I am not familiar with Paul Lindley but an article he wrote set my alarm bells jangling:
Business is changing. The predominance of companies for which profit is everything – and everything else is nothing – is waning, and a new wave of entrepreneurs and socially-minded individuals is on the rise. If I could give one piece of advice to the next government, it would be this: don’t just do what’s best for business, also do what’s best for those people – the stakeholders – involved in business. (…) Consumers are becoming more morally aware. They have an increasing amount of data available at their fingertips – from the ingredients in the products they buy to the supply chains of companies – and they are demanding more from their favourite brands. A new type of company has arisen to meet this demand, already popular in the US and elsewhere abroad. Benefit corporations – or “B-corps” – are companies which include a positive impact on society and the environment, in addition to profit, as their legally defined goals.
Well if I could give one piece of advice to the next government, it would be this: don’t do anything for anyone, just stay the hell out of the way and let markets do what they do.
I suspect my idea of what “social responsibility” means is probably not the same as what Paul Lindley means, so I really do not want the state deciding which of those views is the official approved version. Anyone asking the state to facilitate their objectives is almost always looking to have them stick their thumb on the scale and protect someone’s business model against someone else’s business model.
As I said I am not familiar with Paul Lindley but I am parsing his remark “companies which include a positive impact on society” to mean he thinks a supermarket, garage or clothing store, simply by virtue of offering things people want to buy at prices they want to buy them at, does not constitute a “positive impact on society”… and he wants the state to have policies that ensure straightforward commercial enterprises which do not market themselves according to an approved list of other added-on “social benefits”, are made less competitive vis a vis those who do. As he is fairly vague on precisely what policies he wants I cannot be sure, but that is what I am getting from this article.
If Paul Lindley can see that
why does he think the state should intervene? We’re already doing what he views as the social responsibility choice making ourselves without needing to distort markets in the way Lindley wants.
Lindley has already had considerable success with Ella’s Kitchen organic baby food. I am sure it is only a coincedence that his latest company, Paddy’s Bathroom (children’s soap, shampoo, etc), happens to be what Lindley views as a socially responsible company by supporting a Rwandan clean drinking water campaign.
This stakeholder business is so last century.
B Corps… niche markets. There are and will always be consumers with more money than sense who will pay a premium for fads and fashions like organic, fair trade foods, ‘green’ products, etc.
Companies exist for the sole purpose of using capital to bring goods to market for a profit. The ones that make a profit do so by providing things with added value to encourage people to buy, and the price and thus profit depends on how much value is added, and of course competition.
The predominance of companies for which profit is everything will not wane, because without profit to provide return on investment better than investment elsewhere, there will be no investment in them and they will go belly up.
Legal goals and good intentions have nothing to do with the case. People who yap on like this have no understanding of basic economics or the incentives that drive Human behaviour, and mistake their own ideological fantasies and wishes as reality.
Companies exist for the sole purpose of using capital to bring goods to market for a profit
We will have to agree to differ. Companies exist as vehicles to pursue their shareholders ends. Very often this involves a profit motive, but not always. There may always be a profit constraint – ie we can’t afford to lose more than x a year (in a charitable type company or society), or we must make at least Y a year, in order to stay in business / keep our heads above water, or whatever. Lots of smaller companies pursue all sorts of goals other than profit maximisation – pursuing the owner’s particular obsession with glassblowing or the return of proper sausages. Rowntrees had a “social conscience” long before latte sipping 40 somethings suggested the idea. And even big companies don’t actually pursue profit maximisation as a predominant goal. If they maximise anything it is executive satisfaction, subject to a profit (or strictly return on capital) constraint. Executives like high pay, prestige, minions, no nasty stories in the press, no hurtful remarks from Ministers or the clergy, and little chance of being ousted from their slot. Most of that gets in the way of actual profit maximisation, which is why big companies are always clamouring for the government to provide the one thing that will upset their applecart – regulations that will prevent excessive competition.
Anyway. It is the socialists not the free market folk who are obsessed by materialism and money. In a free market you pursue whatever goal you want, subject to the constraint of trying not to starve.
clamouring for the government to provide the one thing that will upset their applecart
I should have said “clamouring for the government to provide the one thing that will prevent their applecart from being upset”
It’s an odd thing, but when it comes to making payroll or paying the tax people, companies are expected to pay in cold hard cash. The VAT bill cannot be paid via pictures of fluffy bunnies, HMRC wants pounds and pence, and if it cannot pay, they will shut the company down without a qualm. The next time you hear one of these bullshit merchants, ask him if he will accept payment in social responsibility IOUs instead of cash, and let me know his answer.
Lee Moore has it exactly right.
I have always despised the entire “stakeholder” concept. It’s a rhetorical device used to justify stealing from those who have actual skin in the game: the shareholders. No one else has any justifiable claim on a company’s assets. Customers get products they want at prices they find acceptable; employees get wages they contracted for; suppliers get paid for their materials; the municipality gets taxes (as well as employment for its residents and goods for shoppers who visit). Yet all these groups (and more) somehow claim that they have some sort of “right” to more from the company. It’s what I call “the morality of theft” (which also describes leftist ideologies in general).
