Much
has been written regarding the tension between the selfishness of profits and
the resulting benevolences of solid business practices. The tension reminds us
that there are no easy solutions to the human problems of poverty, corruption,
greed, fraud, indifference, economic pain, and financial enslavement. Will an
economic policy that allows for selfish acquisition of property and
accumulation of wealth result in gross negligence of the impoverished? Or will
a policy of forced coercive sharing of property and communal equality result in
shared wealth and a dramatic diminishing of poverty? These questions and more
leave philosophers and economists perennially perplexed by the complexity of
issues affecting the future of society and culture.
When
looking at broad economic policies and how businesses shape communities,
cultures, and connected corporate structures, it becomes imperative to study
the core of human nature and how economic growth hurts or helps the overall
public good. What does it mean to an individual and to a society when a
business becomes profitable? Is there a breaking point when individual or
collective profits exceed public good?
There
are issues connected to incentive, capitalism, greed, profits, responsibility,
selfishness, altruism, charity, and social expectations, not to mention
interest rates, investments, and banking that all deal with economic policy.
Rather than these cloudy issues becoming a philosophical burden with often
murky ethical conclusions, it is probably wise and ironically inspirational to
view these discussions with optimism and opportunity for clarity of social and
economic thought. As in all matters that blend philosophy and utilitarianism,
it would be beneficial to examine Aristotle's writings on the subject and take
great consideration of Biblical teachings in the process.
Beginning
with the conclusion of this essay, I must express the John Wesley belief that
we are required to make all we can, save all we can, and give away all we can.[1] Adhering
to these principles demonstrates a profitable outlook, a meaningful strategic
plan, and a measurable ethical worldview. Acting according to these principles and
with balanced equality is consistent with business growth, personal attainment,
and corporate benevolence. All three support the idea of individual and
collective achievement in the business world.
Greed
and selfishness are two character traits that have been traditionally regarded
as evil flaws in our basic human makeup that we should work diligently to
squelch and ultimately defenestrate as not being worthy of virtue and ethical
practice. We have watched movies, read books, and listened to many sermons
ranting against the terrible vice of greed, convinced beyond question that the
world has suffered greatly from the vicious selfishness of personal acquisition
and unbridled corporate profit taking. We further propagate and substantiate
this attitude of resentment by finding examples of unmitigated greed in
personal lives as well as in the practices of many businesses.
While
there is no question that exorbitant and unrestrained profit taking by
individuals and institutions have resulted in shocking abuses as well as a
deplorable lack of sensitivity to those suffering from poverty, at the same
time, we do need to give economic consideration to the economic benefits of
monetary gain. We may be appalled at the vast wealth that many people and corporations
have accumulated but it is essential to remember that accumulation usually is a
long process that involves economic growth and progress. Even those rare
instances of instantly acquired wealth causes further growth, albeit somewhat
immediate, in the economy.
A
word of how economic principles work is order at this point. Every time a material
good is exchanged for money, regardless of the amount, the economy benefits in
some kind of way. A growing economy is one where trade occurs in a robust
system of supply and demand. Unless a person places money under a rock and
never uses it, the economy will grow from the trade itself or the event of the
trade. If a serious investor purchases 10 million shares of a company and those
shares go up $1 causing the investor to sell his shares at a profit, then the
economy benefits. If he or she then decides to spend the $10 million dollar
profit on a new yacht, the economy benefits. If he or she takes the gain and
puts it in the bank, the economy benefits through interest rates and loans. But
if the gain is buried in the ground, the economy stops benefiting through the
inactivity of the profit. If he or she decides to give away the money to
various charities or causes, the economy benefits by furthering the trading
power of the money.
This
becomes complicated when a closer study of charitable giving reveals situations
where reinvestment of profits is paradoxically more benevolent that giving
freely to those in need. In spite of the seemingly "nice" gesture,
there are times when excessive and unregulated giving ultimately results in a
painful recessionary economy that could bring all business to its knees, not to
mention entire cultures and civilizations. "Charitable giving may not be
the most effective way of solving world poverty. Indeed charitable giving may
even distract from finding the best solution - which might involve a complex
rethink of the way the world organises its economic relationships, and
large-scale government initiatives to change people's conditions. If that is
so, then the effort put into charity might be better devoted to pressuring
governments to bring about needed change. And governments might be more likely
to focus on dealing with poverty if they weren't being helped by
charities." [2]
This
is not to say that charitable giving is economically untenable in today’s
world. Responsible giving and responsible causes help keep the economy moving
forward as people are given the tools they need to be productive. Individually
there are certainly times when a donation or an act of selfless benevolence is
the right thing for the circumstance, particular when the situation is out of
the hands of recipient. But it is worth thoroughly examining what charity
actually means to an economy, to an individual, and the cause it is seeking to
benefit. No economic act of selfishness nor selflessness goes without a cost
and such is true with any form of charity or benevolence.
