Business ethics and short-termism

I'm Don Mayer. I teach at the University of Denver and this is lecture number 5.

In this lecture, we look at how all of us, corporations included, will often orient to short-term rewards rather than to long-term goals. We will discuss whether profits are the only purpose of a business. Look briefly at how short-termism contributed to the 2008 global financial crisis. Recall the landmark work of Robert Jackall in his book "Moral Mazes", and see how managing earnings in the short-term to maximize shareholder value led to a number of corporate collapses, including some Fortune 500 companies.

All of us can and often do choose stress relieving over goal achieving. Short-term temptations are everywhere, social media, movies, television, parties. The list is long indeed. These are all enjoyable activities and the only harm, if any, is that you have chosen short-term pleasures instead of working toward the goals you set for yourself. No one else is harmed, but if you engage in too many pleasant diversions and distractions, you might well feel that you haven't lived up to your full potential. Years ago, I saw a poster in the store window that said "Life begins where your comfort zone ends". Well, the long-term results you want often require short-term discomfort. Many coaches will post exhortations in the team's locker room, such as "No pain, no gain" or "All things are difficult before they are easy". Recruiters for an organization you aspire to work with might well ask you about your work ethic. Can you really say you're willing to give up short-term comforts and pleasures to work hard for long-term results? Many of us are not. Of course, companies can get too comfortable as well. Doing what they've always done or believing their own press releases. Comfort can mean not facing unpleasant realities, missing the bigger picture and even failing to consider the ultimate purpose of a business, a purpose beyond making money in the short-term. The short-term temptations are almost always about money since profits are a necessary condition for success in business, but a profitable business is not always a good business. The Sackler family owners of Purdue Pharma got comfortably rich by selling the opiate OxyContin, or we should say overselling OxyContin. For many years, the company was judged a great success in financial terms, but ultimately the company became a social and legal pariah, paying $6 billion in fines for its actions. If the company had taken seriously any kind of ethical lens, the deontological lens of having a duty not to harm others or use others for your own profit. A utilitarian lens of the greatest good for society or a virtue ethics lens that would have reminded them that honesty is the best policy. The firm would not have pushed opiates onto the public as they did. For many years, it was quite comfortable focusing on profits and not facing the truth of how it was damaging millions of lives and creating a public health disaster.