Corporate Responsibility Revisited

[Wolfman]

I often hear people talking about a corporation's responsibilities, not only in terms of responsibility to shareholders to make profits, but also responsibility to society. In some cases, I would tend to agree with this; I believe that corporations do have a responsibility to contribute some portion of their profits back into society, and to avoid practices that are harmful (ie. pollution, unsafe work conditions, etc.).

But the area I'd like to address is the issue of "loyalty" to their employees. I hear this raised in a variety of formats. When a company is losing money, and they have lay-offs, or close down a factory, then they are criticized for doing so, for putting their hard-working and loyal workers out of a job. Or when jobs are relocated overseas, to countries where the salaries are lower, they are accused of lacking loyalty not only to their employees, but also to their country.

Well, I'd like to turn this around, and look at it from the other point of view. Employee loyalty to their companies.

Tell me -- if Joe Average were working for Company ABC, and then Company XYZ offered him more money (or higher position, better benefits, etc.), how likely is it that he'd take that job? And if he took the job, would it be fair to accuse him of disloyalty to his own company?

Here is the plain fact of life for about 98% of humanity (IMNSHO). We are all motivated by self-interest. The employee's choices are not motivated in general by what is best for the company, but rather by what is best for themselves. If another company offers them more money, better benefits, higher position...why should they not take that? Even if doing so may cause problems for their previous company?

Now, I'm not criticizing this. Quite the opposite. I myself will make my life and career choices based on what is best for me. I've changed jobs when a new job offered a better situation, and I've felt not even a moment's pang of guilt for any difficulties that may have caused my previous company.

And now, I've gone from being the employee, to being the employer. I own my own business, and I hire others to work for me. I do my best to offer fair wages, a good work environment, etc. But in the end, I know that every single one of my employees could leave me tomorrow, if they find something that they feel is more beneficial for them.

Nor would I try to prevent them from doing so; in fact, I've informed all of my staff that if they wish to leave for another job, I will not try to prevent them, and will happily offer an honest reference letter for them. I do not feel that they "owe" me any special loyalty; they must make the choices that are best for them.

And I do not believe that changing my position from being an "employee" to being and "employer" means that somehow I should suddenly change. I'm taking far bigger risks, and have much more responsibility, than I ever did an an employee, yet people try to tell me that now, suddenly, I should consider only what benefits those who work for me.

Well, at the risk of being massively politically incorrect, I say, "BULL-EXCREMENT!" *

My first responsibility when I was an employee was to make the decisions that most benefited me; and now that I am an employer, my first responsibility is still to make the decisions that most benefit me. Just as in the past, I would change jobs if it offered me higher pay or better situation, so now would change my office location, fire old staff, hire new staff, or make any number of other changes that will offer me higher profits or a better situation.

Now, there's a balance here. I know for a fact that if I treat all of my staff very badly, the best ones will leave, and my business will suffer. It isn't always about finding the cheapest staff. And I have to keep a balance between the two sides.

But I know that every single one of my staff would be willing to leave me, at the drop of a hat, if they were offered significant enough motivation to do so. They will not sacrifice their opportunities, their chances to make more money and live a better life, just because it will inconvenience me.

Why should my motivations be any different? I offer excellent pay to all my staff (in fact, I pay a good deal more than the industry average), and in return I get the best people. I offer a good work environment, and plenty of perks. I offer support to all of my staff to improve their skills and knowledge, to get higher positions, etc. In fact, almost everyone in my company loves being there, and enjoys the work.

But I do that out of self-interest -- because I know that spending money on these people now guarantees that I get the best people in the industry, and that I will make more profits. I can guarantee you that if doing these things did not benefit me also, then I would not do them.

And if, in the future, it proves more beneficial for me to close my office here, fire everyone, and move to another location -- I will do it. If an economic crisis strikes, and I'm losing money, I will lay off or fire people as a result.

Cold-hearted? Perhaps.

But when I ask people, "Would you be willing to make a personal sacrifice of making less money, guaranteeing that you would never leave to work for someone else who offers more money, in return for a guarantee that I will never fire you, that you will always have a job?" -- almost nobody is willing to agree. I know that I wouldn't agree.

The idea that I owe a higher degree of loyalty to my staff than they would ever be willing to give to me is ludicrous. The idea that I should make sacrifices to benefit my staff, when my staff would leave me in a heartbeat if they found a better chance elsewhere, is insane. The idea that it is right for my staff to make decisions based on what benefits them the most, but that I am not supposed to do likewise, is ridiculous.

:D

This oughta' stir up some debate :cool:

[Wolfman]

* If you are unclear as to the meaning of "bull-excrement", please feel free to read the Sept. 7 issue of "SWIFT" (http://www.randi.org/jr/2007-09/090707cruise.html) from James Randi, in which he uses the full, correct, unedited, unaltered, and uncensored version of the word which he has forbidden us to use here

[fxm]

As an employer, you do have a responsibility to your employees... to the extent that, in the aggregate, your employees' interests are aligned with the company's interests. There's a balance there; tip the balance too far towards the interests of any individual employee, and you're going to be in trouble -- losing money by paying employees more than you can afford, or having employees that don't do a good job for you but that you can't get rid of.

Likewise, if you go too far in the other direction, you'll also be in trouble -- you won't be able to attract people with suitable talent who will be motivated to do a good job for you.

This is generally true, I think, of most "corporate responsibility" -- a company has to do enough to ensure that the business won't suffer due to its behavior.

[balrog666]

Quick answer: we're all mercenaries.

[Matt the Poet]

As an employer, you do have a responsibility to your employees...

How about 'as a person, you do have a responsibility to other people'? This employer/employee distinction seems a bit spurious to me.

However, remove it and the OP starts sounding more like the work of a sociopath than a successful businessman - Wolfman, are you honestly saying that you feel no compulsion at all to behave morally?

[tkingdoll]

How about 'as a person, you do have a responsibility to other people'? This employer/employee distinction seems a bit spurious to me.

However, remove it and the OP starts sounding more like the work of a sociopath than a successful businessman - Wolfman, are you honestly saying that you feel no compulsion at all to behave morally?

How is he saying he's not behaving morally? He's saying he gives the same level of loyalty to his employees as they do to him. Morals don't come into it.

Would it be immoral by your standards for the employee of a family-run, small business to take a better-paid job with a competitor company, taking all of his knowledge of his previous employer's business, their customers, practices and procedures with him?

Do you think the practice of headhunting is immoral?

Is it immoral to join a company, at a cost to them of thousands in recruitment expenses and induction costs, further thousands in training hours, and then leave a few months later?

[Matt the Poet]

How is he saying he's not behaving morally? He's saying he gives the same level of loyalty to his employees as they do to him. Morals don't come into it.

No he isn't. He's imputing, without much evidence, the lowest possible moral standards to his employees as a justification for behaving the same way himself. The world is full of people who stay in low-paid jobs because they gain satisfaction from doing what they're doing, a satisfaction that often comes from the contribution they make to the world around them

Would it be immoral by your standards for the employee of a family-run, small business to take a better-paid job with a competitor company, taking all of his knowledge of his previous employer's business, their customers, practices and procedures with him?
It would depend on what the company was, the employee/employer relationship, their previous commitments. If their employer behaved like Wolfman intends to then no, not at all. If they were working for long-time friends in a little mom-and-pop store and they moved to Walmart and helped to crush their former employer's business, yes.

Do you think the practice of headhunting is immoral?
Again, it's case-by-case. Do you discard whatever moral sense you've gained from wider society at the office door?

[Spindrift]

The issue I've always had is that it's the hypocracy of preaching that the employees should be loyal to the company, but then when times are tough, employees are let go en masse while the CEO and other upper execs then receive bonuses for the belt-tightening.

Employers sometimes delude employees into believing that if they sacrifice all they will be rewarded. That reward? A severance check, if they're lucky.

Layoffs are often necessary for a company's survival, so I'm not saying that layoffs should never occur. What I object to is getting employees to "commit" to the company, when there is no reciprocal commitment by the employer.

Best company I ever worked for never had layoffs. Lots of people got fired, but no layoffs. The CEO/Pres made it clear that all dead wood was to be cleared and the culling was continuous. When the company was sold, it quickly became clear that the buying company was full of dead wood, but we couldn't do a damn thing about it. I left. Last I heard the company was a shell of it's former self after several layoffs.

[tkingdoll]

As there's no such thing as a job for life any more, there isn't such a thing as loyalty to one's employer, unless you work for someone you have personal loyalty to, of course. But I would hazard that most people aren't loyal, and would leave for a better paid job, and part of that might be because they know if push came to shove, the company would lay them off to save money. But essentially, if you have the right to leave at any time, they have the right to get rid of you at any time.

There are knock-on effects if they do this all the time, of course. Their reputation would become one of an unstable employer and they would cease to attract the best candidates. But the same is true of a job-hopping employee - it's hard to get the best job if you look flighty.

