Sanjeev Gupta
Sanjeev Gupta

Control greed by all means but don’t strangle it

In the wake of the biggest financial apocalypse of our times, the media has loudly voiced concerns about corporate behaviour. Despite widespread condemnation, corporate incentives and bonuses are already returning with a vengeance now that there are strong signs of a recovery. Should they be rewarded already? And as generously as the media would have us believe? Some say it is a return to normalcy but the cynics call it the perpetuation of the conspiracy of a few. And the more discerning believe it is okay as long as the troubles are sorted out — and who better to solve them than the same people who caused them in the first place?

This backdrop leads me to re-examine the age-old question of whether or not corporates have a broader responsibility toward society — a responsibility beyond commerce? The inherent contradictions of a capitalist world are performance versus pay and responsibility versus delivery.

If executives are just tools who should not be burdened with any custodial responsibilities towards the larger community, then some of society’s most educated, most enlightened and best resourced have no duty toward the greater issues of poverty, inequality, ecology and compassion. At a humane level, perhaps this lack of responsibility should exist. Corporate executives are nothing but harassed professionals, probably with families and bills to pay, running from pillar to post pleasing an increasing number of stakeholders and making sure their family’s needs are met. Should they really be expected to do more for society?

The dogma that pervades about this was brought home strongly by Milton Friedman who dared to say that the doctrine of social responsibility is “fundamentally subversive”. He said, in his own words way back in 1961, “Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility OTHER than to make as much money for their shareholders”.

Freidman continued with a flourish and said: “There is one, and only one, social responsibility of business, to use resources and engage in acts to increase profits so long as it stays within the Rules of the Game and engages in open and free competition without deception and fraud.” To him, the concept of a socially responsible company was an oxymoron.

Critics might say that in that case, one is being forced to accept that a corporation is no more than an ingenious way of making individual profit without personal responsibility. But World Business Council for Sustainable Development in its publication Making Good Business Sense defines corporate social responsibility as: “Continuing commitment by business to behave ethically and contribute to economic development while improving quality of life of the workforce, their families, local community and then society at large.” It is about a manner which exceeds the legal, ethical, commercial and public expectations so that capacity is built for sustainable livelihoods.

But it is equally true that various research (Jules Blackman, Henry Maine) on this subject points to the fact that social investment is about “addition” to the primary role of economic performance and thus should be voluntary and needs-based.

What then should be the boundaries? A befuddling problem since there are always going to be vested interests and unclear definitions that can have unintended consequences through the raising of artificial barriers. When it comes to responsibility, corporate executives will argue that there are enough rules for them without having to worry about the ones that don’t exist. But their detractors will say that conscience and evolution have started working at cross purposes and cannot be condoned.

Some argue that the “do good” moralists are ultimately altruistic and distract rather than direct. The core responsibility of a corporate is bottom line and thereby the end should justify the means. Distracting them from that core serves as an interruption, a diversion and thus will breed confusion and bewilderment and the world will only at best see commotion and a disruption to progress and development. A company can only sell if it produces something people need — it can only produce something that people need if it meets standards — to meet standards surely it has to meet social expectations in any case, so what else?

After all, good citizenry, good manners and philanthropy are not under threat here. These are values that corporate executives have exhibited and will exhibit — simply because it makes business sense. To burden them with guilt, activism, witchhunts and rabble-rousing can only be wrong therefore.

One of the biggest challenges we have in modern times is the challenge of ambiguity. Scholars and businessmen alike have pointed out regularly that companies are ill-equipped to pursue broader goals as they either lack democratic legitimacy or have to wade through an ocean of random or populist expectations. It is about the dividing lines between government, regulators, development agencies (UN), lobby group, NGOs, religious movements, corporates, and corporate officers.

Business, by its very definition, is anticipatory and adjusts as it seeks to find a balance between economic objectives, legal laws, ethical expectations and finally discretionary responsibility where there is no clear-cut message from society. A man in business is good at seeing opportunities, he is trained to marshal resources, he is under obligation to break no laws and he is responsible to make money for all including himself.

