Political Compass #16: Shareholder profit is a company's only responsibility.

Great Debates
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Many political debates here have included references to The Political Compass, which uses a set of 61 questions to assess one’s political orientation in terms of economic left/right and social libertarianism/authoritarianism (rather like the “Libertarian diamond” popular in the US).

And so, every so often I will begin a thread in which the premise for debate is one of the 61 questions. I will give which answer I chose and provide my justification and reasoning. Others are, of course, invited to do the same including those who wish to “question the question”, as it were. I will also suggest what I think is the “weighting” given to the various answers in terms of calculating the final orientation.

It would also be useful when posting in these threads to give your own “compass reading” in your first post, by convention giving the Economic value first. My own is
SentientMeat: Economic: -5.12, Social: -7.28, and so by the above convention my co-ordinates are (-5.12, -7.28). Please also indicate which option you ticked.

Now, I appreciate that there is often dissent regarding whether the assessment the test provides is valid, notably by US conservative posters, either because it is “left-biased” (??) or because some propositions are clearly slanted, ambiguous or self-contradictory. The site itself provides answers to these and other Frequently Asked Questions, and there is also a separate thread: Does The Political Compass give an accurate reading? Read these first and then, if you have an objection to the test in general, please post it there. If your objection is solely to the proposition in hand, post here. If your objection is to other propositions, please wait until I open a thread on them.

The above will be pasted in every new thread in order to introduce it properly, and I’ll try to let each one exhaust itself of useful input before starting the next. Without wanting to “hog the idea”, I would be grateful if others could refrain from starting similar threads. To date, the threads are:
Does The Political Compass give an accurate reading?
Political Compass #1: Globalisation, Humanity and OmniCorp.
#2: My country, right or wrong
#3: Pride in one’s country is foolish.
#4: Superior racial qualities.
#5: My enemy’s enemy is my friend.
#6: Justifying illegal military action.
#7: “Info-tainment” is a worrying trend.
#8: Class division vs. international division. (+ SentientMeat’s economic worldview)
#9: Inflation vs. unemployment.
#10: Corporate respect of the environment.
#11: From each according to his ability, to each according to need.
#12: Sad reflections in branded drinking water.
#13: Land should not be bought and sold.
#14: Many personal fortunes contribute nothing to society.
#15 Protectionism is sometimes necessary in trade.

*Proposition #16: * The only social responsibility of a company should be to deliver a profit to its shareholders.

SentientMeat (-5.12, -7.28) ticks Strongly Disagree.
Milton Friedman circa. 1970 coming through loud and clear. He thinks even stakeholder status is dangerous; it’s to be shareholders and shareholders alone. The employees, the customers, local communities, safety, the environment - none of these concerns should impinge upon sheer quantity of money as a target.

But wait, what did the 91 year-old say just last year?

Even he is rethinking pure pursuit of profit as the optimum economic approach, and that is without any stated commitment to seek to minimise suffering which I and other reasonable people feel is important.

The proposition is poorly phrased, I’ll admit, especially with regards to the little weasel word “social” snuck into the “responsibility” part: since shareholder profit is hardly social by nature it surely renders the entire proposition logically contradictory? (I could perhaps understand the left-averse pounding in a Strong Agreement by way of protest.)

But to actually consider shareholder profit as the be-all-and-end-all of corporate responsibility is, well, irresponsible. Pure monetarism, like pure Marxism, looks increasingly like a peculiarly 20th Century idiosyncrasy.

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Asterion [1.62,-2.51 at least this time] ticks Agree.

Now, don’t get me wrong, I don’t like companies playing fast and loose with the environment or the truth or whatever. But I still believe that the only social responsibility is to deliever a profit to the shareholders. However, as we’ve seen in the past, companies that do act either antisocially or asocially often take quite a hit in both public opinion and profits. So while I’d say that the only social responsibility is to deliever profit, it is generally required for a business to be a good neighbor in order to stay in business to deliever that profit.

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Economic -7.38 Social -7.79, strongly disagree.

Delivering profit is a more important requirement as far as staying in business though. If an unethical company has great PR or political connections, good neighbourliness is often not required.

SentientMeat, I think this is an instance where right-wingers will say the question is well phrased. For many of them, profit and wealth creation is a social good and is the only way society truly advances. Trickle down and all that.