I have, historically, given my loyalty to companies but as the redundancy decisions are made from a higher level than the department I work in, I've found my loyalty pointless. Positions are made redundant, not people, so the decision is based on which positions are cost effective and/or dispensable. Now I'm the employer, and would get rid of someone loyal to save my company, without a doubt.

I've also experienced the horrible situation of the most 'loyal' employees simply being expensive encumbants. Guys 8-10 years from retirement who have given their lifelong loyalty to a company but refuse to move with the times, adapt to a more competitive business environment, take on board the fact that women and ethnic minorities are not inferior, or even answer the phone 'because it's not their job'. These people are a huge drain on companies but loyal as hell. I'd rather not reward their loyalty a day longer than necessary. Of course, when such people are made redundant, their lament that their loyalty went unrewarded takes up more energy than they put into their jobs in the past 30 years.

[Paul C. Anagnostopoulos]

I vote that we all become self-employed subcontractors and that the concept of a company be abandoned.

However, the government tax collectors do not agree with me.

~~ Paul

* Get over it, dude.

[Ranillon]

My first responsibility when I was an employee was to make the decisions that most benefited me; and now that I am an employer, my first responsibility is still to make the decisions that most benefit me. Just as in the past, I would change jobs if it offered me higher pay or better situation, so now would change my office location, fire old staff, hire new staff, or make any number of other changes that will offer me higher profits or a better situation.

Now, there's a balance here. <snip>


I would agree with you if there really was a more-or-less balance between labor and enterprise -- a system where both sides have the same level of power would naturally tend to be self-correcting. Problem is that on the whole there isn't a balance. Enterprise has a great and growing advantage over labor. In fact, the balance is getting worse everyday.

While there are of course exceptions on the average business has a tremendous advantage over the individual laborer. They naturally do anyway given that a business is a by-design concentration of power and influence while unless organized with other workers (something that thanks to changing social biases and government policy becomes harder everyday) a single individual only has themselves. All things being equal business is going to win. And, business has been doing everything it can to increase its advantage over the last 30 years (at least in the USA) which only makes the situation that much more imbalanced.

So, until there is more of a balance between the two your argument, IMHO, doesn't work.

[Wolfman]

How about 'as a person, you do have a responsibility to other people'? This employer/employee distinction seems a bit spurious to me.

However, remove it and the OP starts sounding more like the work of a sociopath than a successful businessman - Wolfman, are you honestly saying that you feel no compulsion at all to behave morally?
Are you honestly saying that it is "immoral" for a person who has one job to leave that job and take another one that offers more money? I'd say that no, it is not. It is entirely reasonable, and normal. And the motivation is simple -- self-interest.

And by the same argument, self-interest is a reasonable motivation in determining the best way to run a business, also. You seem to be suffering under the delusion that any decision based on self-interest is "immoral".

[fxm]

Enterprise has a great and growing advantage over labor. In fact, the balance is getting worse everyday.

Perhaps because I work in the magical realm of the Silicon Valley, I don't see this so much. Can you provide some evidence to support this statement?

[Wolfman]

I would agree with you if there really was a more-or-less balance between labor and enterprise -- a system where both sides have the same level of power would naturally tend to be self-correcting. Problem is that on the whole there isn't a balance. Enterprise has a great and growing advantage over labor. In fact, the balance is getting worse everyday.

While there are of course exceptions on the average business has a tremendous advantage over the individual laborer. They naturally do anyway given that a business is a by-design concentration of power and influence while unless organized with other workers (something that thanks to changing social biases and government policy becomes harder everyday) a single individual only has themselves. All things being equal business is going to win. And, business has been doing everything it can to increase its advantage over the last 30 years (at least in the USA) which only makes the situation that much more imbalanced.

So, until there is more of a balance between the two your argument, IMHO, doesn't work.
Ah. Okay.

So, let us summarize your position, based on this putative imbalance of power.

My employees should have every right to leave me if they find another position that offers more pay, better position, more advantages, etc. I don't believe you would support measures whereby I would force them to sign binding 40-year contracts that give them no opportunity to leave, nor do I envisage you championing that an individual employee should sacrifice a better opportunity simply to help the company.

The employees, in other words, can act completely selfishly, based on their own self-interest, and all is fine with the world.

But the moment that employee becomes an employer -- and, in the process, takes significantly more risks, and has significantly more responsibilities -- suddenly they are no longer supposed to think or act this way.

I do believe, as stated above, in laws requiring companies to adhere to certain standards -- to provide a safe work environment, etc.

But I'll tell you one thing -- a country that is filled with successful, profit-making enterprises is, in the long term, going to have a far higher overall employment rate than a country that acts in the way you seem to be encouraging. Why? Because if companies are allowed to act in their own self-interest, and generate more profits, then successful companies will grow rapidly, and be able to provide more jobs.

On the other hand, if companies are expected to act in some sort of self-sacrificing manner, their current employees may appreciate it -- but that company also will not grow or expand very quickly, because it lacks the profits to do so.

With the proper checks and balances to prevent abuse (such as reasonable minimum wage laws, anti-discrimination laws, etc.), I still argue that a company has the right to act based on what are in the best interests of the company as a whole; not based on some misguided concept of loyalty to employees who would leave you in a heartbeat if they themselves had the chance to make more money elsewhere.

[Matt the Poet]

You seem to be suffering under the delusion that any decision based on self-interest is "immoral".

Nope. I'm suffering under what you might consider to be the rather friendlier delusion that any decision based solely on self-interest is immoral. Like any adult, I consider the consequences of my decisions and actions on those around me. The action you describe may, or may not be immoral depending on the consequences:

1) An employee of a boiler room stock operation leaves for a better paid, less stressful job at the FSA, spills the beans on his/her previous employer and gets them shut down: probably moral

2) An employee of a care agency who has been looking after a dying writer quits and finds themselves in an entertainment law job where they can exploit their knowledge to secure film rights to a book at knockdown rates - probably immoral

[fxm]

Are you honestly saying that it is "immoral" for a person who has one job to leave that job and take another one that offers more money? I'd say that no, it is not. It is entirely reasonable, and normal. And the motivation is simple -- self-interest.

And by the same argument, self-interest is a reasonable motivation in determining the best way to run a business, also. You seem to be suffering under the delusion that any decision based on self-interest is "immoral".

It's more than just self-interest. A business has other stakeholders that are affected by its decisions -- customers, business partners, other employees besides those that might have been laid off. It really is a balancing act.

[Matt the Poet]

But the moment that employee becomes an employer -- and, in the process, takes significantly more risks, and has significantly more responsibilities -- suddenly they are no longer supposed to think or act this way.

My italics, but your words. It's a generally accepted moral principle in Western society (whatever that is...) that when you are placed in a power relation towards another person, such that your actions can affect their lives significantly, your burden of responsibility towards them becomes greater.

What makes the employer/employee relationship so different from the patient/doctor, teacher/student relationship in this regard? Why do the 'standard moral rules' case to apply?

But I'll tell you one thing -- a country that is filled with successful, profit-making enterprises is, in the long term, going to have a far higher overall employment rate than a country that acts in the way you seem to be encouraging.

High employment rates do not necessarily make for a happy, or even a particularly pleasant, society. Especially not if the underlying turnover of employees is very high.

...not based on some misguided concept of loyalty to employees who would leave you in a heartbeat if they themselves had the chance to make more money elsewhere.

You've provided little but your own assertion as backup to this belief. Are nurses, teachers or academics only doing their jobs because they can't find anything better?

[Wolfman]

Nope. I'm suffering under what you might consider to be the rather friendlier delusion that any decision based solely on self-interest is immoral. Like any adult, I consider the consequences of my decisions and actions on those around me. The action you describe may, or may not be immoral depending on the consequences:

1) An employee of a boiler room stock operation leaves for a better paid, less stressful job at the FSA, spills the beans on his/her previous employer and gets them shut down: probably moral

2) An employee of a care agency who has been looking after a dying writer quits and finds themselves in an entertainment law job where they can exploit their knowledge to secure film rights to a book at knockdown rates - probably immoral
Arguments from extremes -- beautifully done. What about the average Joe, who works in the average job, who is offered a better job?

I'm also curious as to what aspect of my OP you consider "immoral"? Is it paying higher wages to my staff than other companies, so that I can get the best people? Is it offering them ongoing training and opportunities to improve themselves and their work opportunities? Or would it be offering to write a letter of recommendation when they find another job that they want to change to?

If I wanted to ensure a "captive" labor pool, the best way to do so would be to offer little or no additional training, so that they would not qualify for higher positions or salary elsewhere. By giving them such training, and allowing them to improve their skills and knowledge, I also significantly improve their opportunities to get jobs in other companies.

Yes, that's right. I spend my own money in order to give them skills and knowledge that increase the odds they will leave my company.

I am a sadistic jerk, aren't I?

Why do I do this? Because my business attracts the best and the brightest. And while some will definitely leave, others will stay, and will be able to do more because of the training and opportunities they've received. And my company will, in turn, make more money.

Selfish? Yes. Immoral? No.