The world is quick to latch onto new fads and this trend of putting the long rope of some obscure set of responsibilities around the corporate neck is yet another of those. It is a pseudo attempt by the forces of capitalism to fight for relevance at the expense of its own spearhead which is greed. Greed is the bedrock of ancient civilisations and the cornerstone of modern development. Greed is the single biggest reason for progress — for innovation — for progress. Control it by all means but don’t strangle it. Otherwise we run a real risk of fuzzy frontiers and anarchy and a return to complacency and mediocrity.

The solution to this dilemma lies in responsible policy-making and the guts to make it effective. It depends on avoiding policy expediencies to achieve shorter-term gains thereby creating credibility and trust in the mind of the principal protagonists. An aimless vilification of incentives and performance-based pay is an affront to the essence of the greatest model of our times — capitalism and is therefore not only fraught with danger but laced with the curse of medieval times where people were burnt on stakes at the expense of progress and development.

  • Wise Old Joe

    Good book; “Supercapitalism: Fighting for Democracy in the Age of Big Business” by Robert Reich.

    Very relevant, suggested read.


  • Andrew Slaughter

    Can the present monetory system which depends on economic growth to pay back loans, be sustained in a world running out of resources, including fossil fuels? To me, greed represents how we got into this situation in the first place

  • Hugh Tyrrell

    People weren’t ‘burnt at the stake at the expense of progress and development,’ they were burnt because, conversely, they refused to kow-tow to the current religious dogma at the time. Conservative fundamentalism was putting down change that threatened the status quo.

    I think one needs to be a little more circumspect about capitalism than that it is “the greatest model of our times.” The way it works to funnel money up to the top leaving those lower down with less and less (historical fact) requires that it be regulated far more otherwise it loses its social legitimacy as an economic system. The market is a great way to exchange goods and services, but capitalism, left to its devices (and because it rewards and so exacerbates greed) must be reigned in – as the meltdown has shown so patently.

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  • Gerry

    I’m a re-born capitalist, and I agree – the business fo a business is to make money. How? People call it “raping and pillaging and exploitation”… okay. Lets remove the big corporate and businesses from society, make them redundant, antionalise them, and we’ll be back in the dark ages before you can say “failed soviet union”
    Viva business and capitalism, viva. Stop blaming capitalism for the economic downfall. Rather blame over-regulation and a desire to socialise capitalism for the crap that happened the last 18 months or so. In a pure free-market economy, the economic meltdown would not have happened!

  • MLH

    Greed always strangles someone and usually that someone is weaker and unable to fight back. Our banks, for example, charge fantastic fees. Their customers are not a collective, but individuals. Many must operate bank accounts to be able to receive their salaries. Bank customers therefore have no voice.
    Telkom and Eskom are other examples of sheer lack of ethics. They have become so used to getting their own way, they simply cannot be bothered to justify their habits honestly or learn to compete. Telkom is a dying company. That’s why.
    Eskom could well find itself in distress if it doesn’t shape up. It’s not my job to pay up because they can’t run their company properly. Monopolies get away with far too much because they have captive markets.
    Government is squandering public money, not theirs. It deserves the death penalty it abolished!
    At least with corporates, individuals have some choice as to whether to buy their products or not, but when they don’t perform as promised, they should also be hammered.
    And let’s be honest, the long-term insurance business is not lily white. Return often does not justify the investment; as thousands of pensioners without the backing of corporate employers find out every year.
    You infer that businessmen have no need to behave according to religious or decent principles. Even shareholders should not expect what common decency cannot offer.

