Thursday, December 18, 2008

A Crime by Any Other Name

In Forbes, Professors Fisman and Khurana criticize the view that managers are agents for shareholders. They say that managers are agents for society.

In other words, mangers don’t work for the owners, they work for society.

This is a startling metaphysical leap, little different from the claim that an individual’s will to live is secondary to the will of society. The purpose of any business is an individual concern. The consequences of business are a social concern. Society does have a role to play in dealing with some of those consequences; preventing violence, theft and fraud, for example.

But it is a mistake to use businesses as a means to dreamy social ends. So long as a business is peaceful, does not commit fraud, or violate the property rights of others, society has no right to insist on different social ends.

We all agree that a manager who enriches himself at the expense of the owner is guilty of an injustice. Such a thing is not "free market capitalism." It is more correctly described as theft. Calling it free market capitalism is a symptom of confused morality. Capitalism does not equal looting the shareholders. That is hardly the way to maximize shareholder value.

Why should a social program that enriches itself at the expense of the owners be viewed any differently? Such a program is not "stewardship." It is another form of theft. Social justice does not equal looting the shareholders, either.

In his great novel Crime and Punishment, Dostoevsky made a point the professors miss: a crime committed in the name of society is morally indistinguishable from a crime committed for individual gain.

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