[Wolfman]

The issue I've always had is that it's the hypocracy of preaching that the employees should be loyal to the company, but then when times are tough, employees are let go en masse while the CEO and other upper execs then receive bonuses for the belt-tightening.
I would generally agree with you here. In my company, I give a standard speech to every new employee, regardless of their level or position in the company.

In that speech, I tell them that they owe no "loyalty" to me, as such...they I expect them to work at my company for one reason, and one reason only. Because the job they have in my company is the best opportunity that is available to them at present. So long as this job continues to be the best opportunity for them, they should stay here. If they find a better opportunity elsewhere, then they should leave -- and they go with my blessings.

I tell them that since they are receiving higher salaries than the industry standard, and since I'm putting a significant amount of money into training them and improving their knowledge, I expect the highest level of performance from them. So long as they perform to expectations, all will be fine; if they fail to meet expectations, they may be penalized, or fired.

So the responsibilities are simple:

My responsibility -- provide my staff with the best opportunities. If I fail in that responsibility, they have every right to go elsewhere, and find other jobs.

Their responsibility -- to do their best, to excel in their job performance. If they fail in that responsibility, I have every right to penalize them or fire them.

[The_Animus]

When a company is losing money, and they have lay-offs, or close down a factory, then they are criticized for doing so, for putting their hard-working and loyal workers out of a job. Or when jobs are relocated overseas, to countries where the salaries are lower, they are accused of lacking loyalty not only to their employees, but also to their country.

I think you aren't making a key distinction here.

If a business is in trouble and they need to lay people off to keep the business afloat, or their current costs are too high and they need to relocate that is fine.

If however the company is doing good financially and the onwer wants to move it oversee's so he can go from making 2 million dollars a year for himself to making 3 million a year I think that's not right.

If a company was doing good and then due to owner/management incompitance and inefficiency they decide to lay off tons of people so they can keep their $1 million salary, not so they can actually help the business, I think that's not right.

So I think whether what they do is right or wrong depends upon the specific situation of that company and the intentions of the owner.

[Wolfman]

I thought I'd add a little to the conversation here with an example from one of the most successful Chinese companies, Haier (they make household appliances such as washing machines, dishwashers, fridges, etc.).

About 10 years ago, as a result of a huge investment in automated machinery, they suddenly found that over 40% of their staff were now superfluous. They simply no longer needed them.

However, instead of firing them, or laying them off, what Haier did was started a hotel, and a chain of restaurants. They then gave the superfluous staff jobs in the hotel or restaurants, and training in their new jobs.

I think this was a brilliant solution, one that resulted in generating more profits for Haier from new business, while also providing jobs for all the staff who were no longer needed in the factories. But please note that Haier did not make any sacrifices, as such; they simply found a way to use their redundant labor pool to generate new profits.

If possible (and it is not always possible), I'd champion this kind of strategy as being one of the best.

[Matt the Poet]

Arguments from extremes -- beautifully done. What about the average Joe, who works in the average job, who is offered a better job?
I imagine that they will come to a decision based partially on rational self-interest, partially on the effects of their choice on those they care about, and partially on whatever moral principles they themselves hold. Just like you, me and everyone else who isn't being told what to do by priests and/or imaginary friends.

I'm also curious as to what aspect of my OP you consider "immoral"?
The implication that, as soon as commercial aspects become involved, you have no obligation to act on anything other than self interest.

Once again I ask - given that in any other situation in life, behaving based on that single criterion and nothing else would be considered the mark of an extremely unpleasant person - would, indeed, be considered highly immoral - how does it suddenly become a virtue in a commercial environment?

[Wolfman]

If a business is in trouble and they need to lay people off to keep the business afloat, or their current costs are too high and they need to relocate that is fine.

If however the company is doing good financially and the onwer wants to move it oversee's so he can go from making 2 million dollars a year for himself to making 3 million a year I think that's not right.
Again, let me turn the argument around. Lets talk about the employees.

If an employee's job is not good, their boss treats them badly, and the workplace is unsafe, and they are then offered another job, then changing and taking that new job is fine.

But if a company offers their employees good salaries, great work conditions, and good advancement opportunities, and the employee is then offered the chance to make $20,000 a year more in another company, would it be wrong or immoral for that employee to make the decision to do so?

I'd say no. The employee has every right to make the decision to take another job for more money.

What is their motivation for doing this? Simple. To make more money. Self-interest. They don't care how it affects me, or my business.

[Wolfman]

I imagine that they will come to a decision based partially on rational self-interest, partially on the effects of their choice on those they care about, and partially on whatever moral principles they themselves hold. Just like you, me and everyone else who isn't being told what to do by priests and/or imaginary friends.First, you give me arguments from extremes. Now you cite incredibly vague principles like, "whatever moral principles they themselves hold"...which, in practical fact, means absolutely anything (and therefore means absolutely nothing).
The implication that, as soon as commercial aspects become involved, you have no obligation to act on anything other than self interest.

Once again I ask - given that in any other situation in life, behaving based on that single criterion and nothing else would be considered the mark of an extremely unpleasant person - would, indeed, be considered highly immoral - how does it suddenly become a virtue in a commercial environment?
Actually, I have argued for a wide variety of criterion, not just one. I've cited numerous factors, such as the fact that a company that treats its employees in too mercenary a fashion will inevitably lose its best people, and in the long-term will suffer.

And I find it absolutely hilarious that on the one hand you hold me to some sort of a "moral standard", and declare my behavior immoral, while at the same time, when discussing employees, refer to "whatever moral principles they themselves hold". So employees are allowed a wide range of moral principles, but I must adhere to the one standard that you have decided is "moral".

[plumjam]

When an employee is laid off it's a 100% loss to that employee.

But even in a tiny business of say 6 employees, one of those employees voluntarily leaving only amounts to a 16.6% loss to that business.

Given that the great majority of workers are employed in businesses with a much higher number of employees than 6, you can see, I hope, how the power dynamic is greatly skewed in favour of the employer.

Thus your original argument, which seems to assume an equivalence between employee and employer, is undermined by the uneven power dynamic at work.

[Matt the Poet]

First, you give me arguments from extremes. Now you cite incredibly vague principles like, "whatever moral principles they themselves hold"...which, in practical fact, means absolutely anything (and therefore means absolutely nothing).

In the context of the argument, the actual moral principle isn't relevant. It may be something of which most sane people would heartily disapprove - your Average Joe might be a bigot who objects to working for Jews, for example.

My point here is that they will make the decision on numerous criteria and not pure self-interest at all. They will think about things wider than themselves, because people do that.

(Unless, of course, you've told them not to on their first day at work)

And I find it absolutely hilarious that on the one hand you hold me to some sort of a "moral standard", and declare my behavior immoral, while at the same time, when discussing employees, refer to "whatever moral principles they themselves hold". So employees are allowed a wide range of moral principles, but I must adhere to the one standard that you have decided is "moral".

I haven't declared your behaviour immoral. I've declared your attitude immoral, and I stick by that.

The problem, from what I can see, is that you seem to use words like 'employer', 'employee' and particularly 'the company' as if there were different species.

All there is, everywhere and always, is a bunch of people interacting with each other in a particular situation. And when people interact they tend (if they aren't psychos) to follow some pretty base level, uncontroversial rules about not hurting others, considering consequences and generally doing as you would be done by. Yet you seem to suggest that as soon as the interactive situation gets defined as a 'company' these rules go out of the window. Why?

[Lucifuge Rofocale]

As long as companies can't force consumers to buy their products, banks to give them loans, investors to give them money and talents to go wherever thy want, why should they retain people that is not valuable in that moment for them?
As a consumer, I wouldn't like to live in a society where companies are completely commited to their employees. Such companies, as talented employees are atracted to other companies, will soon be filled with the ones that can't leave. The lack of efficience and productivity will be traslated to prices and I'll soon we all be paying more for less quality goods. Giving that such companies won't survive in a open markets, I can't even buy goods from foreign companies so in the long run one of the following scenarios will happen:

a) The company will be out of business . (I guess that when that happens you are not forcing the entrepeneur to traslate the workers to his/her house).

b) Everyone will be poorer, forcing companies to close.

It has happened everytime here in Latin America when we had those laws mandatory.

Now that we got rid of most the unemployment rate is record low.

[The_Animus]

Again, let me turn the argument around. Lets talk about the employees.

Fair enough. I think my response would be similar in nature to plumjam. The power dynamic as he puts it is not equal. A business that lays off 1000 people so that a few board members or a CEO gets to make extra money above the excess needed amount they already make is wrong. You are hurting 1000 people for the benefit of a few who already benefit enough from the business and those employees as it is.

Also if you have a business that provides a good salary, benefits, safe work conditions, and so forth, then you should have no trouble being able to find a quality replacement if someone leaves. Those 1000 laid off people probably won't have such an easy time with finding new jobs that pay what they were making before.

[Ranillon]

Ah. Okay.

So, let us summarize your position, based on this putative imbalance of power. <snip>


Let's not -- and in the process avoid reframing my words into a strawman.

