The Ethics of Banking: Conclusions from the Financial Crisis (Issues ...

138 9 Financial Wagers, Hyper-Speculation and Shareholder Primacy
prior to the financial crisis and the associated overemphasis on the purposes of and
conditions imposed by finance. 33
Since it is the purpose and the task of the industrial firm to supply society with
the best products, manufactured at the lowest opportunity costs, the conditions that
ensure the achievement of this purpose, namely secure financing and the profitability
of the corporation, are also obligatory. The means to ensure that the firm fulfills its
purpose are not, however, the primary purpose of the firm. If the purpose of the
firm, the production of optimal goods, can best be achieved by means of market
efficiency and the maximization of shareholder value, these are the required means
to achieve this goal. If this goal can be achieved by other means, then those means
must be utilized. Productivity is the duty of the firm, regardless of the efficiency of
the market and the form of financing. 34
The principle that the obligation is derived from the nature and the purpose of
the matter or institution, and that the principal ethical and legal obligation of the
firm arises from its main purpose and not from the conditions which ensure the realization
of its purpose, tempers the idea of the primacy of shareholder value and the
goals of the financial investors. The primary purpose of the firm is not the maximization
of profit or of shareholder value in the capital market, i.e. the financing of
the firm, but rather the production of optimal goods.
One of the merits of the stakeholder approach is that it has restored to the theory
of the firm an idea that was in danger of being forgotten amid the financial theory of
the firm: that the firm is a multipurpose organization and not a single-purpose institution
established solely for the purpose of maximizing the wealth of its shareholders.
Yet the stakeholder approach provides no means of integrating the various goals of
the stakeholders, but places them immediately alongside one another with parity
of status. The question of how the goals of the different stakeholders can be integrated
into the overall goal of the firm is not further elaborated in R. E. Freeman’s 35
stakeholder theory.
33 AccordingtoJ.J.BROUWER, PIET MOERMAN: Angelsaksen versus Rijnlanders: zoektocht
naar overeenkomsten en verschillen in Europees en Amerikaans denken (Anglo-Saxons and
Rhinelanders: searching for agreements and differences in European and American thinking),
Antwerpen (Garant) 2005, pp. 87 and 95, in the countries of Rhineland capitalism, particularly
in Germany and the Netherlands, there is a greater emphasis on practical trades and the associated
skills; in other words, employees and managers are observed to be more product- than
finance-orientated than in American capitalism. Likewise, the managers more frequently come
from production than in the USA, are more orientated to their profession and product, and therefore
also feel a closer affinity with their staff.
34 This fact is emphasized by LEE A. TAVIS: “Modern Contract Theory and the Purpose of the
Firm”, in: S. A. CORTRIGHT,MICHAEL J. NAUGHTON (eds.): Rethinking the Purpose of Business.
Interdisciplinary Essays from the Catholic Social Tradition, Notre Dame, Indiana (University of
Notre Dame Press) 2002, pp. 215–236.
35 R. E. FREEMAN: Strategic Management: A Stakeholder Approach, Boston (Pitman) 1984, and
R. E. FREEMAN: “The Politics of Stakeholder Theory: Some Future Directions”, Business Ethics
Quarterly, 4(1994), pp. 413ff.