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

[smiling_bandit]

I think I’d have to put torture and murder and kidnapping under legal and moral responsibilities, not social, though that depends on your POV a bit.

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.

No, this is completely and totally wrong. Investors give people money, not some third party.The money doesnt go to the NASDAQ or Dow exchange. Its goes right to the company (minus fees for the banking system that tranfers the cash, sometimes). That company has been given money with few or no strings attached save one: they are obligated to attempt to make lots of money for the hareholders in return.

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.

True. But their primary responsibility, legal matters aside, is to make money. If they don’t, they die. Sometimes this means firing lots of people. This is simply the only solution to some problems.

In fact, one of the biggest problems in France right now (and to some degree Japan, too) is an inability to fire workers. Mass layoffs are virtually impossible, as they face multiple legal and bureaucratic hurdles. This indirectly hurts the economy as a whole, since companies can’t afford to hire workers in good times, leadiug to long-term structural unemployment. Treating workers well is one thing. But aside from contract obligations, companies have no obligation to give anyone a job or retain any employee.

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.

And what if that same worker is an investor himself? Its quite common even for fairly poor peopel to have quite a bit in stock. Are his interests to be voided for some other worker? What if the company collapses itself? Is there some inherent evil in letting people who carefully built their wealth from stock investments benefit from wise choices? They are, after all, giving out loans to companies. Like any bank, they are entitled to their money because they own the company.

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.

Yes, thank God. If this weren’t so, we’d have unemployment like France.

[Paladud]

Paladud, originally (5, 0.5) but sliding southward a bit ticks agree.

Brutus’s old signature comes to mind. It was something along the lines of “If you break the law, do it to seize power. In all other cases obey it.” Likewise, obeying the law is not a corporation’s social responsibility but a legal one, as someone stated above in this thread. It’s just much easier to stay within legal boundaries than to risk the consequences of doing otherwise.

The relationship between the employee and the employer is one of mutual self-interest, or one that doesn’t continue very long. Suppose, hypothetically, that I like prostitutes (I have class in a little while, no time to think of a better analogy. I just know this will come back to bite me in the ass.) I pay for the services of a particular one weekly for a few years. If another prostitute whom I find preferable comes along, too bad for the old one. Likewise, if she obtains a degree at some point and gets into a better line of work, I’ll have to look elsewhere for sexual gratification.

Of course, there are stronger (albeit subjective) ethical constraints with outsourcing the jobs of long-term employees. I might not do it if I were in a position to, but it would be wrong to force an employer to retain his workers against his will.

[SentientMeat]

Of course profit is the primary responsibility, but is it the only one? If the law were such that it was actually more profitable to simply pay fines or compensation for company failures regarding the environment, customer safety, treatment of employees, local heritage etc. etc. than make the necessary investment to prevent them, does the company not have a responsibility not to exploit such a situation.

In short, is it impossible for shareholders to make irresponsible decisions?

[dorfl]

@Polerius

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.

The fact that many small shareholders are not active should not be used as an argument that the company does not have a responsibility towards them. They could be active, they just choose not to. A little bit like people who do not vote.

The money doesnt go to the NASDAQ or Dow exchange. Its goes right to the company (minus fees for the banking system that tranfers the cash, sometimes).

Well, sort of. That statement is true for the first buyer of a share in an IPO or private placement. It is not true if you buy a share on the stock exchange. Then your cash (minus transaction cost) goes towards the seller, and the company does not see a penny of it. This is the main fact quoted by those who think that shareholder return does not matter once the founders/original investors are out.

Oh, was I supposed to state my opinion? I choose “This question is worded incorrectly as it assumes that there is only a black and white answer. The issue is more complex than that. Bad, bad, bad design of the questionnaire - at best, because the writer is stupid, at worst, because the writer has an agenda”

dorfl

[XT]

@SentientMeat

Of course profit is the primary responsibility, but is it the only one? If the law were such that it was actually more profitable to simply pay fines or compensation for company failures regarding the environment, customer safety, treatment of employees, local heritage etc. etc. than make the necessary investment to prevent them, does the company not have a responsibility not to exploit such a situation.

As a corporation, it is their ONLY reponsibility…to make a profit. As a society, its OUR responsibility to put the laws and structure in place (or NOT to as we or other nations choose) to minimize abuse and punish it when it happens. If we, as a society cherish the environment for instance, its our responsibility to put safe guards in place to protect it, and to punish those (corporate or otherwise) who break the laws we create. If other things are important in other countries, then that is THEIR choice…its their structure to decide whats important to them.

