Money makes the world go around. But what sort of thing is money? Bits of paper and metal? An elaborate set of IOUs to be redeemed with more IOUs?
What is it
Does our system of credit and money make upward social mobility possible for anyone willing to work hard? Or is it just a big Ponzi scheme? Are corporations the essential structures necessary to harness the capital, energy, intelligence, and leadership on a scale large enough to make and market the inventions that define modern life? Or are they just devices for evading responsibility and rewarding greed? Ken and John put these questions and more to Neil Malhotra from the Stanford Graduate School of Business, in a program recorded in front of a live audience at the Classic Residence by Hyatt in Palo Alto, California.
What do money and morality have to do with each other? What are the ethics of business? What obligations do corporations have to society as a whole? Was the recent financial meltdown a result of immoral behavior? In this edition of Philosophy Talk, John and Ken delve into these questions with the help of a live audience and guest Neil Malhotra, Assistant Professor of Political Economy at the Stanford Graduate School of Business.
The show begins with a discussion of corporations as moral agents. Should corporations be treated as people, as full moral agents held responsible for their actions? John argues that corporations are not people but rather devices to insulate people from the effects of their own decisions. Ken, in the spirit of Locke, argues that people are defined as intelligent beings, capable of reason and reflection, with the ability of self recognition at different times and places. Thus, he argues, it is metaphysically bizarre to call corporations people. John agrees, but shifts the conversation from metaphysics to morals, questioning whether corporations should be responsible to just their shareholders or to the entire community.
Professor Neil Malhotra joins the discussion concerning moral and economic incentives for corporations, grounded in the case of the subprime mortgage crisis. Under law, corporations are beholden only to their shareholders, instead of the larger pool of stakeholders, such as consumers, taxpayers, and third parties. The shareholder model, Malhotra says, encourages short-term thinking, as the price of a stock share is reported every quarter. Other countries, notably those with stronger traditions of family owned businesses, have adopted the stakeholder model.
The show concludes with a comparison of the European and American economic systems, noting the tradeoff between social welfare and social goods. While the European economy would seem to stand on higher moral ground by providing social services, the U.S. economy is much more dynamic, with more growth and innovation. John poses the questions, what if a firm decided to operate on a purely moral basis? Would profits noticeably differ? How can a corporation balance moral and economic incentives, so its actions have the most benefit and the least harm?
- Roving Philosophical Report (Seek to 6:51): Rina Palta speaks with Paul Perez, Managing Director of Northern Trust, about the role of trust in the subprime mortgage crisis. Perez argues that morality and a healthy economy are mutually dependent.
- 60-Second Philosopher (Seek to 49:57): Ian Shoales discusses the corporation and its role in society, tracing its origin from boroughs, guilds, and monasteries, to the East India Trade Company, to the contemporary American corporation motivated solely by profit.