Social contract for business

A company's right to exist is not primarily to make a lot of profit, although profit is necessary for survival. For many of those involved in a business, a business is part of their lives. Is it possible to make a profit and behave ethically at the same time? In short: is ethical entrepreneurship possible?

Why are there companies?
People need goods and services. Some specialization took place even among the first hominids. For example, the men usually hunted (or waged war), while the women gathered vegetable food and performed household chores. A person or group of persons who professionally specializes in providing a particular product or service is called a company. Primarily, therefore, is the raison d'être of companies: to manufacture or do something that others need. Business is therefore essential for our survival; because we developed ever better techniques and more effective cooperation, we succeeded in breaking out of poverty. An escalating process ensued: as more and more techniques were discovered, more time and resources could be used to develop even better techniques.

Profit-seeking BP managers took far too great risks, damaging the Deepwater Horizon oil rig. Source: Wikimedia Commons

What is Profit?
Profit is what you have left when you subtract the costs from the revenues. The more profit a business makes, the more the business has leftover and, if it invests the profit in the business, the faster it can grow. It can also make the business owners richer. Profits can come from a smart, innovative business process, allowing the company to deliver something for little cost while in high demand. Profits can also be the result of parasitic business activities, leaving the company with a lot, but causing a lot of damage to the rest of the world, resulting in net capital destruction.

Examples of parasitic businesses

  • With the exception of all companies in the financial sector, some insurers and non-profit banks. The financial sector itself does not produce anything, but lives on arbitrage, read: skimming the profits of others.
  • The Dutch East India Company, once praised by former Prime Minister JP Balkenende, made a lot of profit by forcing slave-born natives to grow spices, which the Company sold in Europe for a lot of profit. The profit was partly secured by destroying competitors.
  • Patent trolls make money by selling patents as much as possible. In doing so, they force other companies to hire expensive lawyers, hinder innovation because other companies are afraid of violating any patents and they extort companies many millions.
  • Many mining companies are wreaking havoc, after which local residents are left with the lumps, because the owners let the legal entity in which the mine is located go bankrupt.
  • Companies that send ghost invoices or invoices for inclusion in obscure or nonexistent registers.
  • Tobacco producers, beverage manufacturers or other products that are harmful to health.
  • Weapon manufacturers, especially the producers of anti-personnel landmines.
  • Companies that create their own demand by causing problems, sowing fear or by talking to people about non-existent problems, so that they buy unnecessary products or services.

Societal and social responsibility
As an entrepreneur you have a duty to think not only about the profit figures but also about the consequences that your business activities have on the rest of the planet. Several centuries ago this was a very natural thought. Centuries of lobbying by crafty corporate attorneys in the US have unfortunately ultimately resulted in profit as an end in itself being a sufficient reason for a company to exist, in fact, that a manager is punishable if he does not maximize profit for a company's shareholders. Countries outside the US have unfortunately largely adopted this legislation. Managers are also still thrilled when they deliberately let their company flout environmental regulations, for example. In this case, of course, it is more effective to hold personal accountability and prosecution for these types of violations.

Hippocratic Oath for Entrepreneurs?
The contrast between the merchant and the pastor is an illusion. Ethical conduct is also important for business people. If only because a cheated customer does not return. The consequences of corporate mismanagement are also profound, as we have seen in the Gulf of Mexico, where short-term profiteering by BP executives led to the greatest environmental catastrophe in modern history. For doctors, the Hippocratic Oath has existed since classical Greek times. The doctor's oath of the small Dutch Medical Society most closely resembles the Hippocratic Oath and reads as follows:

I swear and subscribe to this oath, as long as I may dispose of my faculties and mental insight, to the end.

I will regard someone who has been my teacher of medicine as a family member and will be selfless by the side. His children will be like brothers to me, whom I will train in my turn, without asking for compensation, in medicine. I will give my teaching to them, along with my own children and to the students, who are subject to the duty of secrecy, but not to outsiders.

I will give my prescriptions to the best of my knowledge and ability, for the benefit of the patients, and I will keep them from all that is harmful and wrong. I will not help anyone who asks me for a deadly concoction, nor will I come up with any advice of my own accord. Nor will I help any woman with a poisonous suppository. Impeccable and God-fearing will be my private life as well as the exercise of my profession.

