Ethics and Economics

Ethics and Economics
Professor Bryson
Marriott School
Brigham Young University
Ethics Still Sorely Needed
• Dean Hill of the Marriott School is anxious
for students to know that ethics is a concern
of the School and of all its faculty.
• He has shared the following data in a
presentation on business and ethics.
Questionable State of Ethics
Did You Cheat to Get Into Graduate School?
43% Liberal Arts
52% Education
63% Law and Medicine
75% Business
Source: Rutgers University survey of students
Questionable Ethics at Work
• 76% of employees observed a high level of
illegal or unethical conduct at work in the
past 12 months
• 49% of employees observed misconduct
that, if revealed, would cause their firms to
“significantly lose public trust”
KPMG 2000 Organizational Integrity Survey
Deterioration in Ethical Values
College students who cheated in H.S.
Self-reported cheating
Believe cheating is common
Used cheat sheets
Let others copy work
Willing to lie to get job
Students who had stolen
1940 (20%)
1983 (11%)
1940 (20%)
1969 (34%)
1969 (58%)
2000 (28%)
2000 (35%)
2002 (75-98%)
1993 (49%)
1997 (88%)
1989 (68%)
1989 (98%)
2002 (39%)
2002 (38%)
(Based on several different ethics studies)
What is the study of ethics?
• Ethics (from the Ancient Greek ἠθικός or
"ethikos" meaning "Theory of living") is
• one of the five major branches of philosophy
• It attempts to understand the nature of
morality; to distinguish that which is right
from that which is wrong.
• The Western tradition of ethics is sometimes
called moral philosophy.
• Ethics in plain words means studying and
analyzing right from wrong; good from bad.
What is ethics?
• Ethics, minimally, would be not to break civil
law codes, but ethics is a higher standard than
• The Marriott School has recently published a
book which goes substantially further; it makes
frequent use of the word integrity. See
Business with Integrity, Marriott School, 2005.
What is the study of ethics?
• But for LDS people, that which is right and
good is that which is of God.
• Ethical behavior, at its highest would be
righteousness, overcoming the “natural man,”
covenant-making and keeping, including
honoring civil contracts.
• It is living the gospel fully, including keeping
the law of the land, etc.
Diverse approaches to ethics
• Ethics professors can
– cite the relevant literature, the philosopher
specialists, etc.
– In a word, teach co-mingled human
philosophies and scripture.
• Rather than philosophical ethics, let us
consider economics and ethics.
Social vs. Personal Ethics
• Personal ethics.
– live our lives not just according to the law of
the land
– Live according to principles of building Zion.
Law of Consecration still pertains.
• Social ethics,
– United Order no long pertains
– Choose good people for democratic process
– Participate in democratic governance
Social vs. Personal Ethics
• Public policy is at the level of Social ethics.
– Our participation in policy discussion at the
highest level of social ethics,
– But it need not contain principles of personal
ethics or strive to achieve the Zion Society.
• For public policy we can look at
– Economics and Ethics (rather than)
– Gospel and Ethics
First, some scriptural thoughts
• The scriptures are filled with ethical
considerations, principles and suggestions.
• Psalms 37 considers righteousness and its
effects in a general (not just commercial)
• 1.FRET not thyself because of evildoers,
neither be thou envious against the workers
of iniquity.
First, some scriptural thoughts
• Sometimes we are tempted to live the way
the world does with its materialism,
entertainment, and culture.
• David suggests in verse 2 what awaits the
• 2 For they shall soon be cut down like the
grass, and wither as the green herb.
Psalm 37 continued
• How do your pursuit of education, good grades, a
high-paying job differ from those of the average
American college student?
• Are you seeking the help of the Lord in your
studies? What do you intend to do with your
• 4 Delight thyself also in the LORD; and he shall
give thee the desires of thine heart.
• 5 Commit thy way unto the LORD; trust also in
him; and he shall bring it to pass
Psalm 37 continued
• Under what conditions will He help?
