The deeply philosophical question of "What is business for?" is addressed in the text. The discussion is indebted to some accounting scandals in the U.S. - but we should ask ourselves this question even without any scandals and cises. After all, it is also about the question whether the market has a kind of self-regulation that selects companies. Definitely the market economy does it via economic factors - if there is no more money and no one wants to lend you money, then it will also be impossible to pay the musicians and so the music stops playing and the dance comes to an end.
But the fact is, when the truth is in the dark and confidence is undermined, it discourages players from staying in the game. And that also has an impact on the ordinary small investor, who is increasingly looking for investment opportunities because stocks, funds, hedge funds, warrants, etc. are no longer attractive enough. This ordinary small investor is supposed to be representative of the middle class - I'll call him Mr. Schmidt from now on. And Mr. Schmidt wonders whether prosperity is also possible by the state. In a hypercapitalist world, Mr. Schmidt was immediately laughed at when he voiced this thought, and the scandals were sacrificed under the primacy of expediency only to calm the markets again. The prevailing pragmatism and utilitarianism must live on!
Trust, too, is fragile. An investment trust is a financial company that invests its subscribed capital in securities for the benefit of its investors - but to describe trust only as a confidence is also legitimate - all very fragile! Especially when there are managers who no longer act for the benefit of the shareholders or stakeholders, do not fulfill their need satisfaction mandate and only work into their own pockets. For Mr. Schmidt it is easy and tempting to point the finger at those at the top, but they are only playing by the new rules and not everyone is a fraud. So shouldn't Mr. Schmidt rather be critical of the system and the rules?
For U.S. capitalism, rising stock prices are a sign of economic success. A misconception - the stock market is the same as any other market, only more perfect. When Mr. Schmidt goes to a grocery store, he is happy when the potatoes are cheap, just as he is happy when he buys shares in a company at a low price. But if it becomes an obsession for Mr. Schmidt (to buy cheaply and sell more expensively) then he can quickly lose sight of the essentials. If only because the essence of economic activity is to buy cheaply and sell expensively. A simple pragmatic law - to question it would be a fight against windmills, the rejection of gravity or to join the assertion of an earth as a disk.
Warrants - in the 1980s only 2% and now well over 60% of the securities volume, are a clear sign of which interests the capital market represents. Namely - none for the interests of the stakeholders. The belief that investors look for companies that fit (ethically and aesthetically) well with their living room furnishings is rather to be excluded.
Charles Handy actually assumes that Europeans look with envy and resentment at the U.S. stock markets. But one should ask oneself, which meaning a "Wall-Street" with its opening hours still plays in the globalized and free trade (free money flows) and the present communication possibilities, if not only as a symbol for a long gone time? And let's look back even longer, even shortly before the discovery of America. Once upon a time, in the 15th century, there was a small town called Amsterdam. The citizens were making so much money trading spices that they didn't know what to do with it. Then one of them discovered a flower called a tulip. Not a particularly good tasting or beautiful flower - but still, at the height of the tulpomania, the proud price of 30,000 guilders was offered for three tulip bulbs (the average annual income at the time was 150 guilders). The Dutch exported the game to the U.S., and U.S. citizens dutifully continued to play it. And yes, Europeans do indeed look at U.S. markets with envy and admiration. Not because of the dollars, but because they still manage (despite the game) not to lose their sane minds.
But it is also understandable that Mr. Schmidt suddenly wants a rethink along European lines. Free health care, and free education, social housing, acceptable living conditions in old age, in case of illness and unemployment, etc. But Mr. Schmidt must also pay the price. Higher taxes and a rethinking of his view of society. He would have to (as a representative of the middle class) no longer look upward and follow as well emulate the elites, but look downward and help the weakest in society. When he has achieved this, then a utopian but realizable society will form that slowly but steadily leads to prosperity.
Some irrational aspects of US financial thinking have not made it into the minds of modern Europeans, with exceptions of course. Examples of this are the creation of values where there are no values and a debt policy that was pursued from the consumer to the state without sustainability. For some years now, the USA has been insolvent, which has resulted in shutdowns or in exorbitant emissions of newly printed dollar bills. Capitalist fundemantalism and nihilistic state constructs have lost their gloss. The free market economy loses its raison d'être at the latest when all its representatives and defenders have to declare bankruptcy, but it should at the earliest when people realize that there are too many victims and suffering people in this system.
The problem is clear. While companies have changed - e.g., from ownershipt to capital companies, and the value of a company has long since ceased to be described by its fixed assets (e.g., machines, buildings, etc.) but more by its people and ideas (e.g., patents), the market system has remained unchanged. The question arises: Can the Americans learn from the Europeans? The Europeans know both planned economy (DDR) and turbo-capitalism (Manchester liberalism) and of course the way of the golden mean: The eco-social market economy. This is good, but it is not the best of all worlds, because it is constantly being undermined by political currents. Of course, the path from shareholder-centric to stakeholder-centric corporate management is viable and an opportunity to develop a better concept of society. Also, the realization that the purpose of a company is not to make a profit, but that the purpose of profit is to improve the company, is evidence of sustainable maturity. It brings to mind Moliere: "il faut manger pour vivre, et non pas vivre pour manger."
But back to the question of the meaning of business. An apparent sense always arises from the dichotomy of good and bad. A good business is one with a community that fulfills a purpose - usually a certain satisfaction of needs. Institutional dictatorship or oligarchy belong to the past - the ideas of democracy are also the status qvo for businesses.
Changing the thinking of the Anglosaxon is not easy. But a first step would definitely be to bring more honesty and reality into their reports. Of course, it is challenging to present complex financial relationships in simple figures. But constantly influencing the capital and financial markets with exaggeratedly embellished figures doesn't get us anywhere. The truth is good for you, even if it hurts.
I have to quote one sentence faithfully: "We are in danger of populating companies with the modern equivalent of monks, people who forgo all else for the sake of there calling". (Handy, C. Page 54)
Business should no longer focus only on the apparent construction of money, but increasingly look at people. They have their own needs, skills and talents - they are not numbers in the HR department. And if people are doing well, this also has a positive impact on the company, as French companies noticed when the standard working week was reduced from 40 to 35 hours.
Conclusion: We all leave an economic and social footprint in the sands of time. Doing good does not exclude economic success. Whether capitalism and the free market economy are the right ground for this is not clear. But there is a shift in thinking in U.S. companies in a positive direction: sustainability and responsibility. But this is just a drop in the bucket.
We are still eternities away from Jean-Jacques Rousseau's warning: "Gardez-vous d'écouter cet imposteur; vous êtes perdus, si vous oubliez que les fruits sont à tous, et que la terre n'est à personne".
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Handy, C., (2002), What's a Business For?, Harvard Business Publishing, December 2002.
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