Investor Ethics

Seth Godin argues that businesses can't be ethical, but people can:

It comes down to this: only people can have ethics. Ethics, as in, doing the right thing for the community even though it might not benefit you or your company financially. Pointing to the numbers (or to the boss) is an easy refuge for someone who would like to duck the issue, but the fork in the road is really clear. You either do work you are proud of, or you work to make the maximum amount of money. (It would be nice if those overlapped every time, but they rarely do).

"I just work here" is the worst sort of ethical excuse. I'd rather work with a company filled with ethical people than try to find a company that's ethical. In fact, companies we think of as ethical got that way because ethical people made it so.

I worry that we absolve ourselves of responsibility when we talk about business ethics and corporate social responsibility. Corporations are collections of people, and we ought to insist that those people (that would be us) do the right thing. Business is too powerful for us to leave our humanity at the door of the office. It's not business, it's personal.

Godin makes a great, if uncomfortable, point. No business can be ethical in and of itself, but it can be a reflection of the ethical decisions of the people who run it.  Earlier in his post Godin wrote this:

The unhappy theory of business ethics is this: you have a fiduciary responsibility to maximize profit. Period. To do anything other than that is to cheat your investors. And in a competitive world, you don't have much wiggle room here.

If you would like to believe in business ethics, the unhappy theory is a huge problem.

So the problem appears to be that since a business manager's fiduciary duty is to maximize the profit of the shareholders then it's almost impossible to do the right/ethical thing if it's not in the best interest of the shareholders.  It's an argument we've heard often throughout the recent past in our country and here's my problem with it: it absolves investors from having their own ethics.

There is nothing that I know of that stops investors from saying to the company's managers that keeping its employees on the payroll is a higher priority than returning a 10% profit.  Investors can also tell the company's managers that preserving the environment is a higher priority than higher profits, that avoiding taxes by playing offshore games will not be tolerated, etc.  Sure, at some point you might have to make some hard decisions in order to help the most people – as Godin writes The local store gets very little long-term profit for its good behavior if it goes out of business before the long-term arrives – but investors can at least let it be known that layoffs are the last consideration, not the first.

*Side note – I do understand that some investors are institutional investors, but guess what?  Institutional investors are managed by people wo when you think about business you have to remember that at the top of the pyramid there is always a person or team of people making decisions.*

To be clear, I'm not disagreeing with Godin.  He's absolutely right that all of these "business decisions" are really a series of individual decisions made under the "it's only business" cover.  What I'm honing in on is this penchant for business writers/commentators to bemoan the complexity of the issue because managers must do everything they can to maximize profits because that's what investors demand.  That's probably true, but as Godin pointed out the managers chose to work there and I pointed out that investors chose to set the tone/goals for the organizations in which they invested.  The reality, as most of us have sensed for years, is that many of those "business decisions" are actually individual decisions made by the people who are directed by one very basic human motivation: greed.

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