• 8 Cease from anger, and forsake wrath: fret
not thyself in any wise to do evil.
• 9 For evildoers shall be cut off: but those
that wait upon the LORD, they shall inherit
the earth.
• 11 But the meek shall inherit the earth; and
shall delight themselves in the abundance of
Psalm 37 continued
• 28 For the LORD loveth judgment, and
forsaketh not his saints; they are preserved
for ever: but the seed of the wicked shall be
cut off.
• 34 Wait on the LORD, and keep his way,
and he shall exalt thee to inherit the land:
Consider Proverbs 11:1
on business ethics
• Here, the scriptures deal directly with
questions of right and wrong in commercial
• 1 A• FALSE balance• is abomination to the
LORD: but a just weight is his delight.
• 2 When pride• cometh, then cometh shame:
but with the lowly is wisdom.
Consider Proverbs 11:1
on business ethics
• 3 The integrity of the upright shall guide
them: but the perverseness of transgressors
shall destroy them.
• 4 Riches profit not in the day of wrath: but
righteousness delivereth from death.
Now to economics and ethics
• Economics is a wise and mature science;
why else would they give Nobel prizes to its
best and brightest?
• Economics has developed a theory of the
core evil of business or resource allocation,
a theory of moral hazard.
The Theory of Moral Hazard
or, Post-contractual Opportunism
• The owner, the “Principal” hires an agent to
take care of a business.
• The property owner can then pursue other
• After the agent is contractually in place and
the principal has departed from the scene,
the agent begins to pursue his own interests
rather than those of the principal.
The Principal/Agent Relationship
• The principal cannot monitor the agents
• So the agent shirks on the job or acts in
other opportunistic (greedy and grasping)
• This theory has myriads of real-world
• Many employees can misuse the trust
placed in them when they cannot adequately
be monitored.
The Principal/Agent Relationship
• Isn’t this a brilliant insight?
• We economists are very much anchored in
the scriptures. We recognized long ago
– the key to misbehavior is knowing one is
not being watched (monitored).
The Principal/Agent Relationship
• Ezekial, an early economist, said in 8:12
• 12 Then said he unto me, Son of man, hast
thou seen what the ancients of the house of
Israel do in the dark, every man in the
chambers of his imagery? for they say, The
LORD seeth us not; the LORD hath
forsaken the earth.
Ezekial 33 on the MH issue
• 1 AGAIN the word of the LORD came unto me,
• 2 Son of man, speak to the children of thy people,
and say unto them, When I bring the sword upon a
land, if the people of the land take a man of their
coasts, and set him for their watchman:
• 3 If when he seeth the sword come upon the land,
he blow the trumpet, and warn the people; 4 Then
whosoever heareth the sound of the trumpet, and
taketh not warning; if the sword come, and take
him away, his blood shall be upon his own head.
Ezekial 33 on the MH issue
• 5 He heard the sound of the trumpet, and took not
warning; his blood shall be upon him. But he that
taketh warning shall deliver his soul.
• 6 But if the watchman see the sword come, and
blow not the trumpet, and the people be not
warned•; if the sword come, and take any person
from among them, he is taken away in his iniquity;
but his blood will I require at the watchman’s
• 7 So thou, O son of man, I have set thee a
watchman unto the house of Israel; therefore thou
shalt hear the word at my mouth, and warn them
from me.
Ezekial 33 on the MH issue
• 8 When I say unto the wicked, O wicked
man, thou shalt surely die; if thou dost not
speak to warn the wicked from his way, that
wicked man shall die in his iniquity; but his
blood will I require at thine hand.
• 9 Nevertheless, if thou warn the wicked of
his way to turn from it; if he do not turn
from his way, he shall die in his iniquity;
but thou hast delivered thy soul.
The Watchman as the Lord’s agent
• The Lord sends a watchman as His agent.
