(530) 467-5690 Chris@TeachU.com

Greed is not good.

The job of a business is to make money. A business should make all the money it can using every tool at its disposal within a framework of ethics and morality. That’s the profit motive. The profit motive is good when it operates within moralistic boundaries.

Take away those boundaries and the profit motive becomes greed. Greed is not good.

A business that eliminates workers in this country and sets up shop in another for the sole purpose of reducing labor cost is greed motivated. These are the companies that cut domestic payrolls and then distribute excessive salaries and bonuses at the top.

In this election year the candidates have all said something to the effect of, “we need to stop rewarding companies that take our jobs overseas.” I didn’t know there was a reward other than the cost savings of cheap labor. Does the government give a tax break to businesses that take the labor component out of the United States? Not that I know of. I propose we penalize companies that take this action. I propose we tax imported goods manufactured outside of the United States by U.S. companies.

When CEOs move their manufacturing operations to a source of cheap labor to “maximize stakeholder value”, the motive is greed. The greatest benefit of this uncreative approach to management is shared by a concentration of dull-witted executives at the top of a company’s pyramid. The stakeholders get their crumbs. The workers get the shaft. These short-sighted dimwits are killing their future market to make more money for themselves today.

Cost cutting as a means of “saving” a company from financial ruin is the sole strategy of the least talented and least capable of executives. Cutting cost to return a company to profitability will show favorable results for a very short term. Most of the dullards that implement this strategy make a quick exit with their golden parachutes reasonably soon after the “numbers” improve. It only takes a couple of business cycles for the deterioration to resume.

Profit motive is completely different from greed. Profit motive is about making money to grow the company in real ways. Growing the company actually does increase stakeholder value.

Let me clarify. If a company with $100 million in sales owns its factory and employees 200 people, that company has capital. The capital produces the product which generates the sales. If managed properly, the 200 employee workforce is a talent pool from which the smart company can derive innovation. If the company invests in the technology to keep its factory at the cutting edge, the factory has a material value. That material value, capital value, enhances the stock held by the stakeholders. It’s a real asset.

On the other hand, the company that sells off its means of production and outsources manufacturing is diminishing stakeholder value. At the same time, the dullards at the top will take their pay increases, bonuses, stock options and “special” contract provisions to feather their own nests. The employees and stakeholders are the losers.

It’s time to demand a return to ethics and morality in business. It’s time stakeholders quit tolerating the greed of talentless management and start demanding some demonstration of business ability.

Greed doesn’t work as a business strategy because it’s not a strategy. Look at Sunbeam after the slashing of personnel by “Chainsaw” Al Dunlap. He was going to turn the company around by his usual approach: cut to the bone. Sunbeam will never be the company it once was. Today, Sunbeam is an importer. Big deal. Shame on you, Al.

No, GERDAU AMERISTEEL actually makes steel in the U.S. They just posted a record quarter. That’s the difference between talented management and dull-witted cost cutters.

The latest National Business Ethics Survey finds that business misconduct is soring. No friends, that’s not a separate issue. When the cutting stops filling the pockets of the greedy, shady business dealings are the next step. We are seeing plenty of that these days from toxins in toys to sub-standard food. That is greed and it’s hurting us all.

Next time your hear a CEO present his cost cutting measures, look for the accompanying growth plan. If there isn’t one, if there are only promises for a brighter tomorrow if “costs can be brought under control”, recognize it as what it is: greed. The greedy don’t share. The greedy aren’t looking out for you. Take a close look at the CEO’s contract and the added provisions and you’ll always uncover his greed. A he makes the pie smaller, he takes more of it for himself.

I’m not going to end this post on a sour note. We are in a recession and things are going to get worse. Those of you who are motivated by profit, for the sake of growth, I applaud and support you. It’s harder to be innovative but if you take that route you will win in the end because greed fails.

Chris Reich, Author of TeachU’s Business talk Blog
Chris@TeachU.com