Trump, Sanders & The Morality Of Business

Geoff Smith Blocked Unblock Follow Following Feb 23, 2016

I’m a Canadian, and this blogging of mine has no political agenda. It seeks merely to challenge some conventional — perhaps tired — business thinking and maybe provoke some discussion.

It’s clear, though, that Bernie Sanders and Donald Trump are threatening a revolution in their respective parties because very many members of the ‘middle class’ and the not so middle class are really angry. They are fed up because they can’t get ahead, because all of the increase in wealth and earnings in the last twenty-five years has gone to a very small number of people. The solutions offered by these two ‘renegades’ may be very different, but their supporters look awfully similar.

But isn’t this a business issue as well? Is it moral that the human component of a company gets a fixed, return (their stagnant wages), while the ‘capital’ component gets all the upside? The downside risk is certainly shared. When things go poorly, shareholders lose their money, and employees lose their jobs. So why isn’t the upside ‘reward’ also shared? And if this is a real and moral problem, do we really want to leave it to government to fix?

There are two elements to this and if you fix both, the shareholders actually make more money. This is my direct experience running our company. The first is certainly money. Employees need to make a proper wage and shareholders need to make a reasonable return. Any business that can’t do this is a moral and commercial failure, shut it. But when a successful enterprise meets these needs and has profits to spare, that ‘extra’ profit should be shared appropriately between the shareholders that enabled them and the employees that earned them. There is no moral reason why one party should get all the excess and the other should get none. It’s simple fairness. Want ever increasing profits? Share them, and the employees will deliver more.

And secondly: Everyone who works at a company wants to feel they are a meaningful part of the overall enterprise. That they contribute and are important. I feel that way and so do you. I saw a story of President Kennedy touring NASA in the sixties, and asking a custodial employee what he did there. The man replied ‘I’m helping to put a man on the moon!’ The story was presented by some company trying to preach teamwork, but the man’s response is not about teamwork, for crying out loud. It’s about meaning, finding value in one’s work.

The failure of business on the ‘economic fairness’ front, and on the ‘meaning’ issue might get Donald Trump or Bernie Sanders elected, but they can’t solve the problem. Only business leaders and owners can.

My direct experience in a 2500 employee, $3.5 billion revenue company is that robust profit sharing, an employee ownership program — and so much openness with employees that it hurts — has been the root cause of all our success, which has served the founding shareholders extraordinarily well. But because this can’t be objectively measured down to some exact number, shareholders and Directors just say ‘If you can’t prove it, I don’t buy it’.

That’s the fault of our logic system, it’s the cause of a lack of business morality in many companies, and it’s why Donald Trump might be the next President.

Just some thoughts. Thanks for reading.