My point is that the current labor-management situation is heavily biased toward the latter. As a result the straightforward sort of "I can do anything, you can do anything" paradigm you offer is inappropriate (IMHO), not least because it can serve (and has when used by others) as a cover for what I would argue is an increasingly and unfairly anti-labor environment (in the USA, at least). Let me explain.

The clear flip side of your argument is that since employees can come and go as they please employers should be able to hire and fire as they please. If the two sides more or less have the same level of power this isn't a bad approach -- either side is just as likely to benefit. However, if one side has a disproportional level of power compared to the other then this approach becomes little more than an ideological justification for "might makes right". The more powerful get to do whatever they wish by claiming they are "free" to act as they want while the less powerful are stripped of any moral/ethical advantage. The letter of the law (or, in this case, the letter of the ideal) gets perverted because the reality of the law is quite different.

For example, let's say that we lived in a society where labor had a huge advantage over management. That is, a business losing a worker would face major hits to the bottom line while the worker would pay little if any cost when unemployed. In this situation the notion that the system is "fair" (or potentially even economically effective) becomes highly dubious in the same manner that it would be unfair if one side had a gun to the head of the other during negotiations. Even if technically both sides are free to come/come or hire/fire as they like in reality management would start off backed up into a corner -- they would have to give a lot to the worker just to avoid disaster let alone benefit. It makes the idea that both sides are free to do as the like an obvious fiction.

Now take that situation and reverse it -- in real life business has steadily gained an increasing advantage over labor. The former has more resources, more expertise at its disposal, and less to lose than the latter, yet laws and government policy has also become more hostile to labor over time. That, like the example above, makes the idea of everyone being free to do as they wish ever more of a sham.

Of course, I am speaking of the system in general. There will always be individual -- and class -- exceptions.



But I'll tell you one thing -- a country that is filled with successful, profit-making enterprises is, in the long term, going to have a far higher overall employment rate than a country that acts in the way you seem to be encouraging. Why? Because if companies are allowed to act in their own self-interest, and generate more profits, then successful companies will grow rapidly, and be able to provide more jobs.


Well, that's the ideological justification naturally, but I am somewhat dubious as to how economically valid this rationalization is.

There is a basic truth that I think a lot of libertarians/free traders/etc seem to miss (or willfully ignore) -- business doesn't want "free trade"; it wants a sure thing.

Accordingly, if it can a business will always try to fix the rules in its favor whether it does that by lobbying the government to change them or through sheer power. Open competition is risky and requires real skill and brains. It's far safer financially to guarantee you are going to succeed from the get-go.

And, the mythical notion of "competition" magically keeping everyone honest is a crock -- at least over time. Businesses will naturally tend to concentrate power to themselves as they gobble up their rivals. After all, competition cuts into profit margins while the more you dominate a market the more you get to set how it works. A business acting out of "self-interest" will use any means it can to gain an advantage and keep it. In the absence of a restraining counter-force the end result are dominating monopolies.

In short, in practice "self-interest" really ends up meaning "free to do act without any responsibility to others".


On the other hand, if companies are expected to act in some sort of self-sacrificing manner, their current employees may appreciate it -- but that company also will not grow or expand very quickly, because it lacks the profits to do so.


Not necessarily -- a beneficient company will tend to have more loyal and better motivated employees. It also gains with public relations. Of course, being beneficient means concentrating on the long term and not just the short term. It also means having a measure of trust -- e.g. be vulnerable -- in your employees and in the future. Our problem is that it is "safer" and often more profitable for the individual in management to go just with the short term even if it means long term cost or even ruin for the business -- or the economy -- as a whole.

But, more fundamentally, the system works if everyone plays by the system. It's when you get businesses that try to subvert the system (often by insisting that some part of the system is invalid) that things begin to spiral out of control. Take the Pension Crisis. Thanks to some businesses being able to dump their pensions on the government (that is, the tax payer) all business are pushed toward discarding their pension systems as well. The end result is a looming retirement nightmare that will doubtlessly have seriously negative political and social effects over time.


With the proper checks and balances to prevent abuse (such as reasonable minimum wage laws, anti-discrimination laws, etc.),


I agree, but for these to be applied effectively you need the government to have the necessary power to make everyone follow the rules. Effective government oversight -- which is not government control -- is absolutely vital. A system where you might technically have such rules, but big business has the power and influence to effectively ignore them when necessary is just a sham.

[Francesca R]

@ Wolfman:

There is a legal difference between you and the company, even if you own all the shares. The company is a separate entity and it is the company that employs the staff, not you. And I find it difficult to grasp the idea that a company has any morals or ethics. Companies have objectives, incentives and prescribed rules to operate by. Morals don't come into it. A company's responsibility is to increase returns for its owners above all else. As a manager of a company you have a responsibility to the company (whose owners are paying for your services, and whose capital you are managing when you are running the business) to help achieve its objectives. You may have morals that you act on but of course they are not determined by the company—you bring them to the table.

Companies may act in a way that serves society because the same behaviour also serves the company's own interest. They may behave "morally" in some cases only because the law compels them to (such that, in the absence of the law it would not be in the company's self interest to behave that way, but net of legal constraints and potential penalty, it is in the company's self-interest to behave that way). And sometimes companies may have a greater incentive to act in society's interest than government does and will do so without needing any legal compulsion. But in all these cases it is financial self-interest that determines company behaviour. Not loyalty, not morals, not social responsibility.

My view is that this is a fundamental difference between what drives company behaviour and what drives people's behaviour. Ethics motivate people directly, but motivate companies only indirectly.

[balrog666]

@ Wolfman:

There is a legal difference between you and the company, even if you own all the shares. The company is a separate entity and it is the company that employs the staff, not you. And I find it difficult to grasp the idea that a company has any morals or ethics. Companies have objectives, incentives and prescribed rules to operate by. Morals don't come into it. A company's responsibility is to increase returns for its owners above all else. As a manager of a company you have a responsibility to the company (whose owners are paying for your services, and whose capital you are managing when you are running the business) to help achieve its objectives. You may have morals that you act on but of course they are not determined by the company—you bring them to the table.

Companies may act in a way that serves society because the same behaviour also serves the company's own interest. They may behave "morally" in some cases only because the law compels them to (such that, in the absence of the law it would not be in the company's self interest to behave that way, but net of legal constraints and potential penalty, it is in the company's self-interest to behave that way). And sometimes companies may have a greater incentive to act in society's interest than government does and will do so without needing any legal compulsion. But in all these cases it is financial self-interest that determines company behaviour. Not loyalty, not morals, not social responsibility.

My view is that this is a fundamental difference between what drives company behaviour and what drives people's behaviour. Ethics motivate people directly, but motivate companies only indirectly.

Well said.

[jimlintott]

@ Wolfman:

There is a legal difference between you and the company, even if you own all the shares. The company is a separate entity and it is the company that employs the staff, not you. And I find it difficult to grasp the idea that a company has any morals or ethics. Companies have objectives, incentives and prescribed rules to operate by. Morals don't come into it. A company's responsibility is to increase returns for its owners above all else. As a manager of a company you have a responsibility to the company (whose owners are paying for your services, and whose capital you are managing when you are running the business) to help achieve its objectives. You may have morals that you act on but of course they are not determined by the company—you bring them to the table.

Companies may act in a way that serves society because the same behaviour also serves the company's own interest. They may behave "morally" in some cases only because the law compels them to (such that, in the absence of the law it would not be in the company's self interest to behave that way, but net of legal constraints and potential penalty, it is in the company's self-interest to behave that way). And sometimes companies may have a greater incentive to act in society's interest than government does and will do so without needing any legal compulsion. But in all these cases it is financial self-interest that determines company behaviour. Not loyalty, not morals, not social responsibility.

My view is that this is a fundamental difference between what drives company behaviour and what drives people's behaviour. Ethics motivate people directly, but motivate companies only indirectly.

In other news "Bicycles Ride Themselves".

A company is not really any different from an individual. That's why we form companies and pay good money to have them be an Inc. or a Ltd. It makes the company effectively an individual entity and shields the owners from liabilities the company may have. It would be foolish to risk this exposure to liability for many owners and without this protection many companies wouldn't exist and neither would the jobs and economic prosperity they bring.

You as much as say that the ethics of a company are brought to the table by the ownership. It is tough to separate the two. An ethical company will tend to have ethical ownership.

Individuals are also motivated by selfishness. Even acts of apparent kindness can be selfishly motivated. Just like a company. Companies and individuals are not so different.

Some of you have companies painted into a corner with damned if they do and damned if they don't. If they do something nice it's only to benefit them. If they do something bad they are an evil corporation. In reality they deserve the same criticism or praise of their actions that you would level at any individual.

[Matt the Poet]

Ethically speaking, there is no difference between companies and individuals at all. Until we figure out how to Borg-ify ourselves, a company is nothing more or less than a group of individuals, gathered together for a common purpose.

Nobody, as yet, has provided a rational answer to my question as to why any of the moral obligations that are placed upon each of these individuals in any part of their lives cease to apply as soon as they are gathered together in a ‘company’.