• He doesn’t monitor his actions while the
process is unfolding,
• but if he shirks and the work doesn’t get
done, he will receive serious retribution.
Moral Hazard and the Master Teacher
• Now we go to the words of the Savior, who tells
the well-known moral hazard parable as recorded
in Matthew 21:
• 33 Hear another parable: There was a certain
householder, which planted a vineyard, and
hedged it round about, and digged a winepress in
it, and built a tower, and let it out to husbandmen,
and went into a far country:
• 34 And when the time of the fruit drew near, he
sent his servants to the husbandmen, that they
might receive the fruits of it.
Moral Hazard and the Master Teacher
• 35 And the husbandmen took his servants, and
beat one, and killed another, and stoned another.
• 36 Again, he sent other servants more than the
first: and they did unto them likewise.
• 37 But last of all he sent unto them his son,
saying, They will reverence my son.
• 38 But when the husbandmen saw the son, they
said among themselves, This is the heir; come, let
us kill him, and let us seize on his inheritance.
Moral Hazard and the Master Teacher
• 39 And they caught him, and cast him out of
the vineyard, and slew him.
• 40 When the lord therefore of the vineyard
cometh, what will he do unto those
• 41 They say unto him, He will miserably
destroy those wicked men, and will let out
his vineyard unto other husbandmen, which
shall render him the fruits in their seasons.
The Insight and Modern Economists
• I have kidded about the insights of
• Economics has made much of this idea,
which is of course 2,000 years old,
(discounting what Jehovah had revealed
even earlier to Ezekial).
The Insight and Nobel Prize Winners
• The Nobel Prize was awarded in 2001 to
Joseph E. Stiglitz, George A. Akerloff and
A. Michael Spence for their contributions
– in principal/agent theory and
– the related theory of asymmetric information.
The latter idea says that one of the greatest
moral/ethical problems in business relates to
pre-contractual opportunism.
Joseph Stiglitz helped create a new branch of econ,
"The Economics of Information,“ exploring the
consequences of information asymmetries and
pioneering such pivotal concepts as adverse selection
and moral hazard, which have now become standard
tools not only of theorists, but of policy analysts.
Michael Spence identified an important form of adjustment
by individual market participants, where the better informed
take costly actions in an attempt to improve on their market
outcome by credibly transmitting information to the poorly
informed. Spence showed when such signaling will actually
work. While his own research emphasized education as a
productivity signal in job markets, subsequent research has
suggested many other applications, e.g., how firms may
use dividends to signal their profitability to agents in the
stock market.
• Joseph Stiglitz clarified the market adjustment in which
poorly informed agents extract information from the better
informed, such as the screening performed by insurance
companies dividing customers into risk classes by offering a
menu of contracts where higher deductibles can be
exchanged for significantly lower premiums. In a number of
contributions about different markets, Stiglitz has shown
that asymmetric information can provide the key to
understanding many observed market phenomena, including
unemployment and credit rationing.
Examples of asymmetric information
• In such transactions the buyer and seller
have different information available.
• The seller of a “lemon” (used car) may
know a lot more about the car’s faults than
the buyer would ever guess.
The Mouth of the Gift Horse
• You may have heard the saying, “never look
a gift horse in the mouth.”
• It may strike the giver as ingratitude or
skepticism, when all he wants to do is show
his affection for you in the gift and take a
huge tax write-off.
• But don’t ever forget to look a purchase
horse in the mouth!
Parable of the Unjust Steward
• Luke 16: 1 AND he said also unto his disciples,
There was a certain rich man, which had a
steward; and the same was accused unto him that
he had wasted his goods.
• Here we have the moral hazard. The contracted,
unmonitored steward managed the principal’s
property (lands?) wastefully (pursuing his own
• The principal, discovering the waste, immediately
fired the agent.
Parable of the Unjust Steward
• 2 And he called him, and said unto him, How is it
that I hear this of thee? give an account of thy
stewardship; for thou mayest be no longer
• 3 Then the steward said within himself, What shall
I do? for my lord taketh away from me the
stewardship: I cannot dig; to beg I am ashamed.
