Thursday, 28 July 2011

Can the PAP move away from profit-maximisation model?

Can the PAP move away from profit-maximisation model? And learn something from Jing Shang.

When Singapore Management University (SMU) board of trustees chairman Ho Kwon Ping comments on the failure of business schools to convey the right ethical values to students, I wonder whether this can also apply to the PAP or not.  

He said: 'Business schools have not only failed to convey the ethical values which might have mitigated, if not prevented, the business excesses leading to the last global recession; but indeed, much of the fault for the excesses actually lay with business schools themselves.'

He, therefore, advocated a shift from the profit-maximisation model of business to a more balanced view of performance.

'There must be new, rigorously devised, defensible and quantitative measures of corporate performance which take into account the interests of all stakeholders.'
(The Straits Times, 25 July 2011)

This sounds familiar to Singapore Inc, a country manages like a company and the sole purpose seems to focus on profit maximisation only. 

Move away from profit-maximisation model

The Singapore government since independence has been engaging in profit-maximisation model. Not only the government and its agencies are doing businesses, even the suppliers of public goods like public transport and housing also focus on profit making.

I am not sure about Ho’s suggestion of ‘balanced view of performance’. Can we assume and extend it to include quality of life, a balanced and managed growth for the benefits of Singaporeans, or a protection of minimum life support for the poor?  Of course, Ho is talking about business and I should not put words on his mouth.

However, because of Singapore Inc, the PAP is running Singapore like a business.  What Ho’s calling for business schools to take a more critical view of themselves, in a keynote address at the 12th International Conference of the Society for Global Business and Economic Development has its significant reference to Singapore Inc as a business identity.

Education and ethics

He dismissed a trend among business schools to offer courses on ethics and corporate governance as superficial.

'Business schools should not see their role as just trying to mitigate their graduates' future ethical lapses by rolling out more courses which try to impart ethics or business sustainability.

'The problem is not an external one which ethics courses can solve. It goes to the heart of what we think the role of business is in society, and to whom are managers ultimately responsible.'
(The Straits Times, 25 July 2011)

Hence, when manages the Singapore Inc, the PAP should consider its role and responsibility in the society.  It used to do these in the early years for employment, affordable housing and transport. 

In the name of money, we are in debt to society

In searching of money and profit maximisation, we always come across news headlines like:

<Murdoch gives Singapore top marks for ministers' high pay> -- maximising pay for ministers?

<NTU's 2011 grad earns $20,000 a month> -- maximising starting pay for new graduates? 

<More seeking help for gambling problems: SOS>
-- maximising profit for a gambler?

<S'pore will spiral down if govt is weak> -- maximising power for maximising profit?

Who cause the social ills? Can we afford to slower down with a better balance between profit and life?
Is there a need to give An (Hong) Bao year after years, especially before elections?

We owe Singapore society a debt of not caring for people who are left behind and who are disadvantaged under the profit maximisation model.

A refreshment from Jing Shang

I have just finished watching the series on Jing Shang晋商(山西Shanxi businessmen. Hundred years ago, Shanxi businessmen built their businesses overall China and even expended them to overseas.

They had input culture (drama, opera), values (mainly Confucianism), and trade into one solid foundation for doing business. Through culture and values, they planted the seeds of trusty, honesty and loyalty into their businesses. 

Shanxi businessmen were the ones who established the modern financial institutions (票号) more than hundred years ago in China.  As we all know, without trusty, honesty and loyalty, a financial institution will not survive and expand. These financial institutions were established without law and legal protections (there was no company, banking and financial law) and no formal acknowledgement from the government (there was no legal person status). 

In the later years toward the end of their closurethese financial institutions even sacrificed themselves for the benefit of their depositors.  Which financial institutions today will sacrifice themselves for their depositors?  If this is the case, there is no need for central banks in the world to pass laws to protect the interest of the depositors.    

For those who can understand Mandarin, I recommend you to watch the last episode called “Old trade mark 老字号”. It is a summary of the whole series. Of course, if you have time, it is beneficial to watch the whole series. This can also serve as a typical case study for business schools on social responsibility.

Part 1 of “Old trade mark”

Part 2 of “Old trade mark”

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