4

Econ -7.75, social -3.95.

Strongly disagree.

One big social responsibility a company has is to its employees; this includes hiring practices. For example, in the US a company must be an “equal opportunity employer” (can’t hire/not hire on the basis of race, ethnicity, etc.). This is a legal requirement.

On a moral level, there are many things a company should not do to its employees. For example, not paying promised wages or commissions is one. These examples may seem like no-brainers, but, then again, the question uses the word “only.”

5

Actually not. The problem here is that the question is total. Its much too absolute (even though the creators of the test surely had no clue what they were writing) in that it evades the idea that companies should presumably not kill people even if they can. I am reminded of the DeBeers corporation in South Africa (and the area), which has a history of enforcing murder and banditry. Given the state of the legal system in the areas they’ve operated in at times, I can make no legal objection, but a social and moral one does exist.

So, I suppose I would disagree, solely on the grounds that the officers must not do immoral acts (I am stricken by the strange image of Snidely Whiplash planning to collect insurance on Nell after dumping her in front of the train… LOL), which may cme under the aegis of this question.

6

6.88/-2.97 Agree

Note that it says “Social Responsibility” not just "“Responsibility”. Companies must obey the laws, but that is not a “Social Responsisbility”, it’s a legal one that we all have. Unless a company explicity has other social responisbilities in its charter (and many do, despite the typical "evil corporation stereotype), then it’s only “social resonisbility” is to do what its shareholders want it to do-- make money.

And yes, the term “stakeholder” is like fingernails on the blackboard to me. :slight_smile:

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Strongly Disagree.

I think investing is like gambling: You are betting that company XYZ’s stock price will increase (you’re not even betting that they will make a profit, just that the stock price will go up)

It’s like betting that a particular horse will win the horserace. Does the horse or its jockey have any “responsibility” to the people who bet on it? ZERO.

Likewise, company XYZ has zero responsibility towards people who bet on its stock price.

Of course, the jockey wants to win the horserace to keep his job and make money, and similarly, a company wants to make profits to stay alive, but to imply that there is any responsibility to the “bettor” is ridiculous.

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I will go so far as to agree that a company does not have a moral responsibility to give to charity and whatnot. It does have a moral responsibility to do no harm, certainly. I am sure you would not argue that a company can do anything it likes so long as there is no law against it.

Grr, I know what you mean. The Japanese have now got their hands on this thing (suteekuhorudaa, barf), and they, as they nearly always do with foreign-born words, use it in the cheesiest, sloppiest manner possible. The dog taking a piss on a fire hydrant outside the company headquarters? Yep, he’s a stakeholder too.

But the term IS useful and important, since companies DO have a legal responsibility to persons besides the shareholders. Companies must pay the government, employees, and debtholders before they can pay the shareholders a dividend. If a company goes belly up, the debtholders (who are just as much investors as shareholders), suffer too. Hence the useful term “stakeholder,” which covers more than just “shareholder.” As far as fingernails are concerned, however, yeah, the term is often used in a nice ‘n’ sugary manner: “With concern for all stakeholders in our global family.” Yuck.

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A good neighbor to whom? The sort of good neighbor Union Carbide was to the people of Bhopal India? The kind of good neighhbor that US corps are being when they outsource jobs to … India? When you’re a multinational, you live in a lot of neighborhoods, and some of them … you trash.

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Libertarian/Right
Economic Left/Right: 4.50
Social Libertarian/Authoritarian: -2.18

Checks agree.

But its just the word ‘social’ that makes me agree with this, SentientMeat. Companies are in business to make money, not to do good deeds for society. By making money they ARE doing things for society by providing jobs and injecting capital into the system, but this is not their function, only a happy side benifit for society…their function is to make money for their shareholders, who have invested THEIR capital in the company in the first place and expect a return on their investment.

Of course, like everyone else, companies have responsibilities…the responsibilities of paying their taxes and following the laws set down by the country they are opperating in. After that, a companies ONLY responsibility is to make money.

-XT

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BTW, I have never seen an actual stock (all my transaction done over the web and were same-day-sales), so I am curious if, when you get the actual piece of paper it says something like:

“We, the Company, promise to do our best to maximize profit for you the owner of this stock”

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So, what **is ** the purpose of a Corporation then?