Just to be clear – this would be a different moral criterion than applies to any other social grouping that we have – families, clubs, sports teams, all are generally expected to behave to certain standards of ethics. If they don’t, they are publicly excoriated when they’re found out.

[Francesca R]

A company is not really any different from an individual.A company does not have emotions, a conscience, or any "purpose in life" other than to make money for its owners.

That's why we form companies and pay good money to have them be an Inc. or a Ltd. It makes the company effectively an individual entity and shields the owners from liabilities the company may have. It would be foolish to risk this exposure to liability for many owners and without this protection many companies wouldn't exist and neither would the jobs and economic prosperity they bring.I'm not sure where limited liability comes into this, except that it underlies the truth that the company is not the same entity as the managers or the owners.

You as much as say that the ethics of a company are brought to the table by the ownership. It is tough to separate the two. An ethical company will tend to have ethical ownership.I didn't intend to create that meaning. I don't think a company has ethics. You might decide not to pollute your neighbours garden because you think it is wrong (irrespective of whether your neighbour would be able to enforce legal action against you for it). A company will pollute its neighbours garden if the expected net financial return from doing so is positive. The company needs to be bound by rules governing what it can and can't do in cases where its financial incentives are not aligned with social ethics. (Note—in many cases the financial incentives are aligned; the potential to be named and shamed, suffer reputational damage and business loss may be sufficient that a law against some type of behaviour is not necessary)

Individuals are also motivated by selfishness. Even acts of apparent kindness can be selfishly motivated. Just like a company. Companies and individuals are not so different.A company only has financial incentives to pursue. Indeed it has a legal obligation to pursue them. If you are a shareholder in XYZ inc and XYZ's managers decided to cut the price of its products purely for moral reasons (such as: "we make enough money already, we would like to give some of it back to customers to be nice") then you could sue the executives for not managing your capital as they are supposed to—namely to increase returns to your capital to the greatest extent.

[Francesca R]

Ethically speaking, there is no difference between companies and individuals at all. Until we figure out how to Borg-ify ourselves, a company is nothing more or less than a group of individuals, gathered together for a common purpose.Not correct. A company is a separate legal entity in law, and is more than a group of individuals gathered together for a common purpose.

Nobody, as yet, has provided a rational answer to my question as to why any of the moral obligations that are placed upon each of these individuals in any part of their lives cease to apply as soon as they are gathered together in a ‘company’. What moral obligations are placed on individuals and by whom? Do individuals only act morally because obligations are placed on them? I offer that individuals frequently behave morally irrespective of any obligation to do so, and if they are behaving a certain way due to externally imposed obligation then their behaviour may not fit the definition of moral.

Just to be clear – this would be a different moral criterion than applies to any other social grouping that we have – families, clubs, sports teams, all are generally expected to behave to certain standards of ethics. If they don’t, they are publicly excoriated when they’re found out.Public excoriation (or other sanction) is not the only motivator of moral behaviour in individuals or groups.

[tkingdoll]

Not correct. A company is a separate legal entity in law, and is more than a group of individuals gathered together for a common purpose.



No, Matt is right. Ethically speaking, there is no difference in certain circumstances. This is usually only the case for small businesses though.

For example, I run a Limited Company. It is a separate legal entity in its own right. However, the business makes no ethical decisions. The Managing Director makes the ethical decisions. And in the case of millions of businesses which are Sole Traders, there is no legal difference. The owner takes personal liability and the business is not a separate entity at all.

You could argue that my ethical decisions are based in part on the law that governs my business, for example deciding whether to pay minimum wage. But at that point it ceases to be a decision and becomes an obligation. How high above the minimum wage I pay is entirely my decision.

[Matt the Poet]

Not correct. A company is a separate legal entity in law, and is more than a group of individuals gathered together for a common purpose.

Law and ethics are not the same thing. Regardless of how the law defines a company, it is still, in actual fact, a collection of individuals. Unless you are proposing some mysterious ‘factor X’ that arrives in the post when you register yourself at Companies House.

What moral obligations are placed on individuals and by whom? Do individuals only act morally because obligations are placed on them? I offer that individuals frequently behave morally irrespective of any obligation to do so, and if they are behaving a certain way due to externally imposed obligation then their behaviour may not fit the definition of moral.

I’m using ‘obligation’ loosely here. What I mean is the internal sense of a ‘moral compass’ that most socialised people tend to have. The basic sense that the people around you have the same kind of consciousness that you do, and would therefore feel the same if you behaved towards them in a certain way as you would if they behaved towards you in that way.

Public excoriation (or other sanction) is not the only motivator of moral behaviour in individuals or groups.
I’m not saying that it is – I’m just indicating that in any other situation in life we seem to expect people in groups to behave ‘morally’ in the way I’ve described above and tend to make a bit of a noise about it when they don’t.

[Francesca R]

No, Matt is right. Ethically speaking, there is no difference in certain circumstances. This is usually only the case for small businesses though.What certain cicrumstances? If you mean unincorporated businesses, these aren't companies but people using a trading name.

For example, I run a Limited Company. It is a separate legal entity in its own right. However, the business makes no ethical decisions. The Managing Director makes the ethical decisions.Agreed. The company does not make any decisions at all. However the decisions of the CEO which bind the company must prioritise financial returns above all else. If business imperitavies are best served by practising ethics then so be it—ethical decisions are taken. But not "because it's right".

And in the case of millions of businesses which are Sole Traders, there is no legal difference. The owner takes personal liability and the business is not a separate entity at all.Sole proprietorships are not companies and fall outside the discussion of corporate social responsibility.

You could argue that my ethical decisions are based in part on the law that governs my business, for example deciding whether to pay minimum wage. But at that point it ceases to be a decision and becomes an obligation. How high above the minimum wage I pay is entirely my decision.If you run a business then the optimal compensation you pay will be the minimum required to attract and retain the labour you need in order to maximise profits (long term / short term or whatever is the priority here). Paying above that would not be a good decision to make on behalf of the company's shareholders.

[Francesca R]

Law and ethics are not the same thing. Regardless of how the law defines a company, it is still, in actual fact, a collection of individuals. Unless you are proposing some mysterious ‘factor X’ that arrives in the post when you register yourself at Companies House.The factor X is the legal separation of the company from any individual involved. What makes a company behave ethically?

I’m using ‘obligation’ loosely here. What I mean is the internal sense of a ‘moral compass’ that most socialised people tend to have. The basic sense that the people around you have the same kind of consciousness that you do, and would therefore feel the same if you behaved towards them in a certain way as you would if they behaved towards you in that way.Agreed. A company (the legal entity) does not experience this consciousness.

I’m not saying that it is – I’m just indicating that in any other situation in life we seem to expect people in groups to behave ‘morally’ in the way I’ve described above and tend to make a bit of a noise about it when they don’t.I think most people expect companies to behave ethically too. But companies are not set up to be in a position to do that, unless it is for financial reasons or legal compulsion (which is a financial reason by another name really).

[Matt the Poet]

Acuity, let me be clear on what you seem to be saying.

As soon as the paperwork is completed and approved that changes a group of entrepreneurs into a registered company, every single one of them, and anyone who joins them subsequently, may (indeed must) divest themselves of even the pretty minimal moral paradigm I’ve described above.

Is this right?

Note, for clarity on my position, that I’m perfectly aware that behaviour on the company’s part that will cause it to go bust also has moral consequences in terms of redundancy, failure to pay back investors etc.

[Francesca R]

Acuity, let me be clear on what you seem to be saying.

As soon as the paperwork is completed and approved that changes a group of entrepreneurs into a registered company, every single one of them, and anyone who joins them subsequently, may (indeed must) divest themselves of even the pretty minimal moral paradigm I’ve described above.

Is this right?The company itself does not possess this "moral paradigm".

The decisions that these individuals make on behalf of the company must be in the interests of the company's owners, which means they must priorotise financial returns above all else.

[Matt the Poet]

The company itself does not possess this "moral paradigm".

The decisions that these individuals make on behalf of the company must be in the interests of the company's owners, which means they must priorotise financial returns above all else.

So therefore - yes or no - the aforementioned paradigm does not apply to individuals who are part of legally constituted companies?

[Francesca R]

I don't know what you mean. "Apply"?. I have said: "Ethics motivate people directly, but motivate companies only indirectly." (post 30)

What makes a company behave ethically?

[Matt the Poet]

You seem to be stuck on this concept of legal definition. This is wholly irrelevant to my argument.

I agree - the law says that a 'company' has no moral obligation in this sense. But I don't, in this instance, care about the law. The law does not change the fact that what a company is, in reality, is a group of people making decisions. If it is not this, please point to the real, physical element of a company that:

a) Is separate from the people that comprise it and
b) releases them from ordinary ethical obligations in the sense described above

[Santa666]

Agreed. The company does not make any decisions at all. However the decisions of the CEO which bind the company must prioritise financial returns above all else. If business imperitavies are best served by practising ethics then so be it—ethical decisions are taken. But not "because it's right".

This has been said several times and I disagree with such a blanket statement. Unless you believe that reducing future cost = maximizing financial return. Almost all companies are interesting in public relations and making sure any and all potential costumers and/or neighbors are happy.

