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Hazlehurst on business ethics

The interests of business clash with those of society. Many people think that its rapacious, short-termist pursuit of profit sets it against the values and needs of everybody else, which has created a poisonous opposition between those in business and everybody else. So says the business guru Michael Porter in a paper called Creating Shared Value, recently published in the Harvard Business Review.

“Companies are widely perceived to be prospering at the expense of the broader community,” he wrote. He went on to talk about “diminished trust in business”. So what is to be done? How can the gap be bridged? “The solution lies in the principle of shared value,” he writes, “which involves creating economic value in a way that also creates value for society by addressing its needs and challenges.”

The idea that business is an amoral pursuit motivated only by greed is a familiar one. Is it true? In some quarters, perhaps. The approach to business that Porter is characterising might be called “chump capitalism”. This is the worldview best exemplified by the attitude of Goldman Sachs when it was hauled before the Securities and Exchange Commission over its marketing of a structured investment vehicle. Goldman knew that one of the people who selected its contents was also betting that it would be a bad investment. Seemingly bemused at the criticism, Goldman’s bigwigs carefully explained that there are two sides to every deal, the buyer and the seller, and one will be a winner, one a loser.

This is an astonishingly nihilistic view, which amounts to saying that chumps deserve to be exploited and that if you enter into a bad deal, that’s your problem. One Goldman employee boasted about selling bad deals to “widows and orphans”. In the old days in the City of London’s motto was my word is my bond, but this seems to have been replaced with a growl of caveat emptor, mate. Not much shared value there, and not must prospect of trust.

But there is another attitude to business that might be called “collaborative capitalism”, which is much more familiar to those in family businesses. A few years ago I remember talking to Simon Berry of Berry Brothers, the wine merchant, and he told me that his family had been working with some wine-producing families for almost 200 years.

Now, wine is a special case and Berry’s might be at the extreme end of the scale, but the picture is familiar to many family businesses: they build stable, long-term, mutually beneficial relationships. Producers need merchants, and merchants need producers. They are on the same side. They don’t look to scam a few extra pennies, they don’t niggle and see what they can get away with, and they don’t worry that the people they work with are trying to do the same. They see customers the same way – as long-term partners, who will use them for their whole lives. Everybody trusts each other and they look to create – well, shared value. People could learn from that.

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