Recent revelations that many corporate executives have backdated their stock options, ensuring excessive compensation even when their companies perform poorly, are merely the latest in a stream of examples of bad business behavior. In an era of evaporated pensions and benefits for the rank and file, piggish pay packets for CEO’s have led a cynical public to wonder where big business has gone wrong.
The answer may be quite simple: too many bosses have abandoned basic human values and embraced the credo famously uttered by Gordon Gekko in the movie Wall Street : “Greed is good.”
But a growing body of research concludes that greed is not always good, and that moral values are a necessary element in the conduct of business. The Gordon Gekkos are predators who take the quick payoff. Although they do serve a useful purpose by keeping other players on their toes and raising efficiency through competition, market participants for the most part avoid them, preferring to do business with the Warren Buffetts – hard-driving businessmen, but known for fair play and creating long-term value.
Consider the trip to the mall, where shoppers buy goods produced and shipped from around the world. This decentralized delivery of goods relies on employees working for two weeks before receiving a paycheck, companies offering each other lines of credit, and banks offering bridge loans. Even though humans have engaged in exchange since before the birth of civilization, the impersonal system of trading is only around 1,000 years old. While legal remedies exist should this system break down, impersonal trading cannot occur unless most people share the values of fair play and reciprocal cooperation.