Many quarries and processing factories will "invest" money in community relations for many reasons: to reduce future complaints, to comply with government regulations, and to clean and protect the environment. Ultimately, you can certainly state all these measure lead to financial benefit, however, not every decision is one made with profit in mind. It is possibly my view is actually the same as yours and I simply interpret company actions differently. Certainly a company is not going to throw money away, but "losing" money on a cause believed to provide a better image or benefit the community is a choice many companies make.

In the end, any decisions must provide for the betterment of the company, however, that betterment does not always have to be financial.

Just my two cents.



Santa

[fxm]

You seem to be stuck on this concept of legal definition. This is wholly irrelevant to my argument.

I agree - the law says that a 'company' has no moral obligation in this sense. But I don't, in this instance, care about the law. The law does not change the fact that what a company is, in reality, is a group of people making decisions. If it is not this, please point to the real, physical element of a company that:

a) Is separate from the people that comprise it and
b) releases them from ordinary ethical obligations in the sense described above

Matt, I think you and acuity are talking at cross-purposes... going back over the posts, you're both saying the same thing. Legally, a corporation is a "person" (i.e., a separate entity), but that is purely a legal definition. A corporation is not a real person, and in and of itself has no ethics per se.

However, the people that act on behalf of that corporation are real people and therefore do have to apply ethics in their decision-making. Nothing releases them from ethical obligations. What does change is the situation in which those ethics must be applied: namely, that the success of the company becomes a factor in making those decisions.

You seem to be asserting that this should not be a factor in decisions that affect individual people who work for the company. Or at least that morally, the "power relation" between the company and an employee is a more important factor.

I think it's hard to make a case for this, on an absolute basis. I also think it's hard to make a case for the absolute version of the inverse, that company success in all cases should trump all other ethical dimensions of a particular decision. Either way, it's reductio ad absurdam.

[Matt the Poet]

What does change is the situation in which those ethics must be applied: namely, that the success of the company becomes a factor in making those decisions.

You seem to be asserting that this should not be a factor in decisions that affect individual people who work for the company. Or at least that morally, the "power relation" between the company and an employee is a more important factor.

I think it's hard to make a case for this, on an absolute basis. I also think it's hard to make a case for the absolute version of the inverse, that company success in all cases should trump all other ethical dimensions of a particular decision. Either way, it's reductio ad absurdam.

Not at all – this is why I added the final paragraph of post #40. When people band together in a company then, as you say, the success of that company becomes part and parcel of any ethical decision that is made.

If I can only afford to pay all my employees minimum wage because I’m giving three quarters of my profits to charity - or, in the context of the OP, because I’m too kind to sack useless people who drag down my organisation’s efficiency (and hence overall revenue) – then a long and, if you’re into ethics, very interesting conversation can be had about the extent to which I’m acting ‘morally’.

My point is that this conversation would, at the very least, begin by applying the same moral rules that apply to wider society – it sounds to me as though Acuity is saying that the legal act of incorporation creates a special case in which these don’t apply.

[Francesca R]

You seem to be stuck on this concept of legal definition. This is wholly irrelevant to my argument.What is your argument? If it is that "people at work for a company still behave ethically", I agree. However if they behave ethically to the detriment of the company, then the shareholders may have a legitimate complaint against them, which could ultimately be legally tested. My example was a company's officers deciding to implement large price cuts "because they believe it is ethical" when this provides no expected business benefits and is not legally required.

[Francesca R]

This has been said several times and I disagree with such a blanket statement. Unless you believe that reducing future cost = maximizing financial return.Yes, reducing costs is maximising (increasing, anyway) return.

Almost all companies are interesting in public relations and making sure any and all potential costumers and/or neighbors are happy.Boosting public image and reputation is also about increasing profits. Why else would companies do it?

Many quarries and processing factories will "invest" money in community relations for many reasons: to reduce future complaints, to comply with government regulations, and to clean and protect the environment. Ultimately, you can certainly state all these measure lead to financial benefit, however, not every decision is one made with profit in mind.You've outlined reasons that (I would argue) increase profits. What is a reason that will not do that (other than law), and how would you defend it? Thanks.

In the end, any decisions must provide for the betterment of the company, however, that betterment does not always have to be financial.I disagree. Better image, reputation, brand value, and so on—these are ultimately all about future financial results.

[Francesca R]

I also think it's hard to make a case for the absolute version of the inverse, that company success in all cases should trump all other ethical dimensions of a particular decision. Either way, it's reductio ad absurdam.Thanks for jumping in, but I'm not so sure.

Suppose the company that I work for wants me to go and open a factory in the Phillipines, but that ethically I (personally) have problems with the local labour laws and the balance of power that employers like my company will wield over workers in the special enterprise zone that the Phillipine government is enticing my company into, and I will not work for a company that sets up in these zones; still less be the champion of such a venture.

I either have to contravene my ethics or leave the firm, no?

[Francesca R]

If I can only afford to pay all my employees minimum wage because I’m giving three quarters of my profits to charityIf you're giving three quarters of your profit to charity, and I'm a shareholder, I would question rather strongly why you are being so "philanthropic" with my money, rather than your own. You would need a strong business case to prevent me wanting you ousted immediately or (my more likely recourse, of course) dumping the shares.

or, in the context of the OP, because I’m too kind to sack useless people who drag down my organisation’s efficiency (and hence overall revenue) – then a long and, if you’re into ethics, very interesting conversation can be had about the extent to which I’m acting ‘morally’.Again if I think you are engaging in such profit-reducing behaviour I would do the same things.

Specifically, what justification would you have acting in either way? How would you defend these actions?

My point is that this conversation would, at the very least, begin by applying the same moral rules that apply to wider society – it sounds to me as though Acuity is saying that the legal act of incorporation creates a special case in which these don’t apply.The conversation between shareholder and business manager would, and should IMO, start with "Why are you acting contrary to the interest of shareholder value?"

[Matt the Poet]

What is your argument? If it is that "people at work for a company still behave ethically", I agree. However if they behave ethically to the detriment of the company, then the shareholders may have a legitimate complaint against them, which could ultimately be legally tested. My example was a company's officers deciding to implement large price cuts "because they believe it is ethical" when this provides no expected business benefits and is not legally required.

My argument is that, in the case above, you could argue (and this would depend on the situation) that the shareholders are behaving immorally by complaining, if they are threatening to overturn a decision that would benefit society as a whole in order to further their own personal gain.

Or, in a wider sense, that ethics, particularly the base-level, golden rule type ethics that we've been talking about, always trumps law. If the law prevents the individuals that comprise a company from acting ethically in this way, then the law is unethcial.

Or to put it another way and to address the OP - your duty to behave morally towards other people doesn't go away just because you are their CEO. In fact, if anything, it intensifies as your responsibility for them increases.

[Matt the Poet]

Specifically, what justification would you have acting in either way? How would you defend these actions?

The conversation between shareholder and business manager would, and should IMO, start with "Why are you acting contrary to the interest of shareholder value?"


Well, personally my opening position in both of the examples I've given is that I would not defend these actions -or, hopefully, carry them out. In both cases I would be placing my own feelings over my duty of care to the people I am employing, and therefore acting immorally.

However, say that I've done something that I would defend. I've increased costs by moving my manufacturing base to somewhere that isn't a sweatshop. Then my response to the shareholder would be "because I don't wish to subsidise cruelty"

The shareholder's response might indeed be "What are you, some kind of communist? You've decreased my dividend and it's lawsuits aplenty for you...". In this case, the shareholder is acting imorally.

They could say "Fair enough. I don't like subsidising cruelty either, and I'm happy to take the hit rather than being responsible for forcing you to do so." That, to me, is a moral response.

On the other hand, they could say "your dividend is my only source of income - your principles have deprived my own children of the chance to go to college". That's where the interesting conversation begins...

[Matt the Poet]

Thanks for jumping in, but I'm not so sure.

Suppose the company that I work for wants me to go and open a factory in the Phillipines, but that ethically I (personally) have problems with the local labour laws and the balance of power that employers like my company will wield over workers in the special enterprise zone that the Phillipine government is enticing my company into, and I will not work for a company that sets up in these zones; still less be the champion of such a venture.

I either have to contravene my ethics or leave the firm, no?

Well, that would depend on what 'the company' means in this context (is it unanimous? Are there people you can discuss it with that might have clout?), what kind of channels there are for arguing the case either way within the firm's structure (can you construct a business case for ethical practices?), what your external responsibilities were (what's the impact of you leaving the firm? Are you supporting a family?)

My point being that whatever moral compass you use to make the decision to act should not change its points simply because you are in a commercial environment. And that if the company itself is indeed unanimous about opening up sweatshops all over the place then it isn't a moral company by my own standards, and I would certainly sell any shares that I had in it.

[Francesca R]

My argument is that, in the case above, you could argue (and this would depend on the situation) that the shareholders are behaving immorally by complaining, if they are threatening to overturn a decision that would benefit society as a whole in order to further their own personal gain.