If we, as a society, decide that a safety net is warrented for those people who lose their jobs or otherwise have bad luck, then its OUR responsibility to provide such, if possible, from the taxes collected. Again, if in other nations they have other priorities, then thats their choice.

A corporation must work within the guidelines and tax structure we (or whatever nation they are working in) create. Thats a given IMO. However, a corporations main, primary, and ONLY ‘responsibility’ is to make a profit (within the structure defined by society) for those who have invested in it, who have provided the capital for it to grow or expand or simply opperate.

@SentientMeat

In short, is it impossible for shareholders to make irresponsible decisions?

Of course its not impossible for shareholders to make irresponsible decisions. And if they do, generally their companies suffer for it or even cease to exist. Again, companies and their shareholders must opperate within the structure we define…and if they don’t and are caught at it, they must be punished.

But this is getting away from the OP, which was whether or not “The only social responsibility of a company should be to deliver a profit to its shareholders.”

Companies aren’t responsible for providing jobs, nor for keeping people on their payroll employed indefinitely. They aren’t responsible for providing safety nets. They aren’t responsible for setting environmental standards. They are simply in business to make a profit. Its societies responsibility to provide direction and structure on things we, as a whole, consider vital or important.

Thus our government, with (hopefully) our input, decides what environmental laws there should be, and how they should be enforced, for instance. Corporations, like citizens, must exist and work within societies defined structure. When they don’t, like when citizens commit crimes, they are punished accordingly.

-XT

[SentientMeat]

Of course its not impossible for shareholders to make irresponsible decisions. And if they do, generally their companies suffer for it or even cease to exist. Again, companies and their shareholders must opperate within the structure we define…and if they don’t and are caught at it, they must be punished.

And if they do get away with it, if the company doesn’t suffer for it, does that not justify their irresponsible strategy? Do they not, like a citizen, have a responsibility to society not to try to get away with it?

Corporations, like citizens, must exist and work within societies defined structure. When they don’t, like when citizens commit crimes, they are punished accordingly.

Surely the corporation/citizen simile breaks down when the punishment handed out to a corporation is far more lenient than that bestowed on an individual? In the Union Carbide example, I would not expect merely to be fined if I killed or blinded an entire town due to my own personal profiteering actions. Does a citizen not have responsibilities other than profit?

[Frankenstein_Monster]

( -2.88 , -5.64 )
Strongly disagree.

@asterion

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.

Some people said something like this about Enron. “Enron did bad, so their stock sank, so they went belly up. See, Capitalism works.” (Or course this is a bit extreme. I’m not suggesting that you or anybody on this thread would say this. But I do remember seeing such comments, probably in the Wall Street Journal)

Anyway, this is not nearly good enough for me. 10’s of thousands of people not only lost their jobs but also their life savings. Their whole lives ruined. All because top executives were too obsessively focused on profits above all else - or worse, just on keeping up false appearances of profit.

I believe executives should explicitly reject the thought that profit is their only social responsibility. I believe shareholders should do this, too. (I own shares and I actually don’t want them to go up, I want them to stay at the same price and pay a reasonable dividend over time. If share prices go up then they become too expensive, which I hate just as much as food prices going up. I realize this is not a mainstream attitude these days.)

Interesting illustration:

http://www.reclaimdemocracy.org/articles_2004/costco_employee_benefits_walmart.html

But Costco’s kind-hearted philosophy toward its 100,000 cashiers, shelf-stockers and other workers is drawing criticism from Wall Street. Some analysts and investors contend that the Issaquah, Wash., warehouse-club operator actually is too good to employees, with Costco shareholders suffering as a result.

My response to such analysts and investors (I dunno if they are representative, they could be just a minority) I say unequivocally:
f— you, a–h—! sorry about that, I realize this is not the Pit

[XT]

@SentientMeat

And if they do get away with it, if the company doesn’t suffer for it, does that not justify their irresponsible strategy? Do they not, like a citizen, have a responsibility to society not to try to get away with it?

If I murder you, and get away with it, does it justify murder? Does it necessarily mean I’ll get away with it next time too…or the time after? You simply can’t stop all the ills of the world. You can only structure your society, your laws, etc, to try and stop some of them. Some citizens, like some corporations, will push the envolope and try and ‘get away’ with things outside our laws. Sometimes they get caught and our punished. Sometimes they aren’t.