• The steward must secure his future. He is losing
his job and his living. He needs friends!
Parable of the Unjust Steward
• 4 I am resolved what to do, that, when I am
put out of the stewardship, they may receive
me into their houses.
• 5 So he called every one of his lord’s
debtors unto him, and said unto the first,
How much owest thou unto my lord?
Parable of the Unjust Steward
• 6 And he said, An hundred measures of oil.
And he said unto him, Take thy bill, and sit
down quickly, and write fifty.
• The steward, as the agent, managed these
resources. He was doubtless authorized to
set the prices and the terms of credit of
these commodities (or lands).
Parable of the Unjust Steward
• So the steward is now giving a more fair
• He will not try to give the master less than
his due, since from other parables we know
that the master expects something like a
market return on what he lends.
• That’s why the master doesn’t object to
these modified transactions. He even praises
Parable of the Unjust Steward
• 7 Then said he to another, And how much
owest thou? And he said, An hundred
measures of wheat. And he said unto him,
Take thy bill, and write fourscore.
• 8 And the lord commended the unjust
steward, because he had done wisely: for
the children of this world are in their
generation wiser than the children of light.
Parable of the Unjust Steward
• The principal now says: “Aha, you are
doing something about your future and
acting wisely. Although you wasted some of
my resources, you are at least doing the
right thing now for your customers so that
they will be more kindly disposed toward
you hereafter.”
Parable of the Unjust Steward
• Note where the parable said “the children of
this world are in their generation wiser than
the children of light.”
• Compare the diligence of a broker on Wall
Street with the typical management of a
home teaching assignment!
Parable of the Unjust Steward
• 9 And I say unto you, Make to yourselves
friends of the mammon of unrighteousness;
that, when ye fail, they may receive you
into everlasting habitations.
Parable of the Unjust Steward
• How did this steward gained the principal’s
– kindness, consideration and mercy, rather than
opportunism, greed and hard-heartedness.
– He made friends of those whose help he might
need in the future.
Parable of the Unjust Steward
• Might the Savior be telling us we should be
wise and recognize we may need assistance
in the future
• We should thus have a different perception
of the implications of current helpfulness,
even in business settings?
Parable of the Unjust Steward
• 10 He that is faithful in that which is least is
faithful also in much: and he that is unjust in the
least is unjust also in much.
• 11 If therefore ye have not been faithful in the
unrighteous mammon, who will commit to your
trust the true riches?
• If you are not faithful in secular things, who will
trust you to be an agent in spiritual things?
• With the Savior, a stewardship always seems to be
a test for the agent.
Parable of the Unjust Steward
• 12 And if ye have not been faithful in that
which is another man’s, who shall give you
that which is your own?
• We are agents so that we may one day
become the principal. We show by the way
we manage someone else’s resources how
we would manage if we had our own.
Parable of the Unjust Steward
• 13 ¶ No servant can serve two masters: for
either he will hate the one, and love the
other; or else he will hold to the one, and
despise the other. Ye cannot serve God and
• Is managing mammon the same as loving or
serving mammon?
• When the agent begins to love the mammon
and think opportunistically about how he
can gain it for himself, he expresses that he
is losing or has lost his love for the Lord.
Parable of the Unjust Steward
• The moral point:
we should never forget that the Omniscient
Monitor, sees our actions and observes
what those acts are gradually doing to our
The Omniscient, Omnipresent
• Luke 12:
• 2 For there is nothing covered, that shall not
be revealed; neither hid, that shall not be
known. 3 Therefore whatsoever ye have
spoken in darkness shall be heard in the
light; and that which ye have spoken in the
ear in closets shall be proclaimed upon the
The Omniscient, Omnipresent
• Luke 12:
4 And I say unto you my friends, Be not
afraid of them that kill the body, and after
that have no more that they can do. 5 But I
will forewarn you whom ye shall fear: Fear
him, which after he hath killed hath power
to cast into hell; yea, I say unto you, Fear
Fear God!
