Creating incentives to get results that we as a society have resolved to achieve

[Boojatta]

Suppose that hiring somebody and training that person increases revenue and costs by exactly the same amount. There is no additional profit. However, shouldn't there be an incentive for the person to be hired? Somebody received training, has a job, and is paying taxes on employment income. Corporate law could be changed to require that corporate management that has hiring authority and that makes the hiring decision will get some increase in salary or benefits to encourage such hiring.

There are various methods of increasing corporate profits. For example, one method is to move work that American citizens are doing in the USA to an overseas location where either nothing like our laws have been enacted or laws resembling our laws aren’t actually enforced. Suppose authorities at the company suspect that there were violations, at the company’s work site outside US jurisdiction, of employment law, environmental protection law, copyright law, or other laws. The US company cannot influence US courts to subpoena people and investigate what happened. For example, maybe a criminal organization at the work site outside the USA is paying bribes to evade the law, or maybe individual members of a criminal organization have close personal ties with people who have political power in the jurisdiction of the work site.

The American company is like a drunk driver. Lacking the capacity to work from an American jurisdiction to orchestrate competence and integrity overseas, the American company cannot be blamed for the details of what happened outside US jurisdiction.

Consider an analogy. The law permits people to stay sober all the time, and the law permits people to become intoxicated. The law doesn’t require, before you get a license to drive a motor vehicle on public roads, that you get highly intoxicated and pass (while intoxicated) a demanding road test on a driving simulator. The law doesn’t demand that an intoxicated person drive a motor vehicle safely on public roads.

What the law condemns is an intoxicated person’s act of choosing to drive on public roads. That action is what creates the hazard. Similarly, the American company can be blamed for choosing to move the operations outside US jurisdiction. It is in the action of choosing to move operations and jobs outside US jurisdiction that hazards are created. Corrupt bureaucrats can extract bribes and use the money to buy products and services from criminal organizations, toxins can be released into the environment and travel around the world, unsafe products can injure or poison consumers around the world, etc.

Of course, labor costs are much lower in various parts of the world that are outside US jurisdiction. For example, political prisoners work for food, or work to avoid torture while they slowly starve to death and new political prisoners are arrested to replace them.

Is it good public policy for corporate law to permit corporate managers to be rewarded for increasing corporate profits, regardless of how they increase corporate profits?