@SentientMeat

Surely the corporation/citizen simile breaks down when the punishment handed out to a corporation is far more lenient than that bestowed on an individual? In the Union Carbide example, I would not expect merely to be fined if I killed or blinded an entire town due to my own personal profiteering actions. Does a citizen not have responsibilities other than profit?

What happened with Union Carbide happened in India. It was THEIR responsibility to punish the company as they saw fit, no? If something similar had of happened here in the US the company would most likely have been ruined by the lawsuits alone, let alone the criminal charges that would have been brought against the CEO and other corporate officers. However, that was for the Indians to decide, which, afaik, is what they did. Different rules, different standards…different priorities.

As to the last part about citizens ‘responsibilities’…I’m not sure to be honest. I DO think citizens have ‘duty’ to the country, but thats ME…society obviously doesn’t as people aren’t required to serve (except when there is a draft…but then, corporations can be ‘drafted’ as well in war times).

My father, when he moved to the US from Mexico joined the Navy and fought in Vietnam. When I was of age I joined the Navy also and ‘fought’ in the Gulf War I. I’m incouraging my eldest son to join either the Navy or Marines (he wants to be a marine for some odd reason…no accounting for taste) before going to college.

But thats MY family, and the duty is what I put on myself and instill in my children. Certainly I don’t expect everyone to feel the same…nor does society. So, I guess I’d have to come down on, each citizens ‘responsibility’ is the same as a corporations…work within societies structure and ‘make a profit’, or that whole ‘pursuit of happyness’ thing.

-XT

[Blalron]

Economic Left/Right: -9.00
Social Libertarian/Authoritarian: -7.79

Strongly Disagree

The reality is that profit to shareholders is all that matters. It doesn’t matter how many people the company has to kill or poison, or how many jobs get outsourced to third world countries for people to work 16 hours a day for 10 cents an hour and no bathroom breaks. Making profit is all that matters.

If you’re asking me whether it should be different, yes it should.

[John_Mace]

@BobLibDem

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.

One can just as well say “unless the worker is an idiot, he’s not restricting his skill set so that he is locked into one employer or one industry.” Older employees have exactly as many options as they plan for. If that person doesn’t plan for alternative employment, why is it my responsibility to keep him in his jobs if I can find someone to do the same job for less money?

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.

True. So what? I created the job in the first place. If I decide to sell my company or move it somewhere else, that’s my perogative. You do not own the job which I have given you at my company. I own it.

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.

I think we are arguing semnatics. A country’s laws can forbid companies from employing slave labor, or from buying products from companies that do. I consider that to be a legal responsibility, not a social one.

[Hyperelastic]

Economic Left/Right: -7.75
Social Libertarian/Authoritarian: -2.82

I checked “Strongly Disagree”. I frankly don’t see how any but the most extreme social Darwinist could check something different. The statement reads, “The only social responsibility of a company should be to deliver a profit to its shareholders.” (emphasis mine) I don’t think distinguishing legal responsibilities from social responsibilities makes any sense, because after all, the laws are there in order to promote the social good. If one accepts this definition, then a person who checks “Agree” must concede that, for instance, GM is obligated to bomb Ford’s factories because it would increase GM’s profits.

Seeking to maximize profit is usually consistent with or neutral to achieving social goods (the invisible hand and all that), otherwise capitalism would not be tolerated. But this is not always the case; it is trivial to list examples. One example is enough to take you out of the “Agree” box.

[XT]

@Hyperelastic

I checked “Strongly Disagree”. I frankly don’t see how any but the most extreme social Darwinist could check something different. The statement reads, “The only social responsibility of a company should be to deliver a profit to its shareholders.” (emphasis mine) I don’t think distinguishing legal responsibilities from social responsibilities makes any sense, because after all, the laws are there in order to promote the social good. If one accepts this definition, then a person who checks “Agree” must concede that, for instance, GM is obligated to bomb Ford’s factories because it would increase GM’s profits.

And frankly I don’t see how any but the most mush headed marxist could check anything different from ‘agree’ or ‘strongly agree’. So, where does that get us? We are obviously looking at things through different filters and definitions, so there is no need to be insulting. From MY working definition of ‘social responsibility’, I really can’t see how anyone could check anything but ‘agree’ or ‘strongly agree’. Obviously you are taking the opposite position and you are equally puzzled how anyone can check anything but ‘disagree’ or ‘strongly disagree’.