• Should we put honor, obedience, respect,
reverence and worship into our fear?
• The topical guide says yes! (These are the
“see also” topics listed under ”Fear of
Fear God!
• Should we take “fear” out of the “Fear of
• The first see also topic listed in the Topical
Guide is “dread.”
Fear God!
• 4. And I say unto you my friends, Be not
afraid of them that kill the body, and after
that have no more that they can do. 5 But I
will forewarn you whom ye shall fear: Fear
him, which after he hath killed hath power
to cast into hell; yea, I say unto you, Fear
Luke 12: 4, 5.
Fear God!
• To me the scriptural message on fear is:
• “If you set yourself against God, fear the
• “If you are an agent of God and He is with
you, there is nothing in all the world you
need fear.”
Why do I believe you will succeed?
• When God’s children remember who they
are and when they love him and follow His
Son, of course they need not fear and
• If you start to slip from the path, or
rationalize, a little fear may help.
Why do I believe you will succeed?
• I know who you are!
• Read Alma 13:1-3
• 1 And again, my brethren, I would cite your
minds forward to the time when the Lord
God gave these commandments unto his
children; and I would that ye should
remember that the Lord God ordained
priests, after his holy order, which was after
the order of his Son, to teach these things
unto the people.
Why do I believe you will succeed?
Alma 13:1-3
• 2 And those priests were ordained after the order
of his Son, in a manner that thereby the people
might know in what manner to look forward to his
Son for redemption.
• 3 And this is the manner after which they were
ordained—being called and prepared from the
foundation of the world according to the
foreknowledge of God, on account of their
exceeding faith and good works; in the first place
being left to choose good or evil; therefore they
having chosen good, and exercising exceedingly
great faith, are called with a holy calling.
Why you will succeed?
The Prophet Joseph said that priesthood
callings were foreordained callings. In the
Oath and Covenant of the Priesthood it says:
• 35 And also all they who receive this
priesthood receive me, saith the Lord;
• 36 For he that receiveth my servants receiveth
• 37 And he that receiveth me receiveth my
Why you will succeed?
36 For he that receiveth my servants receiveth me;
37 And he that receiveth me receiveth my Father;
38 And he that receiveth my Father receiveth my
Father’s kingdom; therefore all that my Father hath
shall be given unto him.
39 And this is according to the oath and covenant
which belongeth to the priesthood.
42 And wo unto all those who come not unto this
priesthood which ye have received (D&C 84).
• You were chosen in the pre-existence and it is a
primary purpose of your life to accept or receive the
priesthood and help build the kingdom, beginning
with your own family.
The Savior’s Summary of Teachings
on the Good Steward. Luke 12.
• 42 And the Lord said, Who then is that
faithful and wise steward, whom his lord
shall make ruler over his household, to give
them their portion of meat in due season?
• 43 Blessed is that servant, whom his lord
when he cometh shall find so doing. 44 Of
a truth I say unto you, that he will make him
ruler over all that he hath.
The Savior’s Summary of Teachings
on the Good Steward. Luke 12
• 45 But and if that servant say in his heart,
My lord delayeth his coming; and shall
begin to beat the menservants and maidens,
and to eat and drink, and to be drunken; 46
The lord of that servant will come in a day
when he looketh not for him, and at an hour
when he is not aware, and will cut him in
sunder, and will appoint him his portion
with the unbelievers.
Part II.
The Ethical Case for Free Trade
• Now we consider public policy, leaving the
level of personal ethics.
• For social ethics we need not be as
concerned with scriptural principles.
• Here we can use Economics and Ethics
Part II.
The Ethical Case for Free Trade
• Adam Smith’s wisdom was often ignored
by policymakers in the United States. Tariff
protection was the order of the day.
