burn brightly as the previous company imploads. They are not harmed because the latest company is burning brighter and brighter. It is only after they have done this four or five times do some people wise up to the game.
In essence. this is what the banks have been doing, but with a difference, they have realised that all investments can be made to look good at thhe begining it is only with time that an investment starts showing it’s true colours. Thus if you create a market to sell off new investment you don’t get burned when it fails. Eventually the markets wise up but by then you have started a new game.
One of which can be seen. by the behaviour of ING Bank and managment of mortgages. What they have done is to flog of “new risk” but remain as the service agent inbetween the purchasor of the risk and the risk itself. Thus as a risk starts to go bad it does the opposit of which you would think. Instead of mitigating the risk by allowing the sale of the property at market price or above (in the case of one “stay in home” investment organisation), they refuse to allow it and enter into protracted and expensive legal blocking of the sale untill bankruptcy or walkaway happens. Why because they get nice big service managment fees from both parties on each action they take, and get little or nothing if they alow the sale to proceed. Thus they are activly working to destroy the economy around themselves and by so doing cause other “market oportunities” for themselves…
As I said “short term gain” often drives these ideas not long term growth. As such the net result is actually to increase inflation costing the economy more (as the economy is based on borrowing).
Such short term behaviour robs the markets of stability that any sensible organisation needs to evaluate investment in the future.
Thus we need to look at “lockin clauses” on investments and execs. However I’m not sure that such mechanisums are actually possible in many cases.
John David Galt • January 23, 2011 12:20 PM
I agree that the “right of privacy” applies only to individuals, but that is not the whole story here.
It seems to me that the right way for courts to approach this case is one that has not yet been asserted: namely, that a business which has custody of an employee’s or customer’s private information has a sort of “fiduciary responsibility” to protect that information from disclosure or misuse, and therefore the business may (and sometimes must) act as the individual’s agent in doing so, just as a bank must sometimes act on your behalf in protecting your money from loss.
Gio Wiederhold • January 23, 2011 4:09 PM
The corporate right to privacy inhibits the IRS in aggregating data on common corporate tax avoidance schemes.
The result enables corporations to collect invisibly massive IP and capital in tax havens and encourages job growth outside of the US. See `Follow the IP’, January CACM, and recent statements by CISCO management.
Dirk Praet • January 23, 2011 7:00 PM
@ Roger / Richard
Points taken. I guess I got a bit carried away with the slightly unfair question to hand over a client list and intranet login just like that. I actually did get the point that the case is about disclosure of the collected documents to other parties under FoIA. I admit that jumping to the conclusion that a positive ruling for ATT could be used to prevent data collection from companies perhaps was a bit of an unfortunate brainfart. Then again, the concern voiced by several people how corporate laywers could use this a precedent to effectively bestow upon corporations the same privacy rights as an individual remains very relevant. My gutt feeling is telling me this is a really bad idea.
BF Skinner • January 24, 2011 11:27 AM
Interesting thing about Corporations. Dept of Justice says they are exempt to Privacy Act of 1987.
Adding to the Corporation as ‘person’ thread.
A person has a moral sense, a conscience, a set of ethical values. People without conscience are considered damaged, pathological.
If a company, with it’s only ethical value being maximize profit, were it a person it would be a sociopath.
Corporations are not ‘people’ they are beasts. We don’t let beasts vote or make decisions on how we care for them. (call PETA)
Technotron • January 24, 2011 5:44 PM
If Corporations are “People”, will the Supreme Court allow companies to get married? and get tax benefits for “couples”?
No, I don’t mean Mergers — because after marriage, 2 people don’t merge into one.
Will the Supreme Court bar a company from “marrying” another company less than 18 years old? If Corporations are “people”, then will the court strip away many of the benefits they get out of “Incorporation”?
zonks • January 25, 2011 11:15 AM
“whether or not corporations have the same rights to “personal privacy” that individuals do. ”
But in this post-9-11 world individuals supposedly do not have right to personal privacy. So if corporations are to have the “same” right, it right equals not having a right.
O sorry this is not about personal privacy but about “personal privacy”.
Comment 9856895421 • January 25, 2011 11:17 AM
@Technotron:
If Corporations are “People”, will the Supreme Court allow companies to get married?
—
hmmm so the next thing is corporations will want to have the right for same sex “marriage”.
HJohn • January 25, 2011 2:30 PM
@Comment 9856895421: hmmm so the next thing is corporations will want to have the right for same sex “marriage”.
…and then the right to insurance to cover damages that existed before they purchased the insurance.
Point being these comparisons can go on forever and, while often hilarious, often send us off course.
Corporations aren’t people, but they are often groups of people. They can’t be culpable and have rights in the sense that people do, but they should be culpable and have rights. The right balance is something reasonable people can differ on. There are things that they should be able to keep private, things they should disclose, and there are things that fall in between based on circumstance.