I suppose that someone in this thread ought to define exactly what the hell a ‘social responsibility’ is because its obvious we are all working off a different definition (and maybe someone could take a shot at what the author of the test meant). To me, there is a distinct difference between a ‘social’ and a ‘legal’ responsibility. Obviously to others there is no difference at all. However, it cuts to the heart of this debate and would radically change the answer. This is why the question is so poorly written (like so many other questions in the test) because the wording is ambiguous. What exactly IS ‘social responsibility’, and more important, what does it mean to the folks that wrote the test?

@Hyperelastic

Seeking to maximize profit is usually consistent with or neutral to achieving social goods (the invisible hand and all that), otherwise capitalism would not be tolerated. But this is not always the case; it is trivial to list examples. One example is enough to take you out of the “Agree” box.

Here is where we really differ. Companies seeking to make a profit have nothing to do with achieving social good (whatever the hell that is). They are unrealated and should be. Companies are in business solely to make a profit. If they don’t make a profit, they don’t stay in business. So, if they achieve social good (again, whatever that is) thats just a happy side benifit. If they don’t, then they don’t. As long as companies stay within the laws set down by our society and pay their taxes, thats all society can expect or ask of them.

-XT

[John_Mace]

As I think about it, is “making a profit” even a social responsibility? It’s a fiducial responsibility. Perhaps the question is meant to mean: “Profits generated by corporations can be beneficial to society in that the investors’ standard of living rises. It is in this sense only that a corporation can be said to have a ‘social responsibility’”.

But maybe the whole test is just meant to be a Roarsach Test. The questions are not meant to have actual answers, but to provoke a subliminal, almost emotional, response.

I don’t like being used!!

[Aeschines]

Companies are not living creatures. Any decision that they “make” is made by individuals. (Of course, there are many sociological factors at work, too.)

Each person on this planet has a moral duty to advance the cause of Light and Love; to make the world better; to make the species happier and healthier; and to protect the environment for both our species and others. Whether a person is a factory worker or a CEO, this duty remains. Hence, a company–as a group of individuals–also has the duty to advance the cause of Love and Light. There is no reason why this cause cannot be advanced by doing good work (ie, providing good products) and making a fair profit.

I’m distressed at some of the poor logic in this thread. Certain posters seem to believe that, heck, if there’s no law against it, companies can do whatever they please. Wrong! A law on the books is not some magic fairy wand that automatically compels a company to act in a certain way. As another poster wrote, if a company puts profits above all else, then it would be “obligated” to try to get away with breaking the law as much as possible. Or how about bribing government officials to change the laws themselves?

I’m sad at the naivete that goes with this logic. So, a company is only obligated to maximize shareholder value? How do you think it really works? In reality, most companies are run primarily for the benefit of the executives. The system is rigged so that they get to vote the shares of anyone who does not attend the annual meetings (proxy votes), that is, all the smallish investors. Management makes sure that no matter how bad it screws up, its ticket is punched (golden parachutes).

Frankly, the whole system of capital stock that we have now is dysfunctional. I think a better way would be for the company to buy out the original investors and run itself as a cooperative–with the understanding that it is a way for the employees to cooperate and generate wealth for themselves.

[XT]

@Aeschines

Each person on this planet has a moral duty to advance the cause of Light and Love; to make the world better; to make the species happier and healthier; and to protect the environment for both our species and others. Whether a person is a factory worker or a CEO, this duty remains. Hence, a company–as a group of individuals–also has the duty to advance the cause of Love and Light. There is no reason why this cause cannot be advanced by doing good work (ie, providing good products) and making a fair profit.

gag Reaches over to emphatically check ‘horseshit’ box.

Each person has a moral duty to advance the cause of Light and Love?? To make the species happier and healthier? You are your brothers keeper?? :rolleyes: You don’t actually believe this tripe…do you?? :dubious:

@Aeschines

I’m distressed at some of the poor logic in this thread. Certain posters seem to believe that, heck, if there’s no law against it, companies can do whatever they please. Wrong! A law on the books is not some magic fairy wand that automatically compels a company to act in a certain way. As another poster wrote, if a company puts profits above all else, then it would be “obligated” to try to get away with breaking the law as much as possible. Or how about bribing government officials to change the laws themselves?

If there is no law against it, but society deems that something should be illegal, then it is OUR responsibility to make such laws. What are you saying here? That companies should judge their actions NOT based on existing laws but on something else?? What exactly?? Get real.

You are right about one thing…laws on the book aren’t some fairy wand, nor are they, as you appearently think, some static thing cast in stone. As our society evolves so do our laws…and this is how it should be.