  • john carlisle

    what a silly, muddled case Sanjeev Gupta is making. He presents no evidence, no case studies or parameters. Opinions only. Not good enough, by a long way.
    First of all there are at least two models: Anglo American and German Japanese capitalism. The latter does not encourage greed or extravagance. In 2000 the salary of president was just 11.3 times that of a graduate starter. (Dore: Stock Market Capitalism.) Greedy??
    Secondly, most companies were started because someone had a really bright idea – either technologically or as a product. They did not start off to make a million. They wanted to make or meet a market need, and enjoy teh excitement of so doing. In the case of the Tatas they wanted to give India a steel industry. John Lewis, the most admired store chain in GB is owned by its employees, and the retiring chairman recently said that his proudest moment was when he divided £155 million among his employees.
    So, why don’t you, Sanjee and your re-born capitalist friend Gerry, factor that into whatever comprises your your weird opinion-forming mechanism?

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  • Rebel Capitalist

    The only way to make the free enterprise system work – by a rebel capitalist:

    1) Revamp our global financial system to avoid boom and bust – Keynesian Economics or similar system.

    2) One economic model does not fit all. World Bank and IMF structural adjustment programmes a disaster in developing world. The solution: ‘Making Globalization Work’ by Prof Joseph Stiglitz.

    3) Protect environment; rain forests, oceans, air.., everything, otherwise our civilisation will collapse.

    4) Implement ‘Fair Trade’ as opposed to ‘Free Trade’ and allow developing countries to erect trade barriers where necessary.

    5) Close the income gap between the superrich and very poor, otherwise we will have a revolution.

    6) Every child around the world must receive consciousness based education so as to eliminate poverty and terrorism. –

    7) The whole world must more towards 100% renewable energy by 2050. If Germany can why not the rest of us?

    8) Move towards Zerowaste. Recycle and re-use everything.

    9) Cut back on meat eating. Meat eating is an inefficient way of converting the suns energy and other resources to food. Excessive meat eating increases disease in humans and exacerbates climate change.

  • Dave Harris

    Sanjeev, I’m saddened that your article exemplifies a wanna be capitalist bereft of human values and no sense economics.

    “Corporate executives are nothing but harassed professionals, probably with families and bills to pay,..”
    Yeah, right! Did you mean corporate executives with obscene salaries with bills like, vacation homes around the world, first class airline travel, exotic family vacations, decadent parties and lavish gifts to friends and families….all this while their stocks plummet and their workers are retrenched by the thousands with salaries, bonuses, medical aid etc..are all cut to the bone! Can you wrap your little brain around the fact that within the last few years the ratio of CEO-to-worker pay was over 500-to-1?

    “Greed is the single biggest reason for progress — for innovation”
    What BS! Its the human desire to succeed and their thirst for knowledge is what drives innovation. Go to Silicon Valley, the mecca of innovation, to understand this phenomenon.

    “The core responsibility of a corporate is bottom line and thereby the end should justify the means.”
    What a shameful and disgusting statement from someone who professes to work with emerging economies. Its no wonder these “emerging economies” end up with corrupt governments that are eventually have to be overthrown militarily.

    You and your ilk with your “greed is good” mantra give capitalism a bad name!

  • http://Firefox old, female

    “depends on avoiding policy expediencies to achieve shorter-term gains”
    Idle youth are the MAJORITY of our population; an unhealthy imbalance for mischief and mayhem.
    Its time to think “long term” to quote Manuel and the older generation of leaders.
    Today and tomorrow become yesterdays of lost opportunities.
    You will reap what you sow is unadulterated fact.

    Part of the too-many-millions, given to SPORTS’ bottomless pits, which is BTW currently at obscene levels – could be diverted to:
    Skills upgrades.
    Counseling Programs, etc.
    Give a hope for a future to our young people who look to gangsters as their mentors.

    Let them be paid whilst learning; with no obligation by the learner other than to give a full day’s honest “learning experience.”
    This was done in the past and benefited the companies and societies.
    It created loyalty and work ethic in the work force. Increased skills base as the learners usually applied for work and management can see any potential in a person for future employment. Win – Win and feel good at doing good !

    It is time for the… me/my/I …generation to stand back and assess the extent of their greed and disdain for fellow human beings. Enough is enough; not lust for more !

  • MFB

    We have to strangle them before they strangle us.

