Class Warfare Blog

June 22, 2010

The Immorality of A Pure Profit Motive

Filed under: Economics — Steve Ruis @ 4:13 pm
Tags: , , , , , ,

I am puzzled by the concordance between the very right-wing part of this country (the Tea Baggers, etc.) which are simultaneously pro-religion and pro-business, specifically pro-corporation. These folks claim there is no morality without religion and corporations can be trusted to do what is right. Both of these points are quite debatable, but what I want to address here is the second. Our corporations are, by and large, the most amoral institutions on the planet, so why would “morals” believers want to trust them?


I think one of the biggest problems we have in the U.S. is we have elevated “profit” to being an end in itself, actually we have elevated it to a near divine principle. Making a profit has become a moral principle. Almost all corporations say what is the equivalent of, “well, we have to make a profit,” as an answer to almost any question regarding the business of that corporation. Wall Street bankers defended their actions (the ones that triggered the recent financial meltdown) with “Our job is to do whatever we can to make a profit for the company.” Really?

Chip Conley in a TED presentation took Maslow’s pyramid and remade it so that it applies to businesses instead of individuals. Here it is:

Starting from the bottom, a business needs to earn a profit to survive. That seems obvious. If the business doesn’t survive all questions become moot. Actually I have seen a great many businesses violate this principle in that the founders drew quite nice salaries while on “start-up” money, then limply surrendered when the business didn’t make enough profit to attract more money from venture capitalists. They had “got theirs.” But, by and large, if a business wants to continue as such, they must make a profit. Even, whose business plan famously included “don’t worry about making a profit” for up to eight years needed to make one.

The next step up is “Success.” Nobody wants to be a part of a business that just survives, just limps along. Part of being considered a success in the “world of business” is making healthy profits. CEO’s of businesses making really good money get touted for better jobs, get written up in magazines, sell a lot of books with the title “The Way.” That kind of thing. Even the lowliest workers prefer working in a company that is “successful” as they think it means their jobs are stable. (Might even get a raise, what?)

The highest step “Transformation” is the equivalent of “Self-actualization” for an individual and this is mostly a state of intangibles.

So, trying to make a profit to survive: to meet your payroll, to keep your doors open, to be able to buy the equipment of production, all of that is quite understandable. In this profit is not an end in itself. It is “making a profit to survive.”

Once you get past that point, though, is where the dysfunction arises. Just when did making a profit become an end in itself. Often a company says things like: “Last year we made a 5% profit. This year we have set a goal for 8% profit.” Why? What was wrong with the 5% profit? The answer is typically, “Well, with higher profits, we can expand the business and make even more profit!”

So, let’s say you make the 8% goal, then 11%, then 12%, then 14% . . . so what?

Too often this is done to manage stock holders. If the stock holders think the company is doing better and better and that its dividends get larger and larger, they hang onto to that stock; it gets scarce and the price of that stock goes up. If the company needs extra money, it can then sell some of the stock it possesses to raise those funds.

So? Is this just a giant game? The one with the most profit wins?

I do not think that we can accept profit—in itself—as an end. I think we clearly must insist that it be a means to an end.

The goal of every business must be stated “to make a profit while. . . . ” I accept that a profit needs to be had, but to what end? A number of people have started businesses to provide jobs for their workers. “To make a profit while providing quality jobs for our workers.” That has a nice ring to it. It is prominent in Toyota’s mission, for example. Some companies have been started to make the world a better place. “To make a profit while producing clean, renewable energy to Americans so our children will inherit a cleaner, safer world.” Nice. Some companies have a smaller focus. “To make a profit while providing wholesome bread inexpensively.” Also nice.

I think we need our corporations to explicitly state what their “while” is and when they take actions to increase their profits, they need to make explicit how that affects the “while” part. I imagine it would take several PR firms to help BP come up with “We cut corners and endangered our workers and the entire population of the American Gulf Coast and all of the wildlife therein in a reckless pursuit of profit to . . . to. . . .

I’m waiting to hear from them on this.

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