Or, in a wider sense, that ethics, particularly the base-level, golden rule type ethics that we've been talking about, always trumps law. If the law prevents the individuals that comprise a company from acting ethically in this way, then the law is unethcial.I don't see how you can say that ethics would trump law when it would be the law that prevailed over ethics. The most famous legal test of this scenario was Dodge v Ford Motor Company (1919) (http://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Company) The law may indeed be unethical in the opinion of some, but it determines behaviour.

[Matt the Poet]

I don't see how you can say that ethics would trump law when it would be the law that prevailed over ethics. The most famous legal test of this scenario was Dodge v Ford Motor Company (1919) (http://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Company) The law may indeed be unethical in the opinion of some, but it determines behaviour.

We appear to be staring at each other across the notorious is/ought gap.

Yes, the law prevails in most cases. Most cases, in fact. Why does this mean that you or I shouldn't act ethically anyway? Would you obey all laws, regardless of how ethical they were?

If your answer to this is 'yes' then I should warn the mods that I intend to straight-up Godwinise this thread's ass.

[Francesca R]

Hmmm . . . , your question has wandered some way from companies to me. No I wouldn't obey all laws as a given. Yes I would act ethically. But I always argued this. "Ethics motivate people directly".

But I see nothing in a company's make up will compel it to act ethically in preference over business success. There are many many examples in evidence of this—companies which are household names staffed by decent people committing ethical atrocities with impunity. I found this book (http://www.amazon.co.uk/Corporation-Pathological-Pursuit-Profit-Power/dp/1845291743/ref=sr_1_1/202-3671740-6275019?ie=UTF8&s=books&qid=1189788078&sr=1-1) to be a good essay on the matter.

[balrog666]

Acuity, let me be clear on what you seem to be saying.

As soon as the paperwork is completed and approved that changes a group of entrepreneurs into a registered company, every single one of them, and anyone who joins them subsequently, may (indeed must) divest themselves of even the pretty minimal moral paradigm I’ve described above.

Is this right?

Note, for clarity on my position, that I’m perfectly aware that behaviour on the company’s part that will cause it to go bust also has moral consequences in terms of redundancy, failure to pay back investors etc.


Yes.


And one of the major points of being an LLC is that you cannot sue me as an owner for the actions of the company.

[balrog666]

Or, in a wider sense, that ethics, particularly the base-level, golden rule type ethics that we've been talking about, always trumps law. If the law prevents the individuals that comprise a company from acting ethically in this way, then the law is unethcial.


You seem to be implying that there is one and only one ethos here, that people making decisions for a company use the same reasoning, logic, and ethics that they would apply in their personal life. Is this correct?

[Matt the Poet]

You seem to be implying that there is one and only one ethos here, that people making decisions for a company use the same reasoning, logic, and ethics that they would apply in their personal life. Is this correct?

Yes. With the obvious proviso that they are using that reasoning, logic and ethics in a particular situation. So they do have moral duties to shareholders, employers and the general welfare of the company that support them - which they wouldn't when deciding whether or not to buy free range eggs at the supermarket.

My point is that they also the same moral duties to the wider world as they did before they put their ties on that morning. If those two duties conflict, they will have to choose one or the other, and that choice itself will be based on whatever ethical reasoning they bring to bear on the situation

[Matt the Poet]

Hmmm . . . , your question has wandered some way from companies to me. No I wouldn't obey all laws as a given. Yes I would act ethically. But I always argued this. "Ethics motivate people directly".

But I see nothing in a company's make up will compel it to act ethically in preference over business success. There are many many examples in evidence of this—companies which are household names staffed by decent people committing ethical atrocities with impunity. I found this book (http://www.amazon.co.uk/Corporation-Pathological-Pursuit-Profit-Power/dp/1845291743/ref=sr_1_1/202-3671740-6275019?ie=UTF8&s=books&qid=1189788078&sr=1-1) to be a good essay on the matter.


I agree with you that a corporation, like many other groups, allows the individuals with in it to feel as though their responsibility to behave morally.

I also agree that the law, particularly in 'Anglo-Saxon style' economies, is designed to make such bad behaviour at the very least easy and, most of the time, practically compulsory.

If you're a fan of the work you cite then I'm fairly confident that you agree with me that this is a bad thing - in which case I suspect we can disengage and shake hands.

My wider point is that, as companies are. as I've said, groups of individuals making decisions on how to behave, then short of the re-installation of a rigidly planned economy, which nobody really wants, there is nothing that's going to rectify the situation except those individuals taking moral responsibility for their actions.

[balrog666]

Yes. With the obvious proviso that they are using that reasoning, logic and ethics in a particular situation. So they do have moral duties to shareholders, employers and the general welfare of the company that support them - which they wouldn't when deciding whether or not to buy free range eggs at the supermarket.

I would have to disagree, a fiduciary responsibility to the company goals coupled with personal integrity is not simply a subset of some grandiose, all-encompassing ethos.

My point is that they also the same moral duties to the wider world as they did before they put their ties on that morning. If those two duties conflict, they will have to choose one or the other, and that choice itself will be based on whatever ethical reasoning they bring to bear on the situation


Now you want them to put their personal moral bias ahead that same fiduciary responsibility but somehow not violate their personal integrity? Or are they just are unethical if their decision doesn't match yours?

I just don't see the argument.

[Francesca R]

If you're a fan of the work you cite then I'm fairly confident that you agree with me that this is a bad thing - in which case I suspect we can disengage and shake hands.
I'm a fan of the book as I think it is a thorough and honest treatment of the downside of corporate behaviour, and it is mostly about "is" (fact) rather than "ought" (viewpoint). But I am not convinced that corporate structure is a wholly bad thing at all. I work for one and hold shares in many. Nonetheless, you will not see me arguing on this board (or anywhere) in favour of libertarian / laisser-faire "self"-(non)-regulation of business. Companies are not at all set up to regulate their own behaviour, and the invisible hand will not act for society in many circumstances.

My wider point is that, as companies are. as I've said, groups of individuals making decisions on how to behave, then short of the re-installation of a rigidly planned economy, which nobody really wants, there is nothing that's going to rectify the situation except those individuals taking moral responsibility for their actions.I can see why you get to that conclusion but I think there are additional options. My view increasingly leans towards the notion that limited liability is a flawed concept, or at least ultimately wholly at odds with ethics, and should be abolished, or at least partially abolished. The reasons for this:

In an ethical or holistic sense, limited liability is simply not real—it is an imaginary concept. It is possible to offload the risk associated with any action to someone else, or another country, or the environment etc. But it is not really possible to externalise it beyond our effectively closed system of planet earth. It is delusional to imagine that "the pieces" will never have to be "picked up"
Much of the financial risk associated with a business can be diversified away, same as any other risk. It could also be insured against given the appropriate pooling of claims and availability of derivatives markets. Same as other risks. Limited liability is free insurance. The implication is that it gives a company a free pass to take risks it will not have to pay for, and thereby rip (someone) off. Companies—like people—respond to incentives, so that's what they end up doing.
If the expected return from a business is positive and compensates for the (true) risk, limited liability is not necessary.

[fxm]

Thanks for jumping in, but I'm not so sure.

Suppose the company that I work for wants me to go and open a factory in the Phillipines, but that ethically I (personally) have problems with the local labour laws and the balance of power that employers like my company will wield over workers in the special enterprise zone that the Phillipine government is enticing my company into, and I will not work for a company that sets up in these zones; still less be the champion of such a venture.

I either have to contravene my ethics or leave the firm, no?

If those are the only two choices, then yes. However, situations are rarely so black-and-white.

I have been in the situation myself where I was ready to leave my job because of what my manager had asked me to do, which I found unethical. Fortunately, I was able to raise my objections to the senior management, and the situation got resolved such that I did not have to compromise my ethics.

[Francesca R]

Could you be more specific? Did the senior bosses acknowledge that it was surely counter to the business's success to let you off doing whatever, and backed you anyway because of ethics? Was there no question that the payoff from acquiescing to yout ethical wishes was worse for the firm?

If that's true (they made a purely ethical decision in backing you), then why did you need to threaten to leave (thus turning an ethical position into a demand with financial consequences for the firm, and thus no longer appealing just to the firm's ethics)?

As I said, in many cases, you will find that ethical incentives and business incentives are aligned—not least because firms operate in society and end up having to cater to society's expectations to some extent in order to compete.

[fxm]

Could you be more specific? Did the senior bosses acknowledge that it was surely counter to the business's success to let you off doing whatever, and backed you anyway because of ethics? Was there no question that the payoff from acquiescing to yout ethical wishes was worse for the firm?

If that's true (they made a purely ethical decision in backing you), then why did you need to threaten to leave (thus turning an ethical position into a demand with financial consequences for the firm, and thus no longer appealing just to the firm's ethics)?


I'm not sure I understand the question. My quitting the company would not have had any direct financial consequences for the company -- other than, perhaps, the benefit of not having to pay my salary any longer.