I will not perform actions that do not belong to my competence, but, if necessary, make room for those who are knowledgeable in the matter. If I go into the private realm of the patients I will do so for the sake of healing, avoiding any abuse of my position in my attitude towards women and men, especially in the sexual field.

Everything I see or hear as a care provider, including the private lives of the patients, I will keep to myself, in the conviction that such things must be kept secret.

The respect of all people for my way of life and profession may be my part forever, if I keep this oath and do not break it. In case of transgression and perjury, however, the opposite may happen to me.

Shouldn't there be such an oath for entrepreneurs and especially managers?

 

9 thoughts on “Sociaal contract voor het bedrijfsleven”

    1. Well, I don't know. Smaller companies are afraid that unethical decisions will be made, but there are also things that are not acceptable within national borders. Consider, for example, the authorities against which the actions of Wakker Dier are aimed.

  1. The point is, just like in nature, parasitism is a great survival strategy. Worms, leeches, ticks, mosquitoes ... If as a company you can shift your environmental costs to the local environment and residents such as Shell, for example, do on a large scale in Nigeria and everyone happily continues to buy your product because they are addicted to it ... 

    By the way, I am all for such an oath, but I am not sure how to enforce decent behavior. But joint and several liability of the Board of Directors and the largest shareholders of a company would be a very good start. In principle, the corporation structure is precisely designed to leave all responsibility in the middle and so that no one is really liable.  

  2. Although there are already too many quality marks, this would be a nice one. Provided there is also a truly independent and pure organization behind the quality mark.

  3. I can only give one answer that I think is justified, such an oath must be made for every individual, in every position. Using this as a basic principle makes everyone responsible for their actions. Without taking the oath, the person is not allowed to perform any work. Such a thing would then have to be constitutionally established. No business rule or structure can ignore it. But this must be too utopian I think.

  4. Interesting proposal I must say to introduce an oath for entrepreneurs. However, I think that in our current social model and with the current zeitgeist this will not work. You cannot compare an entrepreneur with a doctor. Civil servants also take an oath. For doctors, the health of the patient is paramount and for the civil servant the general interest. Judges must also take an oath. However, these are all professions in the non-profit sector when it comes to the common good.
     
    Our current capitalist system is mainly about making a profit. Neoliberal ideology has become a strong export product from the US. You see this recurring in many management literature from the US, for example. It is not without reason that the banking crisis started in the US in 2008. To get such an oath, there will have to be a fundamental change in how we think about capitalism. A sustainable form of capitalism will have to emerge before it will be widely accepted that an oath must be taken.
     
    You also have to take into account the legal consequences. If you break the oath? Will you be legally prosecuted? And what about other countries like China where companies can go where they don't have this oath? Performing such an oath will also incur additional costs. Good employership simply costs money if an oath is not to be broken.
       

  5. An oath is nice, but it does not guarantee anything. Just look at the oath that US presidents make to the constitution and then rape it.
    Fortunately for this world, I came up with the solution to this not insignificant problem tonight.
    In the old days there were kings or a small elite who controlled all the property and the rest of the people had to work and had no input. A democratic system with more authority was introduced through revolutions, whereby opportunities and prosperity were more fairly distributed. Now you see that this system exerts less and less influence on that part of society which is the most productive. The power belongs to the companies and thus to the shareholders of companies, often the financial elite through our banking system.
    It is time for a democratization process at the top of companies, just as the government used to be democratized. Rather than just representing the interests of shareholders, the interests of all stakeholders should be represented in the decision-making process. Other stakeholders are customers, creditors, employees and the environment. Together with owners, representatives of these stakeholders should sit on the Board of Directors or a Supervisory Board with greater powers. CEOs and COOs must implement policy of this Board and are under stricter supervision by stakeholders.
    This will ultimately be beneficial for all stakeholders, because in the end they cannot do without each other and through good communication and cooperation they will get the best product and the most satisfied customers, employees, creditors and shareholders.
    So another world problem solved!
     

  6. Board members should be able to be fired by the stakeholder they represent. In that sense, there must indeed be an organization that judges them. It is up to the individual stakeholders to set this up. In the case of employees, this already exists, namely the works council, consumer organizations also already exist.
     
    If the management does not adhere to the policy of the board, she will be fired by the board. The board also determines the salary of the management, so that problem with bonuses and excessive rewards is also over.
     
    The government also has to enforce much less and draw up rules, which also saves us tax money and a lot of hassle. Internal regulation and democratization of decision-making are key.

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