Should Corporations Act Purely on Self Interest?

Apr 24, 2005 culture leadership suggest edit

I saw this post on Don Park’s blog…

My perspective on this latest hot topic is that I think companies should act only in interest of itself, the Microsoft shareholders in this case, and not anyone else, including its employees. So I think the discussion should have been about whether leaders of Microsoft made the right decision in the interest of its shareholders.

I don’t understand this mode of thinking. Should people in general act purely on self interest and not for the common good? Why should corporations be any different? After all, they are made up of people, both shareholders and employees. It seems not all companies agree as Boeing, Nike, Coors, HP, and others supported the bill.

I suppose Microsoft would have continued to support the bill if it was rewritten to state that gays are not protected under anti-discrimination laws to own stocks in major corporations. Oh then you’d see some major rallying around gay rights.

I understand that having a corporation get behind a political cause is a touchy situation. Whose values do you support? Your employees? Your shareholders? America at large? But it’s clear that this bill supports values Microsoft already holds dear. Microsoft has in the past supported this bill and has shown itself to be progressive in its own policies.

And Ballmer’s worry of discriminating against anti-gay bigots is a real piece of work. Here’s a snippet.

What message does the company taking a position send to its employees who have strongly-held beliefs on the opposite side of the issue?

As Shelley eloquently points out, this bill doesn’t deny rights to others. And the message would have already been sent by the fact that Microsoft’s own policies are reflected in this bill. So if you’re worried about the bigots feelings Mr. Ballmer, are you going to change your policies to reflect that as well?

We’ve all seen what acting purely on corporate self-interest produces. Oh, Enron springs to mind, sweat shops, destruction of the environment, and countless other examples. Corporations have all the rights of a person without many of the implicit responsibilities. Corporations are members of the community. It’s time they start acting like it.

Found a typo or mistake in the post? suggest edit

Comments

6 responses

Walt • April 24th, 2005
Unfortunately the case at hand has more to do with politics than either ethics or business. However, you make a good point that company managers are finding it more difficult to determine who exactly they represent.

Your point that Enron is an example of company management purely representing the interest of the shareholders is misleading. In that case, management represented its own interest and not the shareholders or the employees. The result, was that both the shareholders and employees (who overlapped because employee pensions were held in Enron shares) lost their shirts while management became rich.

Company managers should represent their shareholders' interests (as Enron did not). In most cases, they will find that their "stakeholders" (employees, suppliers, neighbors etc.) are better off with a vibrant growing company. Problem arise when company managers are dishonest - then everyone suffers, most notably the shareholders, but also the employees and the environment.

Whose job is it to protect the environment and prevent sweatshop labor? That is the government's job. Figuring out environmental and labor policy is hard enough for public policy experts, let alone for companies who are in the business of maing a profit, not determining policy. Once environmental and labor laws have been decided, company managers should and must openly and honestly follow them. If we count on companies on their own to protect the environment and prevent sweatshops, we will be sorely disapointed.

As for the specific employment law issues in this case, the law at issue is more symbolic than anything else. The general rule is "at will employment", but a company has the burden of showing a non-discriminatory reason for letting go of an employee in a protected class. So far, these include women, minorities, and anyone over 50. Eventually, we will all find ourselves in a protected class (even if it means waiting until we are 50). Adding other group to the list or protected classes will just mean a company will have to make sure there are a couple bad reviews before they fire a person in that class. Of course, this does not diminish the symbolism inherent in Microsoft's change of policy - and symbols are important. Considering its past representations, Microsoft was weak to change its policy as a result of political pressure.
haacked@gmail.com (Haacked) • April 24th, 2005
I'd argue that Microsoft's act isn't in the best interest of its shareholders if it disillusions some of its top employees and causes an increased brain drain.

As for making policy, I'm not advocating that companies make policies. I agree, that's the gonvernment's job. This isn't a question of whether Microsoft should create policy but whether they should have continued to extend support for a policy that they already support internally.

It's obvious corporations have legislative agendas. Microsoft's claim was that it was trimming its own, not cutting it completely. I'd hardly argue that companies should completely stay out of lending support or withholding support to legislative bills. Corporations pay taxes, they have the right to participate.
Randy Charles Morin • April 25th, 2005
I think, the pissing piece, is that sometimes, acting in self interest, also means acting for the common good. These overlap more often than not.
Walt • April 26th, 2005
Phils Comment: "I'd argue that Microsoft's act isn't in the best interest of its shareholders if it disillusions some of its top employees and causes an increased brain drain" is saying exactly that.

The issue isn't weather Microsoft should act in the best interest of its shareholders, but was Microsfot acting in the best interest of its shareholders in this particular case. Phils says no. Enough said.
Haacked • April 26th, 2005
Randy, I'd totally agree with that statement. In fact, in truth, I actually believe that acting selfishly with does require acting in the common good.

But in practice, I don't see that being the case. Often, people and corporations act selfishly with limited forethought, wisdom, insight, etc... It's this focus on the short term gain that's the problem.

My theory could be restated that always acting selfishly with perfect (or very good) knowledge of long term effects will benefit the common good. But much like many theoritical laws, it doesn't exactly describe the real world.
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