I’d like to see which poster said that companies should break the laws as much as possible to maximize profits. I must have missed that one.

@Aeschines

I’m sad at the naivete that goes with this logic. So, a company is only obligated to maximize shareholder value? How do you think it really works? In reality, most companies are run primarily for the benefit of the executives. The system is rigged so that they get to vote the shares of anyone who does not attend the annual meetings (proxy votes), that is, all the smallish investors. Management makes sure that no matter how bad it screws up, its ticket is punched (golden parachutes).

I’m frankly STUNNED by the naivete here, and scratching my head wondering how some folks make it in the real word. You have no concept of business at all, yet you are attempting to expound on business practices. This reads like somekind of cereal box marxist caracature. You aren’t pulling my chain here are you? :dubious:

@Aeschines

Frankly, the whole system of capital stock that we have now is dysfunctional. I think a better way would be for the company to buy out the original investors and run itself as a cooperative–with the understanding that it is a way for the employees to cooperate and generate wealth for themselves.

:rolleyes: I hesitate to ask this…but do you have a cite for your assertion that the entire capital stock system (whatever the hell that means to you) is dysfunctional? Do you have any evidence that cooperatively run companies perform better than stock held companies? Have you ever even seen a cooperatively owned company, or worked for one?

Cause I have…SAIC is an ‘employee owned’ company, and I worked for them for years. Employees can buy stock in the company (its privately held or was when I worked there…someone told me they were thinking of going public), and to an extent there is profit sharing. However, I hate to break it to you, but there is also a CEO and a board of directors who get all those goodies you mentioned before. Its not some kind of marxist workers utopia where the engineers sit down with the janators, the CEO with the file clerks, in Love and Light.

If you want what you are obviously craving, I suggest you go to…um, Cuba I think still has what you are looking for. Probably North Korea also. Most of that drivel is now out of China, but you might be able to find the odd state run factory somewhere in the country.

-XT

[John_Mace]

@Aeschines

Frankly, the whole system of capital stock that we have now is dysfunctional. I think a better way would be for the company to buy out the original investors and run itself as a cooperative–with the understanding that it is a way for the employees to cooperate and generate wealth for themselves.

True. We all know that owners are evil and workers are good. So the good workers should buy out the evil owners. Oh wait… then the workers become owners and are therefore evil. Damn! It sounded so logical at first…

[Zagadka]

A company working soley for its own profit is like a person working for its own profit - it sounds attractive on paper, but ends up empty and dysfunctional.

There are a number of other factors a person or commercial entity needs to consider, including by certainly not limited to employee relations, personal relations, self image, environmental balance (both the area-around-it and the earth-first types), balanced function, etc etc. Simply working for profit gives you a weak image and rotten core that can collapse easily, as we saw with the movement to organized labor unions and, eventually, corruption. We also see little to no employee loyalty these days.

It is true that a communist-type system (yes, I used the Forbidden Word) works well on a SMALL level, say a cooperative, or a small-medium sized local factory. When everyone knows each other and lives and works together, it works exceptionally well. The problem is, it exponentially grows too big for itself to handle, and eventually must convert to a different system.

As for the social laws in place… well, there is the old saying that for every crime a criminal is arrested for, he has committed a hundred. This does not, however, invalidate the legal system.

[John_Mace]

[QUOTE=Zagadka]
It is true that a communist-type system (yes, I used the Forbidden Word) works well on a SMALL level, say a cooperative, or a small-medium sized local factory. When everyone knows each other and lives and works together, it works exceptionally well. The problem is, it exponentially grows too big for itself to handle, and eventually must convert to a different system.
QUOTE]

Got a cite for the statement that it works “exceptionally well”? Does that mean it works better than the more traditional owner operated company?

[RickJay]

0.75, -5.00

Disagree.

An absolute fact; I work for a large, well known, international corporation that does not have any shareholders. Not one, in any form. Nobody “owns” my company. So there’s one company whose responsibility CAN’T be to deliver profit to the shareholder, because there is no shareholder to deliver profit to.

If you don’t understand how such a company could exist… well, you must not know much about business, because such companies do exist. No, we are not a charity. Hell, not-for-profit corporations are a whole chapter of tax law.

Plenty of companies exist for reasons other than delivering profit to the shareholders, or could exist for a multitude of reasons.

[pervert]

I understand that you do not want to give the name of your company, but could you give the name of another sizeable corporation which is not a charity and has not owners?