But
what is the role and responsibility of economy if not to allow and encourage
trade and growth in order to meet personal and collective needs? In a free
trade economy, people have the incentive to develop ideas, to work hard, to
increase their trip, and to improve their current conditions. An open economy
of supply and demand without excessive manipulation by regulation and unruly
restrictions allows for the system to work to the betterment of everyone. In a
perfect world, supply and demand meets everyone's needs over time and keeps an
economy thriving at a high and consistent rate. Yet we do not exist in a
perfect world. In a free market economy, all people work according to their
needs and the supply works hard to meet the demands for products and services.
It makes for an ideal libertarian world apart from the constant and unwieldy
burden of governmental interference in our lives at every level.
The
libertarian position is certainly strong and to be respected for its love of
freedom and for broad consideration of all people, but the libertarian position
assumes a type of goodness that resides in human beings to make the best
decisions over a period of time. It is that of an optimist unable to recognize
the potential for corruption and fraud, and the potential for people to relish
or at least ignore the suffering of others. Some humans have an unlimited
capacity for inflicting pain on others and remaining selfishly ignorant of the
plight of other people and, in some cases, entire cultures.
Examining
the concept of altruism has been a common practice for philosophers since the
anti-altruistic positions of Ayn Rand. She proposed an "objectivist"
philosophy of selfishness and self-interest as serving the greater social
needs, advocating that every person should seek to improve him or herself
through entrepreneurship, diligent effort, commitment to excellence, and
economic capitalism. For some who choose to stretch the concept, her approach
leanes toward the modern idea of libertarianism. On the surface, objectivism
makes logical sense in its personal imperialistic pursuit of individual happiness
that collectively benefits culture through artistic and economic growth and
improvement. But the philosophical position begins to fall apart when seriously
studied in terms of the impoverished and the disabled. Turning a blind eye to
the suffering is not within the social guidelines of ethical responsibility and
should never be glorified as a virtue. Objectivism as a philosophical position
to be studied is certainly valid but when viewed as a practicing virtue, it
does not have the strength of ethical responsibility and further points to a
world without social consciousness. Objectivism, however, is not without merit,
and its contributions to identifying profit goals for corporations are
constructive for building a strategic model for success. Profits in business
are not only to be expected but are virtuous in their basic design. It is when
objectivism ignores social responsibility and human sensitivities that it loses
its validity.
When
vast profit-taking of a business overrides human values and then results in the
pain and suffering of other people, the motive and the practice must be
reassessed. The profit motive is a strong one and can be vastly and mutually
beneficial to many, or, rather sadly and in some cases, terribly harmful. As in
any endeavor that is inherently good, profit has the potential to govern all
thought and become a god in and of itself. Our desire to worship something is
real and pronounced, causing us to fill the emotional void in our lives with
something. For a Christian, this gap or void is filled with God, resulting in
supplication and redemption of our natural inclinations. Yet regardless of a
person's religious preference or beliefs, the fact remains that we tend to fill
our lives with some kind of deity. Our natural inclination is to deify those
things which may not be virtuous in all situations, and to honor those ideals
that fit our own personal makeup. The result is often obsessive and perhaps
addictive behaviors including problems with alcoholism, drugs, sex, and even
money. We read and hear each day about criminal behaviors caused from drugs or
stealing or other such destructive forces. When the purpose controls the
person, the person’s humanity is eroded to the point of serving the wrong
deity.
To
be fair, there is nothing wrong with having a strong philosophical and
pragmatic purpose, and for a business that purpose is profit. The profit motive
is a good one and companies that focus their core business on making profit are
successful. In a grand sense, this follows the admonition to "make all you
can" and to use your talents accordingly. A good company seeks to increase
its profits by expanding its business and thus creating greater value. This can
be done in a multitude of ways including investing profits back into the business,
increasing productivity, raising prices, marketing globally, or acquiring other
businesses. But a business must always be mindful of its original purpose of
making profits by staying targeted on its origins and avoiding unnecessary and
often debilitating expansion.[3]
The point to be made is that creating a profitable business is hard work and
requires energy, planning, marketing, productivity, accounting, inventory, and
mostly lots of consumer or business to business demand. When a business is
profitable, everyone gains, including the producer, the agency, and the
consumer.