• Henry George, an early American
economist, tried to help the US turn to free
• Without any formal training, George had
become a classical, market economist.
George’s Case for Trade
• George wrote Protection or Free Trade: An
examination of the tariff question, with
especial regard to the interests of labor
• He used the classic specialization logic and
also went beyond it.
George’s Case for Trade
• He even claimed that trade was an ethical
and religious issue.
• He considered it an evil that inefficient,
technologically backward producers should
form a conspiracy with legislators to force a
nation’s entire population to pay a much
higher price to the conspiring domestic
Wartime Blockades and Peacetime
• Protective tariffs compared to a blockade.
– In war, a country blockades a foreign country
so it can’t import commodities from world
markets for military purposes or for the people.
• In peacetime, domestic producers and
bought-off legislators do to their own
country what enemies would do in wartime.
• They eliminate the possibility of buying
desirable world-market goods, stopping
foreign products at the nation’s ports.
Wartime Blockades and Peacetime
• This, claims George, is foolish policy, but is
• Unethical.
– for what it does to our own nation, and
– for what it does to other nations, which have
• worked hard to develop good products for
the buyer
• and a living for our trade partners (laborers
and managers) abroad.
Wartime Blockades and Peacetime
• George wrote that a theory of foreign trade
calling for a country to blockade itself from
world markets
“might consort with that form of polytheism
which assigned to each nation a separate
and hostile God; but it is hard to reconcile it
with the idea of the unity of the Creative
Mind and the universality of law. Imagine a
Christian missionary expounding to a newly
discovered people the sublime truths of the
gospel of peace and love –
Wartime Blockades and Peacetime
-- the fatherhood of God; the brotherhood of
man; the duty of regarding the interests of
our neighbors equally with our own, and of
doing to others as we would have them do
to us. Could he, in the same breath, go on to
declare that, by virtue of the laws of this
same God, each nation, to prosper, must
defend itself against all other nations by a
protective tariff?”
The Promise of Peace and Plenty
• George pleaded with his readers, whether
Christian, Deist, Agnostic or Atheist on this point.
“Who can look about him without seeing that want
and suffering flow inevitably from selfishness, and
that in any community the golden rule which
teaches us to regard the interests of others as
carefully as our own would bring not only peace
but plenty.”
Part III.
The Ethics of Corporate Governance
• An important issue: the earnings of
• Corporations have not been permitted to
function without public oversight since the
early 1900s.
• A congressional wave of corporate
regulatory legislation.
• Corporate governance pertains to
– the use of resources,
– investments and
– leadership selection and oversight.
Ideological vs. Objective
Perceptions of Corporations
• Omnipresent anti-corporate sentiment
helped motivate the corporate regulatory
• Sometimes corporations cause such
– Note the recent corporate scandals of our own
• Are corporations organizations of greed and
excess? Must they be reigned in by
The Potential Costs of
“Punishing” Corporations
• The end of the Marxist-Leninist movement in the
Soviet Union and East Europe.
• By 1990 it unraveled due to “communist” central
planning failure.
• Its goals focused on the management of corporate
– forcing corporations into state-owned enterprises
– managed by state agencies rather than corporate
Corporations as State-owned
• State-owned enterprises (SOEs) assigned
numerous social functions, e.g.,
• the provision of housing,
• medical care,
• child care,
• education,
• entertainment and vacation facilities.
Corporations as State-owned
• Profit was not an issue for SOEs, nor
was efficiency, nor cost-savings, nor
innovation, nor other entrepreneurial
activities. The SOEs were therefore
highly unproductive and wasteful.
• The system was sustained only by state
coercion (and for many years of
economic waste).
We should punish offenders, not the
institution of the corporation per se.
• The corporation:
– individuals with skills become agents for
investors seeking favorable returns.
• Financial markets fund corporations so
ideas can be transformed into desirable
products and services.
We should punish offenders, not the
institution of the corporation per se.
