Enlightened Self Interest

EthicsAs regular readers know, I used to be a libertarian. But I was never that comfortable with it. A good example is how I used to bristle at a phrase that Ayn Rand used quite a lot, “enlightened self interest.” So she would say something like, “Sure it is in your best interest to kill everyone and take their property, but you can see that this is a bad idea blah, blah, blah… Enlightened self interest!” This concept is a philosophical black hole: you can stuff anything inside it. What’s more, without it, libertarianism descends into barbarism: might makes right.[1]

There is probably no part of our world that has been so poisoned by the notion of self interest as corporate law. The common belief in our society is that corporations must always do whatever it takes to improve their stock prices. Whenever someone points out that CEOs only care about short-term profits because their bonuses are based upon them, they are slapped down with this canard: they are legally mandated to do that! But as the video below with legal scholar Lynn Stout and David Cay Johnston shows: this is not actually true.

Corporations are supposed to do what is in their own enlightened self interest. Whereas in a philosophy, this is just a bunch of rubbish, it means something here. The interests of a corporation is not necessarily to increase profits. This should not come as a shock. Young people all over the world decide to forgo immediate profits in order to get an education that will increase their profits later. It just makes sense that corporations would do the same. But it seems increasingly that they do not. It is well know that corporations are sitting on huge piles of money rather than invest it. They know the economy will improve over time, but instead of looking to the future they do nothing. Last week, I pointed out how someone who really cared about his company would act:

It is interesting to look back at how Milton Hershey dealt with the Depression. Instead of sitting on his huge piles of money, he assumed that the depression would eventually be over. So he invested in his infrastructure and when things got better, he was in a great position to capitalize on it. Of course, there were other reasons why he did so well. For one thing, it is a hell of a lot easier to get people to splurge on a nickle candy bar than on a thousand dollar Buick. But still, Hershey was farsighted in a way that most businessmen can’t even imagine.

So we really should expect CEOs to run their companies better. In fact, the law demands it. But in general, we are stuck with simple minded, short term self interest. We don’t even get the somewhat slippery “enlightened self interest” we should expect.

Here’s the video. It is only ten minutes long and it is very educational:


[1] Libertarianism is explicitly based upon the idea that success makes right. If you are making money off something it is good, if you aren’t, not so much. So it shouldn’t come as a great surprise that without a few philosophical tricks libertarianism is nothing more than social Darwinism.

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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