Any
book, article, speaker advocating for a skewed position that says profitable
businesses are not socially responsible are simply ignorant of what business means
and how the economy works. It is an erroneous position to claim that the
purpose of a business is to be ethical or to serve the public good. A
corporation with that motive will fail in its enterprise unless, of course, it
is a charitable, non-profit organization, in which case it is questionable to
call it a business. The purpose of a business is to generate a product or
service that makes profits for the business. To summarize the teachings of
Michael Porter, Professor at the Harvard Business School, business is not about
besting the competition or commanding a market share, it is, rather, simply
about profits whether the company is large or small.[4]
As
a business increases its earnings, the profits are often reinvested in products
or, in the case of the wise CEO, in personnel. A business that values its
employees works to create value in them and in their work. This is expressed in
many ways with compensation being an important part of that value. When
employees are duly compensated for their work, the result is often loyalty,
trust, accountability, and higher expectations. Profit is a strong motivation
for business owners and employees benefit from increases in the business,
unless, of course, the compensation is artificially contrived. Such is the case
for increases in the minimum wage requirement.
It
is not within the scope of this essay to delve into the economic problems of
minimum wage except to demonstrate how a false wage increase mandated by the
federal government actually results in unemployment and loss of productivity.
When employees are compensated for achievement and for producing beyond their
initial expectation, the monetary benefit extends to the entire company as
profits are increased. But when an artificial wage minimum is imposed on a
business, unless the business has either had a shockingly profitable quarter or
unless the business is deliberately mistreating its employees, the new wage
will likely result in unemployment or reduced hours. Keep in mind that the best
companies, recognizing the value of its employees, will compensate employees
according to its own profit margin. When a minimum wage is required, many
companies will not be able to meet that demand and will find other ways to
remain solvent.
In
a well-intentioned gesture, minimum wage tries to help everyone and ensure
compensation that is adequate for putting food on the table and a roof over the
head. In some sense, that does happen, but the contrived program of minimum
wage generally does more harm than good for a society. It takes away incentive
and forces a business to react to the constraints of its own financial picture.
Granted there is some research arguing for minimal employment damage after a
minimum wage increase, and certainly not all companies are hurt by the
requirement.[5]
In general, however, an ethical and responsible business suffers under the
federal interference of wage minimums.
This
then brings us to what it means to be an ethical and responsible business.
Keeping in mind the admonition to "make all you can" and the reminder
that profits are not in and of themselves problematic and, indeed, often
generate the kind of economy that carries with it social responsibility, at the
same time, the principle only works well with those businesses who recognize
the role that businesses play in the collective gain of societal improvement.
This includes supporting education, families, the legal system, social
contracts, entrepreneurship, and altruism. In a subtle or not so subtle way,
all businesses support these ideals through their diligent effort at turning a
profit. Each time a product is produced where the trade for the product
improves the value for the consumer as well as the producer, society gains in a
multitude of measures.
But
there is a personal and corporate line where profit without responsibility has
negative social and ethical consequences. Those consequences are not
necessarily economic, although argument could be made that selfish hoarding of
wealth does not serve an economic gain for many people, but the consequences are
likely to the heart and soul of the individual or, in the case of a business,
the core of the company. Just as personal morality is potentially eroded
through a series of self-destructive actions which include but are not limited
to: stealing, lying, cheating, inflicting pain, and abuse, so also is a
business's core eroded through similar actions. Contending that corruption and vice
always result in failure is rather naive and unsupported by evidence; but there
is no question that consistent and heinous corruption is damaging and usually
detrimental to achievement and long-term success. This is evidenced by the
immediate fame and ultimate demise of stars such as Oscar Pistorius and Lance
Armstrong both of whose deplorable conduct took authority over their fame and
achievements.
On
the corporate level, we have watched Enron, Tyco, WorldCom, AIG, Bernie Madoff,
and many others rise to the surface as dead fish destined to decay on a dry and
deserted beach. These businesses suffered not just from creative and corrupt
accounting practices but also from a lack of scruples, integrity, and social
responsibility to shareholders and culture at large. Their infrastructure from
the top down crumbled due to unrestrained greed, selfishness from leadership,
poor business planning, and a shocking lack of honesty and integrity. It was
not that their desire to be profitable exerted control over their actions; it
was more that the leadership's lack of moral fiber and social responsibility
caused the individuals to be misguided in their profit seeking decisions.