• According to the economics model of
governance, revenues thus generated belong
to those who have provided the funds;
• Private investors provide financial rewards
to those who transform ideas into profits.
What? Me Worry about CEOs?
• One may worry that corporate leaders will
view the firm as “their own.”
• They may gain control over the board of
directors, rather than being managed by
them. What is the principle/agent problem
• If CEOs forget they are the agent, they
might pursue their own interests, rather
than those of the owners, the shareholders.
What? Me worry about corporate
• But maybe there is something equally
problematic to a greedy and self-interested
CEO. . .
• The firm’s so-called “stakeholders” would
like to gain control of corporate resources.
What? Me worry about corporate
• Who are the stakeholders?
• Any party with interests in the outcomes of
the firm’s activities.
What? Me worry about corporate
• Stakeholders include:
host communities,
employees' families,
environmental groups,
labor representatives,
and other aspects of society in general.
The fundamental “stakeholder” argument
• “The corporation can be ethically and
socially responsible only by considering all
stakeholder interests.”
• But aren’t all of us interested in the
corporations activities and resources?
• Corporations use our air, our internet, our
streets, our airways, etc.
• That makes us all stakeholders, right? The
corporations have money. We all want
The fundamental “stakeholder” argument
• The stakeholder view: the shareholder is no
longer the sole or even the primary
stakeholder in a corporation.
• The shareholder and profit maximization is
to be replaced by the stakeholder.
The Longed for Return of Proudohn
• Do we return to Proudohn, a forerunner of
Lenin, who complained that “property is
• Stakeholder advocates wish to consider
better ways to use corporate wealth than the
corporations that create it.
The Longed for Return of Proudohn
• If corporations use property in ways we
don’t approve, should we not take it back?
• To some, that might suggest a Leninist
revolution and the establishment of a central
planning system to empower the people and
end the tyranny of capitalism?
Corporate Tyranny…
• Stakeholder advocates note that
corporations impact society in creating
wealth? Don’t they
– fail properly to compensate their employees?
– produce environmental effluents?
– fail to pay their fair share of the tax bill?
…should it not be opposed?
• Should not society regulate corporate
activities to prohibit monopoly power abuse
and anti-social activities?
• It should and it does! It did long before the
stakeholder doctrine appeared.
…should it not be opposed?
• Should society retain the power to tax
corporations, to police their contracts, to
protect the public from environmental and
other hazards?
…should it not be opposed?
• It should and it does!
• Those of anti-corporate mentality may
assert that abuses still occur, in spite of the
extensive legislation already in place. If
they are right, the legislation should be recrafted.
• But with Sarbanes-Oxley the pendulum has
probably already swung back too far.
…should it not be opposed?
• In all likelihood, if we come down on
corporations, what will other countries do?
• In a global system, such action drives them
elsewhere to improve some other nation’s
living standard.
The Question of Property Rights
• The corporate wealth of which we have been
speaking is property.
• It is the property of the private and public
institutions (and the shareholders of the
latter) that produce the wealth.
• Property rights have been established by our
legislatures and one cannot speak of “ethical
and moral conduct” demanding that those
who are not owners of property should be
empowered to confiscate that wealth in any
form because they are “interested” in its use.
The Question of Property Rights
• To say “confiscate” is perhaps too strong a
term. Stakeholder advocates would rather
convince corporate leaders to relinquish
wealth voluntarily.
• That would also be theft, but on the part of
the duped corporate leader.
• Remember, the corporate leader is simply
an agent hired to manage the property of the
The Question of Property Rights
• Should one succeed in doing social good
with resources already subject to property
rights strictures, the action cannot be
deemed ethical.
The Question of Property Rights
• “Stakeholder” advocates still have the
option, of course, of convincing legislators
of the virtue of taxation for social projects.
• Their preference also to work on corporate
leaders and future corporate leaders may
indicate that public coffers are insufficient
for all their spending aspirations.