If anyone hasn’t seen Danny DeVito’s speech as Larry the Liquidator in “Other People’s Money”, it’s worth watching. (So is the entire movie, for that matter.)
Not one company named in the article – just a cultural Marxist, intellectually jerking off on the internet – the thing Al Gore said he invented. So I will name a left fav:
Apple – whose president lectures us on our treatment of homosexuals while he has many stores in Muslim countries that behead these same people of which he claims to be one. Screw this hypocritical lefty totalitarian.
I was a lowly civil servant in 1996 working in a job centre when the Leader of Her Majesty’s Loyal Opposition used the term ‘stakeholder’ in a speech and it gained some media notice. Almost overnight, the management were using this new jargon with the delight of the VietCong talking of the North coming to ‘liberate’ the South. I took the concept to be that a business ‘belongs’ to anyone but the actual owners, so very modern.
In fact, to an extent, the last British government, as part of its creeping barrage of fascism, changed the law on Director’s duties so that Company Directors have fiduciary duties to have regard to interests other than those of the owners of the company that they direct, by Section 172 of the Companies Act 2006:
Indeed Ed, pretty much anyone using the term ‘Stakeholder’ is saying “I am an anti-capitalist anti-market statist”.
Businesses serve society by making stuff we want and need.
End of story:
Now that governments have established the principle of interfering in everything, the argument has shifted to “how much interference.” I think we could safely say while one lot might offer a little less interference it is still interference. We increasingly will argue over how much.
I agree with Chip. But millions don’t. So I just kinda-sorta approached this, trying really hard to do it the Samizdata way, using the language of the left (I’m not very good at using the language of the left, this is REAL rough).
It’s not necessarily business-specific, but it is strategy-specific. Feedback welcome and solicited.
https://happycrow.wordpress.com/2015/04/16/foundationism-healing-the-progressivelibertarian-divide-among-activists/
That is an epic article Russ 😉
There are at least two fundamental ethical statements in that excerpt that are prime examples of the progressive/collectivist tendency to define key concepts so that their meaning is intrinsically opposed to the concept of individual rights.
One is the idea of “moral awareness” that puts the moral in opposition to the individual. A person is not moral, or morally admirable, for the creative energy he might expend in developing an economically viable idea, or the enormous amount of careful, diligent effort required to nurture that concept into a growing enterprise, or the valuable product or service the enterprise provides to other people who reward and recognize the value by purchasing the offering, or, most significantly, by providing honest, productive work for the employees of the concern, and enabling them to live their lives, and raise their families, in a decent and self-respecting manner.
All of these valuable aspects of a person’s life and efforts are simply waved away as immaterial, or, if they are grudgingly acknowledged , followed by a “but…” question, the essence of which is a demand to know what the person has done that is completely detached from anything which might enhance her interests, or the enterprise, and which, according to this inverted morality, should even be antithetical to those goals.
The second trick phrase is “socially conscious”, or any of the many variations on this theme. Here is encapsulated the very essence of the moral inversion which this viewpoint attempts to use to condemn any normal action a person might take in any commercial enterprise in order to improve its chances for success, and substitute a standard in which the moral consists only of those actions which are tangential to the enterprise’s main function, or, in fact, are harmful to it.
The extreme example of this mindset is the relentless criticism of the firms that develop and provide the numerous medicines and treatments which alleviate untold human suffering and death. No matter what amazing things they provide, usually after years of careful experimentation and testing, they are always wrong, and even evil, if they dare to make a profit from their work.
Other equally bizarre examples of this inversion are the vicious criticisms of food and energy companies for anything and everything they do, as if in some “bizarro world”, these fundamental elements of modern life should be provided gratis by elves riding unicorns.
It is telling, and morally corrupt in a most fundamental way, that this same inverted morality praises and extols the state in every possible way, and invariably seeks to increase its power and resources, even though in all ages of human history, it is the violence of the repressive state which is the most deadly threat to people’s lives and well-being, far beyond even the most virulent plague or natural disaster.
It is often asked, ” What can be done to stop the march toward a repressive state?”
One of the most critical areas of contention is, and must be, the attempts by the collective camp to define “the moral” as “anything that is anti-self”.
For millennia, the rule of collectivist force, expressed by one variation of autocracy and theocracy after another, left humanity struggling in a deadly swamp of bare subsistence, disease, violence, ignorance, poverty, and early death.
Only with the recognition of the rights of the individual, and, especially, of that person’s right to their own life and legally acquired property, has humanity begun the climb out of misery toward a decent life for ordinary men and women to live their lives, and raise their families, as they see fit, according to their own talents and efforts.
Preventing the loss of those rights, and a return to the repression of the collectivist state, is the primary and essential moral work of any person committed to the preservation and enhancement of individual liberties, and, by direct correlation, the well-being of the worldwide human society in all it’s marvelous facets and variations.
We have been given a pearl of great price—life in a land flowing with milk and honey, beyond the wildest dreams of our ancestors, created by the energy and effort of independent minds trying to live their lives in a productive fashion.
