SEPilot wrote:PM wrote:Well, this is timely. From today's BBC website.
"The corporation has failed to deliver benefit beyond shareholders, to its stakeholders and its wider community," he said.
"At the moment, how we conceptualise business is, it's there to make money. But instead, we should think about it as an incredibly powerful tool for solving our problems in the world."
Read Adam Smith. Everyone working for their own best interest works for the best interest of the whole. That applies to corporations too. If corporations work to maximize profits by offering the best products and service that they can it will also go a long way towards solving those problems you refer to.
But this is one of the cases where Smith’s argument fails to be true.
If corporations work to maximize profits by offering the best products and service that they can
This is based on an assumption that offering the best products and service maximizes profit. This can be true, especially in small business, but more often than not when it comes to large scale corporations it is not true. McDonald’s doesn’t offer the best service (they do half decent there though as of the last decade or so) and they certainly don’t offer the best product, but they make the most money. Why? Because they have an established brand due to some very smart and sometimes somewhat nasty business decisions.
The Boeing example here is a little more like the Ford Pinto, but still seemingly not as sinister. They found it cheaper to make a lesser product than to make a better one because going the extra mile to offer thatbest product wouldn’t make them any more money. 346 lives later, that obviously wasn’t the right decision, but the stock is still doing well so it’s not the end of the world for more than a few individuals. Making a better product , which is in the best interest of the average person, would cost a lot more to develop and product for very little gain which means less profit and that does not please the self interest of the stakeholders. In such a corporate culture as that of Boeing, that means they cut the corners 10 times out of 10 as that works towards the self interests of the people that own the company.
It’s much like constitutional freedom. It has limitations such that you have freedom up to the point that you don’t infringe on someone else’s freedom. This isn’t the maximum amount of freedom you could have, but it’s the only fair way we’ve found. Similarly, at some point someone working for their own self interest goes against the interests of others.
It’s like what Churchill said about Democracy: all forms of governmental systems are flawed and are the worst, but democracy is the least worst. All economic systems don’t really work. What’s the lesser of all the evils here? My guess is probably some sort of mixed market economy; however, I subscribe to the idea that any economic system whether communist, fascist, capitalist, or somewhere in between is just a giant “legal” pyramid scheme. Boeing is just one example.
Smith’s idea could work if the best product always sold the best and had the best profit margin and if stakeholders could see past their own noses and think longer term, but they want their money and they want it NOW... or at least soon.