Bain Capital And Business Ethics

Let’s talk about ethics. Like it or not, business ethics are not absolute, they change from age to age. For example, 300 years ago children worked in factories in conditions we now consider deplorable. It was ethical to employ children then, given the extreme hardship and poverty of the times. Today, children do not have to work to survive. It would be unethical to hire them to work as they did 300 years ago. That said, I am certainly not contending that, within the context of the times, every action of the so-called Robber Barons was ethical.

Were the actions of Bain Capital unethical? All I can say with certainty is that cutting wages and dismissing employees in and of itself is not evidence of unethical conduct.



With regard to the “human factor” in business, any successful businessman knows there is a human factor in employee relations, especially within the context of a free labor market. The days of running a ship like Captain Bligh are long gone. A business which respects and listens to its employees is at a tremendous competitive advantage in the marketplace. In such an environment it’s easy to acquire and retain high quality employees.

The respect must be mutual, however. There is a limit to what any business can provide to employees in the way of salary, working conditions and benefits. There is a point where an investment in capital equipment is more profitable than an investment in employees. This is not heartless or inhuman, it is merely reality and simple economics. I invite all my employees to do what is in their best interests. If an employee of mine finds a better job, I encourage him to take it. My employees have no compunctions about “firing” me. Their first loyalty is to themselves and their families. Mine is to me, my family and my business. My employees treat me as a means to their ends; I do the same with respect to them.

The primary responsibility of successful business owners is to make a profit. There is simply no other rational way to operate. This is not to say that making the highest possible profit is most ethical. It is simply to acknowledge that without profits, the company is no good to anyone. Everyone concerned with the business is better off when the company is profitable, and everyone in the company should know this. As it happens, in my business I tend to hire people when profits are greatest and dismiss people when it is unavoidable and when losses so dictate. My employees understand why this must be so.

Any business owner who doesn’t realize that his employees are his most valuable asset is a fool and, probably, a failure. This is why it is foolish to believe that businesses become extremely profitable by disabusing their most valuable asset. Still, any business owner will tell you that managing that asset is the trickiest part of staying profitable.

Just as some business owners are fools and disabuse their employees, so some employees are fools and disabuse their employers. They may be the proverbial bad apple or a group of employees who band together to demand more than the employer can profitably provide.

The bottom line is the free market is just that: free. Both employers and employees are free to voluntarily strike deals with each other that are mutually advantageous. However, this is not so true in our not-so-free market of today. Oftentimes well-meant government laws and regulations tie the hands of employers and eliminate choices available to employees.

The market today is a complex mix of many, many different individuals, both employers and employees alike, all motivated by different goals and ethical standards, all controlled by a plethora of government rules and regs. Particular situations are not black and white. It’s impossible to generalize that all employers or employees in a particular industry are of a particular ethical persuasion.

Did Bain Capital act unethically? Did Romney? Who can say? Can you? On the basis of what facts and information? If you know salient particulars of that unique situation, I’ll be listen and consider.

Government intervention in the marketplace creates a huge dilemma for American business. If the government offers a farmer a subsidy for growing corn, is it unethical for the farmer to grow corn?


Is it unethical for a taxpayer to accept a deduction for raising a dependent?

Many libertarians believe laws which protect Intellectual Property are immoral, yet they copyright their written work.

If you are an American businessman, how do you combat government intervention and coercion without becoming a self-sacrificial lamb?