An
analogous look at this could provide greater clarity on this problem of blame
and historicity. I knew a former student who fell into hard times and had
trouble supporting herself. She had recently lost her job and had no immediate
solutions to putting food on the table. While there were many solutions to this
problem including charitable organizations in town, temporary day employment,
loans, family, friends, she chose instead to steal some food from a local
grocery store. Had she taken a minimum of food for a meal or two, perhaps the
store would have been a little more redemptive in its punishment of her action.
But as she was taking the food, she began to consider the personal benefit of
more. Her cart grew in volume and she left the store with nearly $200 worth of
food. In visiting with her later and listening to her story, I asked her why
she felt compelled to steal and why she stole that much. She could not answer
very well except to say she put aside her personal scruples and decided to see
how much she could steal.
Food
is a natural expectation for our bodies just as profits are a natural
expectation for businesses. There was nothing wrong with the young lady's
desire to eat, but her methodology was seriously flawed, resulting in community
service and a criminal record. She put aside her virtue, replaced it with vice,
and faced the consequences of her action. On a much larger scale, the above
named companies did the same thing. When leadership seeks after profit without
considering how the virtuosity of their methodology, the result is potentially
criminal.
The
crime in stealing is the act in and of itself regardless of the amount. The
crime, no matter what a criminal may claim, is not in getting caught, and the
virtue is not escape from public notice; the crime is the act of stealing or
lying or cheating or any number of legal and personal iniquities. When
leadership or CEOs or managers accept the lack of honesty as normal or even
right, the result is mass deception on a global scale, ultimately affecting
thousands or millions of people and thereby defenestrating all social
responsibility. The problem with such actions is not in seeking profit nor even
greed by itself, and the problem is not poor planning and then getting caught,
nor is the problem quantifiable by amounts of money taken, the problem rests
with individual and corporate integrity and ethics.
In
the marvelous book Greed and Corporate Failure, the authors examine the
mistakes of several major companies already mentioned. Although the use of the
word "Greed" is used in a negative light, and I maintain it is
actually more of a virtue than a vice and knowing that quibbling over semantics
of a word is not productive, the book does remind us of how easy it is for
corporations to fall into the vicious trap of poor accounting and corrupt
management. Even with strong internal controls, honest governing boards,
and competent accountants, when leadership practices a philosophy of dishonesty
and fraudulent reporting, the end result is corporate failure. WorldCom, for
example, had several protective devices in place but still sank due to a lack
of virtuous behavior by one CEO. "WorldCom did have a few excellent and
experienced directors who would never have tolerated even marginal accounting
practices, let alone fraud, had they known about them. But the board only met,
on average, quarterly and the meetings largely involved formal presentation
from management rather than detailed discussions. With weak internal controls,
ineffective external auditors and a laissez-faire audit committee, outside
directors had little chance of detecting the fraud."[6]
The
stories of WorldCom, Tyco, and Enron are big and markedly public examples of
corruption and fraud. While major loss of millions usually makes headlines, of
equal or greater concern are the many levels of dishonesty and unethical
practices that occur in lesser amounts or unknown corporations about which we
never hear. But regardless of how much or how often or in what way these things
occur, in the end we must continue to advance the cause for virtuous actions in
personal behavior and in corporate practice. To do so is to act responsibly for
the greater social good of how business benefits all people in a robust and
exciting economy.
In
conclusion we return to John Wesley’s encouragement to make all you can, save
all you can, and give away all you can. It is time for all people and
businesses large and small to commit themselves to profit making, to building
an inventory for the future, and to contribute to those in need. Such is the
responsible role of the businessman and
in those desiring to create value in the business. Rather than finding
fault in successful business, it is time to applaud them for their achievements
while exhorting them with great patience and wisdom to practice a watchful and
compassionate action on the impoverished, the widows, the orphans, and on the
disabled. But without undue criticism, we should all be mindful that many times
profits are a form of benevolence in this complex economic world.
[2] http://www.bbc.co.uk/ethics/charity/against_1.shtml--accessed
2/24/2013.
[3] Zook, Chris and James Allen. Profit
from the Core. Boston, Massachusetts: Harvard Business Press, 2010, pp.
23-62.
[4] Magretta, Joan, Understanding Michael
Porter. Boston, Massachusetts: Harvard Business Review Press, 2012, pp.
19-35.
[5] http://www.businessforafairminimumwage.org/news/00135/research-shows-minimum-wage-increases-do-not-cause-job-loss,
accessed 2/25/2013.
[6] Hamilton, Stewart and Alicia
Micklethwait, Greed and Corporate Failure: The Lessons from Recent Disasters.
New York: Palgrave Macmillan, 2006, p. 77.
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