Monday, March 15, 2010

Are Profit Making Corporations Sinners?

Dan Gouge, in his post at the Evolving Church "Kingdom Economy Conference" blog entitled "What Marxism Shares with Christianity," argues that having the sole goal of profit-making makes business corporations evil. Since the business corporation is a central feature of capitalism, he therefore concludes that capitalism is something to be overcome - not in the eschaton after the return of Christ, but in history. He approvingly quotes Zizek to the effect that the meaning of being a Marxist is asserting this faith that something better than capitalism is coming.

There are some serious errors in logic in this post that need to be pointed out. But the most serious problem is thinking that capitalism ought to be opposed and, if possible, abolished in the name of morality. The line of thought in this post is interesting because it is so typical of how many people think and that is why I want to engage it.

First, Dan in this post notes that a corporation is a legal person and therefore able to own property, conduct business transactions etc. Then he proceeds to treat the legal personhood of the corporation as if it were a real person instead of an artificial legal entity. It is sort of like treating a robot or a computer as if it were an actual human being. He rightly says that a person who had no goal in life except to maximize profits would be a psychopath and a jerk. But saying this about a corporation makes about as much sense as calling a factory a psychopath and a jerk because it has no goal except to produce goods. Is a factory to blame because it has no friends and no hobbies? Is a corporation to blame because it does not go to church? A human being with no goal in life except to produce goods would be a severely cramped person, but a factory is not a real person and neither is a corporation.

Second, Dan argues that for the corporation to focus solely on profits inevitably leads to it acting immorally and exploiting people. But the fact that some corporations act in such ways does not prove (1) that doing so is intrinsic to having profit as their goal or (2) that seeking profits is immoral in and of itself.

Let us take the second point first. To seek a profit is, in effect, a matter of the business corporation paying its bills, just like paying for electricity or salaries or any other legitimate business expense. The shareholders invest money that is used by the corporation as a tool to make more money and those shareholders need to be paid for making this investment. When the corporation borrows money from the bank to finance the expansion of a plant nobody calls it immoral for trying to make enough money to include paying back the loan with interest as one of its legitimate business expenses.

The investors give the money without charging interest and they take a much bigger risk than the bank (which usually requires collateral) and so they deserve to earn dividends and see the share price increase as just compensation for their investment. The fact that you potentially can earn more return by taking a risk encourages investment, job creation and more taxes paid by the corporation to the government - all of which make the community richer and enable government to provide a social safety net for the poor and vulnerable. How is that immoral? Actually, it is not immoral at all - it is a positive good.

As for the first point, the assumption that having profit as a goal automatically leads to immoral behavior is simply false. A desire for profit more often leads corporations to moral behavior because if you don't serve the actual needs people have - if you don't provide a good or service at a price people can afford - then you go bankrupt. Corporations that try to cut corners with immoral behavior often end up cutting their own throats.

Now it is true that in a certain percentage of cases it appears that corporations can engage in immoral behavior and get away with it. But there is nothing in the profit motive itself that mandates this. As I argued above, the corporation is an artificial person - actually a tool of real persons - and real persons (unlike artificial ones) have moral obligations. It is the responsibility of the managers of corporations to act in a moral manner even if that decreases profits and it is the responsibility of shareholders to hold management accountable for doing so. Failure of either to do so may result in legal action against the corporation (and a resulting loss of profits) or a public boycott and shaming (which may also result in a loss of profits). The fact is that the profit motive is a powerful incentive not to act immorally, rather than a guarantee that one will act immorally.

But, you object, corporations do in fact act in immoral ways: they pollute, they exploit, they price gouge etc. Yes, they do act immorally sometimes just as people do and just as governments do. Sometimes individuals take illegal and harmful drugs, smoke, over-eat and indulge in other forms of self-harm. They do this in spite of the clear motive we all have to take good care of our own bodies for the sake of our health. The world has fallen into sin and sin is pervasive. But to blame sin on the profit motive is a false analysis. It is to locate what actually resides in the human heart in a structure of the business world and it is thus an evasion of human responsibility.

1 comment:

Peter W. Dunn said...

To keep your readers informed, I provide the link to Dan's response to this post at the City of God