Nick P • January 25, 2011 3:16 PM
@ moderator
Wheres the comment I posted yesterday morning? These delays have been happening to a lot of my comments lately.
Moderator • January 25, 2011 4:19 PM
Nick, it’s not in the database. In the server log it looks like the comment was previewed but never posted.
nick p • January 25, 2011 5:16 PM
@ moderator
Mustve been a glitch. Thanks for looking into it. Ill try to redo it.
Nick P • January 25, 2011 5:27 PM
@ BF Skinner (repost)
Great points. The excellent documentary, The Corporation, applied the WHO’s diagnostic checklist for psychopathy (A.P.D) to case studies of corporate behavior. They found that the average corporation is the prototypical psychopath, meeting more diagnostic criteria than most human psychopaths. The 3 hour movie provides many more insights and interviews with corporate leaders and is free on youtube. Id recommend everyone check it out.
More specific to this debate, why should we be giving privacy rights and limited liability to a psychpath in the first place? I think we should increase the accountability of a person whose only want is increased ROE at all costs. It also bugs me that Id spend jail time and loose nearly everything for a thousand dollar fraud, whereas a corporation usually just gets a fine and its management MIGHT face prosecution. Something just seems inherently wrong with that…
RobertT • January 25, 2011 8:54 PM
@Nick P
“It also bugs me that Id spend jail time and loose nearly everything for a thousand dollar fraud, whereas a corporation usually just gets a fine and its management MIGHT face prosecution.”
I agree completely, corporations should be held accountable for their actions AND jailed if transgressions warrant. As a matter of fact I’ll personally fund and build a “corporation jail” if the legislature agrees to pay me the typical amounts due a private jailer. I’ve got my accountant working on the exact details of how many corporations I can legally incarcerate in one cell, before I fall foul of the “International Corporate Rights Commission” 🙂
Sorry, Nick I couldn’t resist the temptation.
Nick P • January 26, 2011 1:55 PM
@ RobertT
Haha! I was actually thinking more of jailing the people involved in the criminal decision. But if we build your jail, all we’ll need is a filing cabinet. 😉 I’m also giving you the heads-up that my personal corporation, when out of corporate prison, plans to sue you for emotional distress, wasted bandwidth on this post, and physical injury sustained due to “crinkling.”
DD • January 27, 2011 10:07 AM
Article in todays NYT front page below the fold,
deutsche band and morgan stanly foreclose on Sgt Hurley while hes serving in iraq. foreclosure was illegal, His wife and to young children were kicked out and the house was sold. he owed 100,000, they sold it for 76,000 he comes home from iraq, thinks that the law, a law that purports to protect those serving on active duty from creditors. It dosen’t. the banksters don’t care. Like the bill of rights, no penalties are specified in the law.
what I think, the bank should be liable for returning the home to him, because what they did was a crime, and the new owner who purchased essentially stolen property can sue the bank. the new owner and the sgt. should get punitive damages, for the property, for the crime, and for the effect on the sgt.s life, homeless or whatever with two children but since banks have no regulations except the ones they make or have their proprietary senators make for them.
this sort of “mistake” carried on knowingly for over five years should result in damages that make all other banks take notice and even look to see what they are doing to others, there are numerous case of the same thing.
but banksters are like dickcheney, who had other priorities when he go his 5 deferments, and other priorities when he and the Oil companies, (still secret energy plan) planned the iraq war. along with the israeli agents wolfowitz and perle, (look at their curiculae vitae on the internet and find AIPAC and JINSA
Moderator • January 27, 2011 1:45 PM
DD, I’ve warned you before to stick close to the topic. In particular, I am completely out of patience with the way that you constantly free-associate your way to some kind of rant about George Bush and/or Dick Cheney. If you start your own blog you can talk about anything you like, but if you want to keep commenting here, focus on the actual subject of the thread from now on.
aikimark • March 1, 2011 1:37 PM
SCOTUS unanimous ruling against AT&T:
http://www.dailykos.com/story/2011/03/01/951361/-SCOTUS:-A-corporation-is-not-a-person
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DD • January 20, 2011 7:57 AM
Corporations were invented by the supreme corrupt, for their friends in the 19the century railroads and other big industries. They exist so guys like lloyd blankenfeld can do whatever they want and if people get killed or land gets polluted, the corporations can go blithly on and no person can be held responsible.
Called anonymous societies, and other things in europe, the whole point is to avoid criminal responsiblity for crimes and torts.
will the five black robed traitors who installed the callow bush boy as president against the popular vote, do anything except what their masters want.
NOt a chance. Corporations are winning all our rights and taking them away from us.