Monday, January 15, 2007

Ends Vs Means

The movie Guru and the recent aritcle in Newyorker by Malcolm Gladwell ( ya of the blink fame, the yap yap yap God) both run on similar platforms. While the movie defends the importance of the bottomline at any cost, the article tracks the implications of the fall of enron, specifically the indictment of Jeffrey Skilling. The essential argument is this: Organizations should be purely concerned about the profits that they earn to the shareholders. Shareholders' by giving up the capital have no moral responsibility or right to claim the actions of the firm as theirs. Neither do they have culpability. They are just innocent people who have put in their hard earned money in search of returns. While in the movie, the average man makes money of Guru, but first holds him guilty of crimes and then salutes him, Skilling got a jail term because his shareholder's did not understand what was told to them or did not make enough checks to whether what the company was saying was possible.

Puttting it logically, every person who claims the profit or actions of a company would be morally culpable for the crimes that the organization he patronizes commits. That is the logic one uses against the collection of conflict diamonds, the primary importance of the self choice to force corrective action in soceity. A kind of the market based mechanism. But the markets are funny, for them some actions are criminal ( lets say a bank investing funds of a terrorist organization), but others(some one selling food to terrorists) may not be seen as wrong at all. The problem for legal systems arises when one of the actions is questioned and the society looks for a penalty. That is the case with Enron, corporate fraud? definitely yes. What if thier complex financial sheanigans worked out? And also, arent all the analysts (and God Bufett himself) not responsible for overlooking or failing to understand the corp's actions? How would the courts decide. The juries must find it compelling to brand the highly paid corp executive 'fraudsters', but the blame lies with free society when they overlook something that was bound ot happen sooner or later.

Profits as a primary motive sounds as a very enticing prospect and the people who are pursuing it might give a lot of happiness to a lot of people, but the people who are at the receiving end of the means can sometimes be final voices that determine of the life of the profit makers. That is what the market seems to indicate and the profit seekers will know that at the end of it all 'the market knows' .

Enron Corp was one of the worlds' most famous energy companies. The company went bust in 2001 following the uncovering of financial shenigans where in cross holdings and complex financial deals were used to show enormous paper profits. The fall also took out accounting firm Arthur Anderson from the market.

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