The situation in question had to do with fair treatment of employees. My interpretation of fairness differed from my immediate manager's interpretation. It would be difficult to directly tie this to a business incentive; either approach would have had minimal or no direct impact, if any, on the success of the business, its profits, or whatever.


As I said, in many cases, you will find that ethical incentives and business incentives are aligned—not least because firms operate in society and end up having to cater to society's expectations to some extent in order to compete.

And yet you seem to be arguing that this is the exception, rather than the common case... and that they do this only grudgingly. I would disagree with that assessment. Owners and managers of companies are not inherently obsessed with company profits to the exclusion of all else, being forced into behaving in ways that any reasonable person would deem ethical only because they have to by law, or by threat of destruction.

What it may come down to is an interpretation of what is or is not ethical behavior. Just because you or I may think that a particular action is unethical, doesn't make it absolutely so. In your example, you disagreed with how the Filipino employees would be treated. Someone else may have had a different view -- viewing the plan as providing a positive economic opportunity to those people that they would not otherwise have. In my example, the disagreement also was one of interpretation of what was ethical.

[Francesca R]

And yet you seem to be arguing that this is the exception, rather than the common case... No—merely that it is not the universal case

and that they do this only grudgingly.Yes—or rather—companies behave ethically when it is good for business.

I would disagree with that assessment. Owners and managers of companies are not inherently obsessed with company profits to the exclusion of all else, Above all else, which in the limit would come down to excluding all else in the case of a conflict, yes. Maybe not as individuals, but through the collective action of decent individuals stewarding companies, this is how companies end up behaving.

What it may come down to is an interpretation of what is or is not ethical behavior. Just because you or I may think that a particular action is unethical, doesn't make it absolutely so. In your example, you disagreed with how the Filipino employees would be treated. Someone else may have had a different view -- viewing the plan as providing a positive economic opportunity to those people that they would not otherwise have. In my example, the disagreement also was one of interpretation of what was ethical.This is all true, but outside my point which is that companies have no ethics at all.

[fxm]

No—merely that it is not the universal case
Agreed.

Above all else, which in the limit would come down to excluding all else in the case of a conflict, yes. Maybe not as individuals, but through the collective action of decent individuals stewarding companies, this is how companies end up behaving.

(my bold) I detect a logical inconsistency here -- generalizing from an extreme. Companies (or more accurately, the owners and managers of companies) do not universally behave unethically.

I agree that there can be cases in which collective actions by decent individuals that lead to bad things happening. However, this is not unique to companies, and I am arguing that this is not typical.


This is all true, but outside my point which is that companies have no ethics at all.
True, but only in the sense that companies are not really persons. The people who are part of the company do have ethics. The people that own or run a company can (and these days, often do) create a code of conduct that expresses ethics guidelines that managers and employees are supposed to apply in their decision-making. This doesn't guarantee that managers or employees, or even the owners themselves, will necessarily follow those guidelines, or that even if they do, that bad things won't happen due either to individual or collective behavior. No system is, or could be, perfect.

But to try to come back to the original topic of this thread...

In the OP, Wolfman was asserting that an employer has no more loyalty to its employees than an employee has to his or her employer. Specifically, since an employee can quit at any time, an employer should be able to fire an employee at any time as well.

This is essentially "employment-at-will". In California, where I work, this is technically what we have in law (to the best of my understanding, as I am not a lawyer), at least in the case of salaried employees (who are supposedly exempt from some of the labor laws). In practice, though, it is generally recognized that the employer/employee relationship is unequal, and I think that's a good thing. An employer typically has a lot less to lose by an employee's quitting than an employee has if he or she gets fired.

So while an employee has the right to arbitrarily decide to quit his or her job, an employer generally must have a good reason to fire someone. I'm not sure that that is necessarily having more "loyalty", but I don't consider it unfair.

[tkingdoll]

Sole proprietorships are not companies and fall outside the discussion of corporate social responsibility.



That is absolute codswallop. There is no difference between my business now, as a Limited Company, and when I was a Sole Trader, other than legal (for liability and taxation). I employ the same number of people and have the same responsibilities towards them as before. In fact, in many ways my decisions are less selfish, because when I was a Sole Trader, if the company went bust I would lose my home. That is now not the case so I can be more flexible with my staff benefits.

A sole trader could employ a million people if he wanted to. How does that fall outside the discussion of corporate social responsibility?

Here are some UK stats for you from 2003:

There were an estimated 4.0 million business enterprises in the UK at the start of 2003. This compares with an estimated 3.8 million business enterprises in the UK at the start of 2002.

This estimate, and figures in this release, comprises the private sector (including public corporations and nationalised bodies) and therefore excludes Government and non-profit organisations.

Almost all of these enterprises (99.2 per cent) were small (0 to 49 employees). Only 26,000 (0.6 per cent) were medium-sized (50 to 249 employees) and 6,000 (0.2 per cent) were large (250 or more employees).

Small and medium-sized enterprises (SMEs) together accounted for more than half of the employment (58.2 per cent) and turnover (52.4 per cent) in the UK.

Small enterprises alone (0 to 49 employees) accounted for 46.2 per cent of employment and 38.3 per cent of turnover (see Figure 1).

I think those figures show that society is extremely dependent on small businesses.

[Francesca R]

In the OP, Wolfman was asserting that an employer has no more loyalty to its employees than an employee has to his or her employer. In employer/employee situations nobody has to be "loyal" beyond legal requirements. I think the thread convo has been about the approval or disapproval of various posters for other posters' personal positions on morality. Which is a fine conversation (by the way) but not one I have much to add to,

Specifically, since an employee can quit at any time, an employer should be able to fire an employee at any time as well.Some have noted (and I agree) that it is disingenuous to claim that because either side can walk away from the bargain (quit/be fired) then it follows that bargaining power is equal. Of course the latter does not follow from the former.

[Francesca R]

That is absolute codswallop. There is no difference between my business now, as a Limited Company, and when I was a Sole Trader, [B]other than legal (for liability and taxation).That's the difference, yes, pace to the "codswallop". An individual and a company are (very) different things.

Before you point it out, I am well aware that employment law binds an individual and a company equally. Ethics, however, do not.

A sole trader could employ a million people if he wanted to. How does that fall outside the discussion of corporate social responsibility?Because a sole trader is not a corporation.

I think those figures show that society is extremely dependent on small businesses.Er . . . who said it wasn't?

[tkingdoll]

[bold=me]That's the difference, yes, pace to the "codswallop". An individual and a company are (very) different things.

Before you point it out, I am well aware that employment law binds an individual and a company equally. Ethics, however, do not.

Because a sole trader is not a corporation.

Er . . . who said it wasn't?

Most small businesses are sole traders (in the UK at least). The 'social' part of 'corporate social responsibilty' refers to society. Therefore, sole traders are extremely relevant to this discussion.

We're not just talking about huge corporations. Wolfman's business is not a huge corporation like Microsoft, I assume. If the claim is that businesses and people are different, then I have proved that wrong. If the claim is that businesses cannot be ethical, then I have proved that wrong too, by demonstrating how many employers are in fact individual people and not faceless corporations.

[Francesca R]

Most small businesses are sole traders (in the UK at least).if "small businesses" are companies then they are not "sole traders". There is nothing to be served by your vacillating between terms.

If the claim is that businesses and people are different, then I have proved that wrong. If the claim is that businesses cannot be ethical, then I have proved that wrong too, by demonstrating how many employers are in fact individual people and not faceless corporations.Claiming you own proof via ipse dixit doesn't help you.

I doubt I will respond to any more of your posts (in this thread).

[tkingdoll]

if "small businesses" are companies then they are not "sole traders". There is nothing to be served by your vacillating between terms.

Claiming you own proof via ipse dixit doesn't help you.

I doubt I will respond to any more of your posts (in this thread).

What a weird response. I assume you are only interested in discussing whether or not large corporations have ethical responsibilities, and not employers in general. In which case, we are having two different discussions. I think it's very relevant as so many employers are Sole Traders, and therefore a large section of society depends on them and their ethical decisions.

[Francesca R]

What a weird response. I assume you are only interested in discussing whether or not large corporations have ethical responsibilities, and not employers in general. In which case, we are having two different discussions.OK yes, apparently we are. I apologise for my comments in the previous post in that case. :)

[tkingdoll]

OK yes, apparently we are. I apologise for my comments in the previous post in that case. :)

It's all cool, crossed wires are common enough on the internet. :)

[Francesca R]

(Mine's wireless—must be crossed radio waves)

[JoshuaSBK]

It seems you're trying to find a fair balance, Wolfman. That's a fair and productive way to run a business. It's important to always keep an eye on the bottom line. You have to. I actually work for an bank that adheres to a triple bottom line: people, planet and profit. Shorebank has established its mission and market helping those people, organizations and entrepreneurs who want to change the world. And they've become very successful doing it. With $2.4 billion in assets and $4.2 million in yearly revenue, ShoreBank has become an amazing resource to the socially responsible investor. Also, if you're interested, they offer a High-Yield Savings Account too. Three and a half percent interest is not a bad way to make money -- and make a difference. Check them out at sbk.com.