Wednesday, July 16, 2014

The purpose of a corporation... to maximize profits. That statement is no less true today than when economist Milton Friedman said it 44 years ago.

(That's why we need government.)

Eduardo Porter, writing in the Times today, asks:

Is it naïve to expect corporations to assist in addressing the social, economic and environmental challenges of the day?

(The answer is yes.)

As an illustration, Porter writes:

Almost half a century later, Coca-Cola’s chairman, William E. Robinson, argued that a corporate executive served not just stockholders, but also workers, customers and the community. “The neglect of the customers and his labor relations will seal his doom far faster than an avaricious quick-dollar stockholder or director,” he said.

(I would argue that if Coca-Cola really cared about those constituencies, it would immediately cease production of all that caffeinated sugar water that is -- at best -- useless to society.)

No, to repeat: the purpose of a corporation is to maximize profits. That much is certainly true. But one of the purposes of government is to protect shareholders, employees, customers and the community at large (because corporations won't).

This isn't coming from some idealistic blogger in a bathrobe. (Okay, maybe it is.) But it's also coming from someone who's spent his entire adult life working in the private sector. And if there's one thing I've learned, it's that my interest and the interest of my organization has not always coincided with the interest of the customer, etc. There have been many times when I had to do something in a "gray" area for a customer because I knew my competition would. Also, there were many times when I did something that wasn't necessarily in the customer's best interest because I knew I had to make a sale or risk getting fired. (And my first responsibility is to my family, isn't it? How on earth could I come home and tell my wife I'd been fired because I wouldn't do something that was borderline unethical?)

And while I hate buying anything from Amazon or Walmart (I once had a friend, who published a book, tell me not to buy it on Amazon because it would actually cost her money!), I can recall interviewing a landscaper some years ago who told me that his service was more expensive because he didn't hire "illegals." What do I care? I thought, I'm looking for the best deal. (Shame on me.)

But I'm only human, after all, even if corporations aren't. (And they're not.) And that's exactly why governments need to regulate them. Because if someone doesn't, they will only be motivated to maximize profits at the expense of everything else. It's not a perfect system, but society needs protection.

1 comment:

Ed Crotty said...

Government is the ONLY thing that can have enough power to fight for people against corporations. To keep corporations from abusing the public. Our biggest problem as a country is that the goverment is too responsive to corporate needs vs public needs. Probably due to campaign financing. This situation was certainly not forseen by the founding fathers and is the biggest threat to our republic. (imho)