  • Rebel Capitalist

    Continued… making capitalism work by the rebel capitalist:

    10) Reduce violent crime in society. Research shows how violent crime was reduced in Washington DC (USA) by 23% almost immediately. “Social Indicators Research”, 47(2): 153-201.

    11) The massive overseas corporate land grab in Africa, China, South Korea must immediately be halted. “Corporate investors lead the rush for control over overseas farmland”

    12) Food sovereignty for all, not just food security. “People’s Food Sovereignty Now! Declarations”

    13) The rights of peasants, small and middle-scale producers, agricultural workers, rural women, and indigenous communities must be guaranteed – See Via Campesina.

    14) Biofuels from food crops or produced on land used for food must immediately be halted –

    15) Genetically modified (GM) crops must be immediately banned. They are harmful to human health and the environment, regularly produce lower yields and require higher herbicide use. [References can be supplied]

    16) Sequester or remove 40% of the CO2 from the atmosphere through natural geo-engineering, ie. By converting the world’s 3,5 billion tillable acres currently under chemical industrial farming to organic agriculture. Read more:

    The above is my type of capitalism. Greed is in check.

  • Jan Hofmeyr

    Well said Dave Harris.

  • Gerry

    Just a few tid-bits to brighten up the day!

    “Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery.”
    Winston Churchill

    “The function of socialism is to raise suffering to a higher level.”
    Norman Mailer

    “Socialism is workable only in heaven where it is not needed, and in hell where they’ve got it.”
    Cecil Palmer

    “The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of Socialism is the equal sharing of miseries.”
    Winston Churchill

    “Underlying most arguments against the free market is a lack of belief in freedom itself.”
    Milton Friedman (Profound!)

    “All people, however fanatical they may be in their zeal to disparage and to fight capitalism, implicitly pay homage to it by passionately clamoring for the products it turns out. ”
    Ludwig Von Mises

    “The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics. ”
    Thomas Sowell

    “It is the fundamental wisdom of the capitalist system that it functions irrespective of the wisdom or the stupidity of the capitalists. ”
    Gustav Stolper

    and last, my fave, because it sums me up perfectly:
    “He who is not a socialist at 19, has no heart. He who is still a socialist at 30, has no brain.”
    Otto von Bismarck

    Have fun now!

  • Wise Old Joe



  • Gerry

    @Joe – Yeah, yawn! Capitalism has no spark of revolution, its boring coz it works!

  • Cobus De Wet

    There is a lot to be said for both arguments.The truth is Sanjeev is 100% right,we cannot strangle Capitalism but we can refine it into a workable model that will satisfy the Socialists as well,although this could be tricky!Their is no argument that the wealth should be spread around a little. If their is anything like Corporate responsibility, then it should be to look after the people at the lowest level of your own organisation. A simple suggestion would be to enforce regulation not to curb “greed” but to force companies to filter some of those profits down to the workers. Who will in turn be happy to then fuel more “greed” by the company they work for. Shareholders wont be able to complain because they know what they are getting up front if the rules are clear, profit equals a percentage back to the employees the reverse also to be true. We always pick on the big corporations,but how many of us will be prepared to take a cut in our salaries when the company goes through a bad patch. When you live in South Africa,for argument sake,workers demand even more money regardless of how the company is doing.I love the Quote By Otto Von Bismarck,Thanks Gerry,we are all Socialist at 19 but God forbid you be one at 30. The proof lies with the ANC,its one thing preaching Communism its another to give up the spoils of Capitalism.

  • http://yahoo K Kanengoni

    In my perspective, greedy is driven by the desire to keep all rather than innovation. This keep-all mentality has no relationship to innovation as innovation is driven by the desire to turn new pages in life or do things differently. My humble submission is that greedy should be firmly kept under check since it has a tendency of amassing resources where they not effectively used. Perhaps the author could give a few examples of where greedy motivated innovation. This may assist us understand his concept of greedy being an underlying motivation for new ways of doing business.