Those who claim business should be doing more for the common good often also view business as a problem. If business is out to exploit us, full of greedy Gordon Gekkos, why would we want to give business more of a role in societal matters? If business is a problem, it would seem that we keep businesspeople in their lane as producers and marketers, rather than tasking them as moral arbiters?
I should probably clarify that, as a business professor, I am unabashedly pro-business. Entrepreneurs, value creators, and (dare I say) capitalists are all heroes in my worldview. But let’s say such individuals are the villains (billionaires are often portrayed as such). Let’s imagine that businesses were only interested in short-term gains and would do anything to ensure a profit from an exchange regardless of the costs to others. If this were the case, involving business in social matters would only invite manipulating issues and capitalizing on causes.
If I thought my neighbor couldn’t be trusted, I wouldn’t invite them to join the local watch committee or oversee donations for community programming. If anything, I’d keep a distance from their activities. The same can be done by consumers. If a company is doing something that is disagreeable, don’t buy from them. If a company is acting illegally, report them.
If I had a neighbor who positively engaged with the community and helped improve its status, I’d likely support that neighbor. I’d also be mindful of how my actions stack up in comparison and wonder if I could be doing more. Most people want to be viewed in a favorable light in their community and most people want to “keep up with the Joneses,” or even to demonstrate socio-economic or cultural superiority.
Businesses want to be proud of their products, services, and their positive reputation. Most businesses want to continue to advance their position in terms of market appeal and foster a loyal customer base. A trusted neighbor earns support; a bad one is avoided. The same logic works for companies — no sweeping regulations required.
According to Theodore Levitt’s 1958 Harvard Business Review article, “The Dangers of Social Responsibility,” business consists of two core responsibilities: to engage in face-to-face civility, and to seek material gain. By this code, reasonable and rational business owners, in acting in their own self-interest, are mindful that unethical actions could impede long-run profit potential.
Indeed, the Bernie Madoff types eventually get turned in and lose their status, despite the appearance of success. It is also worth noting that it was Madoff’s own sons who were the ones that alerted the authorities. Regulations and red tape do little to stop bad actors and can do a great deal of harm for good businesses by creating unnecessary or costly hoops and hurdles that hamper operations and the development of innovative processes.
Business, like any community, has its good and bad players. While bad actors should be held accountable for wrongdoing, demonizing all participants keeps us from seeing the many already acting in accordance with our societal norms and community values. When bad behavior is uncovered, damages can be assessed and punishments rendered, but regulation in response to bad behavior often hamstrings far more community members than were behaving badly. Rules and red tape rarely stop fraudsters, but they can certainly hamper innovators.
The business community creates value for individuals and empowers individuals to create value. Treating people well (accruing benefits in every exchange) generates more money. Profit is not an evil endeavor, and more often than not, it means a business is doing something right, such that customers are eager to hand over their money. Like the buyers of those products, their producers run the spectrum of character and honesty, but depicting them as morally different from other participants in the exchange is misunderstanding the nature of commerce.
Regulations cannot force bad actors to be good, but communities can. Individuals determine whether a business will be ethical and efficacious. Reward good behavior with your dollars.