For us to allow that wondrous dream to be destroyed by the moral vermin of the collective would be a crime against our own humanity beyond anything the worst criminals of history have ever done.
Oh crikey – Mr Blair and his “stakeholders” are back.
Not that this P.C. (Communitarian – i.e. collectivist, not voluntary communities) stuff, ever went away.
Adam Smith warned that a businessman who claims to be trading for the public benefit, not is his own private profit, is a crook – do not do business with such a person.
However, worse than the conmen who love “stakeholder” crap (in the hopes of looting the taxpayers) are the “intellectuals” who push it.
They want socialism by the back door – instead of formal nationalisation, “just” the business operating “for the public good” (for the “stakeholder” SAD PUPPIES, THINK OF THE CHILDREN).
Ludwig Von Mises and Fritz Hayek, called this approach “German Socialism”.
First practiced as “War Socialism” in the First World War (the contrast between German and French economic policy in the First World War is interesting), then by the National Socialists in the 1930s.
“The social good above private profit” was the great slogan of the National Socialist government.
As for a “social enterprise” that spends money wildly (with no real concern for returns on spending).
I work for such an organisation – and right at the bottom to.
And I can tell you that “the workers” HATE the spend thrift, could-not-care-less attitude to the spending of hundreds of thousands Pounds.
And we also hate the patronising cant about how the enterprise “serves the public” – and lectures about the place from people who have no real connection with it (or the town).
They fly in for a few years, boast of “doing good”, BANKRUPT THE PLACE, and then fly off to their next project.
“They have an increasing amount of data available at their fingertips – from the ingredients in the products they buy to the supply chains of companies – and they are demanding more from their favourite brands.”
This one passage would seem to completely undermine his thesis that the government need do *anything*.
It would seem the citizenry has the matter well in hand.
Stella Artois beer has been advertising (in the US, at least) that they help provide women with water in the third world:
http://www.multivu.com/players/English/7425551-stella-artois-water-org/
I’m sorry, but I’d rather know if their beer is any damn good. Likewise, Toyota and Subaru sometimes advertise how “green” their vehicles are, hoping to instill moral superiority in their customers. GMAFB. Sheesh.
It doesn’t matter if the beer tastes good, you should buy it as a duty! Where’s your sense of responsibility? If you get old, you won’t have taste buds, so it won’t matter what you drink, will it?
I suppose that this highlights the perils of the artificial legal personality of a company and limited liability. Once the law regulates this area, it can be tinkered with to give the legal person of the company a mind inclined towards a statist outlook, without the outward appearance of nationalisation. ‘The euthanasia of the rentier‘ that Keynes called for.
Bodies corporate, including commercial bodies corporate, are an ancient practice Mr Ed.
Both private Law Merchant and Canon Law (Church law was often used in commercial matters) recognised limited liability even in the Middle Ages – as long as the creditor knew, in advance, that he was dealing with a limited liability body corporate.
As well as trading companies (with their “trading pot”), churches, monastic orders, charities, clubs, societies, colleges (and so on) are examples of corporations – bodies corporate with an existence in law and limited liability.
Nothing prevents people, for example, paying higher prices for goods or services from enterprises without limited liability – for example buying insurance from Lloyds syndicates.
It is a matter of choice – do you value lower prices, or unlimited liability, more.
Of course the above does not mean the present situation is perfect.
A great mass of regulations and TAX law (high income, inheritance and Capital Gains taxes) have taken the ownership of corporations away from individuals (who still dominated ownership in the early 1960s) and handed it to institutions (such as Pension Funds).
“hired managers in charge of other hired managers” (no OWNNERS in sight in some enterprises).
This is bad – and should be reversed.
Also the stock market (and so on) is a terrible mess – and has been since the government take over (falsely presented as “deregulation”) of 1986.
By the way – abolishing bodies corporate would not alter the P.C. situation.
Individual owners and partnerships would continue to bow the knee to the P.C. cause.
Both because of fear of the state and of “activists” – and because they are educated to believe in this “social” stuff themselves.
Second Laird on the movie Other People’s Money.
Business’s goals other than making money: Lee Moore is right that there are other goals, even other main goals. “My dream is to own a bookshop.” “My dream is to become a professional singer, and to acquire fame and fortune while I’m at it.” “My dream is to bring jobs and fame to Pigeon Forge, Tenn.”
We do not live in order to breathe.
On the other hand, Paul reminds us to bear in mind that breathing IS necessary. And in the world of business, it’s necessary at least to break even if the bookshop or Dollywood is to survive, and to make profits if it is to flourish. Even true charities need infusions of dough, and if these are not to come from profits then they must come from donations. If the foundation or whatever it is that is the “owner” of Wicksteed Park wants the Park to survive, let alone thrive, it needs to find management that knows how to run a park at a profit, or else one that is really really good at fundraising and then at delivering on the implied promise to the contributors.
To do this latter, the Park will still have to be seen to be providing value to the community or to the Park’s visitors or to some other body which the contributors wish to support, for whatever reason.
That is not at all to deny that people go into business specifically to support themselves and to make money; I imagine most do. Good for them, as long as they do their honest best to provide a product or service as good as they can manage at the price their clientele can afford to pay.