Pride and Profit

I take great care to expose my students to all sides of an issue. At the same time, I am not bashful about letting them know what I think. It is always crystal clear to my students when I am expressing my opinion and that they need to weigh these issues themselves, coming to their own conclusions.

Yesterday, I covered a chapter on ethics in my beginning management classes. I intensely dislike the way ethics is usually taught in business schools, and I let my students know that. My beef is with the implicit suggestion by many of my colleagues that capitalists should apologize for the profit motive.

Few of my business school colleagues, as far as I can tell, are outright socialists. Most recognize the necessity of private property and profit to the well-being of a society. Still, they seem uncomfortable with the idea that profit is to be celebrated, rather than apologized for.

A lupine premise has slipped into business ethics over the last several years under the sheepskin of the “stakeholder” theory. The stakeholder theory of the firm states that businesses are beholden not just to their owners (stockholders), but to all manner of constituents (stakeholders). These may include the community at large, other businesses, charities, the environment, cute little animals, and pretty much anything else that exists within a large but loosely defined radius.


There are scads of good reasons to be benevolent toward others. Should a business owner find it in his/her heart to give to charity, start an animal shelter, or clean up a park, that is an individual choice and can be defended on any number of grounds. Stakeholder theory, though, states explicitly that business decisions, in order to be ethical, must take these constituents’ desires into account. In other words, a business’s stockholders are only a kind of proxy for the community as a whole.

Think about the implications of this view for a moment. People who have never invested a penny in a business have the right to influence its decisions. This “right” extends, apparently, far beyond negative rights (the right to prevent another from inflicting material harm such as pollution) to include a host of positive rights (the right to a job, to insist that a business support certain philanthropic projects, to determine an appropriate facade for the main office, etc.). 

The demands made by stakeholders are pompous and generally silly, but the premise behind them is positively corrosive. Businesses exist because their owners are either capable of creating value for others or hiring those who can. They must also be willing to do so, a fact lost upon the legions of community busybodies who would do people more good were they to sit at the feet of a few successful businesspeople rather than in chairs at a city council meeting.

Businesspeople who earn profits primarily through political pull rather than competent business practice are as much to blame as the busybodies. This kind of rent-seeking behavior has so come to dominate our economic landscape that virtually no industry is without political remedy. Thousands of hours and dollars are required to cut hair, give a massage, or advise people on diets. And who picks up the tab? Look in the mirror.

The business/political/social environment has become an absurd game of gain by graft. Politicians get elected through the support of big businesses which support rules designed to squelch competition, which ups the prices of things for you and me and lines the pockets of the first two. In the meantime, small businesses learn by example that the way to make competitive life easier is to reduce competition through force–just like the big guys. And so they form lobbying organizations that do just that through onerous and often goofy licensing requirements and regulations. Seeing an economic landscape in which the whiniest get the mostest, citizens then band together to dictate whatever petty little preferences they have. Last, academics codify the whole clusterhug into a theory. What’s a poor libertarian to do?

I’ll tell you what I do. I tell my students that it does not have to be this way, using these five bullet-points:

1) Never, ever apologize for making an honest profit.

2) Remember that by running a profitable business, you have already done humanity a world of good.

3) Look in the mirror every morning and ask yourself if you are genuinely trying to earn a profit with integrity. If the answer is “no,” face your shortcomings forthrightly and work to correct them.

4) Treat other people with dignity and respect, whether they can do anything for you or not. Insist that others treat you the same way.

5) Save your charity for those who cannot help themselves. Withhold it from those who will not. You know the difference, even if others don’t agree with you.

When in conversations with people who seem to think that profit is the problem, answer with your own version of the above. We will regain our individual dignity and ensure our future prosperity only when we regain our pride in honest commerce. There are a lot of people out there, young and old, who need to hear this message. Please, help me deliver it.

About Terry Noel

I am an Associate Professor of Management and Quantitative Methods at Illinois State University. My specialty is entrepreneurship.
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5 Responses to Pride and Profit

  1. David says:

    Profits, which lead to wealth creation, benefit the entire society. Businesses provide jobs and benefits to their employees. Monies paid to those employees then enable secondary employment in the community. Profits should be celebrated.

    I sometime participate in surveys, and one of the questions that is often asked is the extent to which I make purchases based on a company’s social consciousness and “giving back” to the community (as if they are taking from the community). I always indicate in these surveys that those contributions are of minimal importance to me as a consumer. I do not want to promote the idea that companies must engage in this redistributive philosophy.

    I agree with Terry that individuals must be free to do whatever they choose with their money. If they choose to be charitable, that’s terrific and is rewarded with a tax break. In fact, I prefer social programs be run by charities, rather than the multi-levels of bureaucracies of state and federal government. In the case of government social program, too much money is spent on running the programs relative to the benefits given to those in need. Charities are far more efficient.


  2. tiffany267 says:

    If you haven’t already read “The Virtue of Selfishness” by Ayn Rand, I highly recommend it. It explains why you’re on the right track with the thoughts which you expressed.


  3. Dick Richards says:

    Two things.
    First, when competitors see that a game is rigged, they will switch strategies from trying to be best at the game to trying to rig the game in their favor. That’s what is going on in our capital. If there was no money to be made by paying for lobbyists, there would be no lobbyists.
    Second, regarding David’s comment about wealth benefitting the entire society, I agree 100%. Bill Gates has already done far more for the world by building Microsoft than he will ever do by giving away all the money he has made. Yet he was ostracized by the left for his wealth as he made it but is now lionized for giving it away.


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