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Appearently its just legalized gambling John. :rolleyes: That would make the purpose of a corporation to provide people with the entertainment they can’t get at the track, as well as do good deeds for society.

-XT

14

Ah hell…I missed this gem here.

No wonder you think that the stockmarket is just like betting at the races.

-XT

15

Depends what your definition of purpose is :slight_smile:

Let’s take the definion from www.m-w.com

In that case, the purpose of a Corporation is to make money for its founders (that’s why they founded it in the first place, right?)

Once the founders are dead, things get a little trickier, but I would say that the purpose of the Corporation is to continue to provide employment to its employees.

In some sense, once the founders are dead, why don’t employees just get up and leave? Why do they stay? Is it because of some responsibility they feel towards the shareholders? They stay because they need the job. So, the enabling force of the Corporation, the employees, stay for themselves. I would say that the motive behind the enabling force of something, also can be thought of as the purpose of that thing.

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And if the owner of a house dies, should the house go to the neighbors?

Stockholders are owners of the company. In a nominal way, they get to make decidsions about the company. This is where your horse race analogy breaks down. When I bet on SUNYSIDE to win, I don’t get to tell the owner how to train the horse. I just get to watch it and have fun (or not).

Someone (or some group of people) always own a corporation. Always. If the original owners die, it simply passes to the current owners. Like any piece of property.

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Strongly disagree. Wish there was a stronger option. The stockholders have less at stake than the workers. Take an auto company as an example. The guy that has been on the assembly line for and has 25 years seniority and is still 10 years from retirement has a whole lot more at stake in the company than some fat cat investor that happened to buy stock. Should the company move an operation overseas so that it maximizes the profit for the investor or should it keep its current plant going so that Joe Lunchbox can keep his house and maybe send his kids to college? If the company cares only about the shareholders, then its loyal employees are of no consideration.

A well run company cares about making a profit, but they must balance this against the needs of its employees, respect for the environment, and being a good corporate citizen. Maybe a sports shoe company could make more profit by making tennis shoes with third world child slave labor, but that doesn’t mean they should. Maybe a tool company could deliver a bigger dividend by moving the headquarters to the Bahamas, but that doesn’t mean they should. Maybe a super retailer can increase the price of stock by moving into a town, undercutting the local businesses and raising prices after they drive them out of business, but that doesn’t mean they should. Maybe it is cost effective for a utility to lobby for legislation to weaken environmental controls so that operation costs can be reduced, but that doesn’t mean it’s right.

18

In theory, stockholders are owners of the company, but in practice, most people who buy a stock, simply sit back and watch it go up or down and then sell, thus making a profit or loss, not unlike the racehorse example.

Of course, there are big investors that have a large percent of the shares, and they in fact do have a say as to what the company will do. But for millions of average investors, that is not the case. They simply sit back and watch the action.

19

“Fat cat”? “Happened to buy the stock”? That’s no argument. How about “careful investor who decided to risk investing in the company”? How do we, in our society, define ownership? Do we define it by who actually has legal posession of the thing, or do we define it by who 'has more at stake"? If I own a house that I have rented to a family for 10 years, does their “stake” in my house trump my right to sell it if I so choose? Nope. It’s the same principle with corporations. Unless you redefine the legal meaning of “ownership”, then your argument doesn’t stand.

False dichotomy. Not many companies survive if they treat their employees like shit. Companies which treat their employees well have a competitve advantage over those which don’t. But if a company simply focusses on retaining employees at the risk of satisfying sharehodlers, everbody loses.

You often throw the “slave labor” argument around in these types of discussions. It’s a strawman argument. No one is arguing in favor of slave labor. And there are ways to deal with real “slave labor” situations-- preventing companies from hiring foreign workers is not one of them.

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Unless the investor is an idiot, he isn’t putting all of his financial resources into the company in question. The worker has. The guy on the assembly line has invested his one and only life. Your renters have other options besides living in your house- but the older employee who has a life invested in his company has few if any options.

It’s possible for a company to treat its employees well and then decide they are expendable, if all they care about is the bottom line.

Slave labor is a real issue .

If the sole social responsibility for these corporations is the stockholders, then they have acted properly. But if these charges are true, then I believe most of us would agree that there are other considerations besides the shareholders to take into account.