How to Retire a Capitalist King Without Robbing the Kingdom

A man who has presided over the same great commercial empire since 1970, and served it, as he himself says, since 1965, now lays down the chair and takes up the gentler dignity of chairman emeritus. His company is immense, its value numbered, I am told, in the thousands of billions of your dollars, and his impact on it and its owners is described by his colleagues as without parallel. Such phrases should always awaken suspicion; praise is cheapest when it is costless. Yet the fact remains: a single directing mind has shaped a vast conglomerate for more than half a century, and has at last contrived to leave it standing without himself upon the stage.

The arrangement, as reported, is curious and instructive. One trusted lieutenant has already assumed the office of chief executive and conducts the daily business; the founder now relinquishes the chair to his son, not as a second commander, but as guardian of what they call the company’s culture and values, declared to be worth more than anything on its balance sheet. The father avows confidence in both: one to run the enterprise, the other to watch over its character as a sort of living policy the shareholders own and hope never to claim against. Here is nepotism, but of a limited and frankly avowed kind; here is professional management, but under the eye of a family trustee.

In The Wealth of Nations I observed that we obtain our dinner not from the benevolence of the butcher but from his regard to his own interest; I never meant by this to absolve him from justice, but to explain the ordinary motive of his labour. The long tenure of this chairman, his careful selection of successors, his desire that his work should outlive him, all partake of the same principle. He wishes his name, his fortune, and his moral sentiments to endure; he understands that an abrupt or capricious departure would injure both his own wealth and that of his partners. It is self-interest, but self-interest under the restraints of reputation, contract, and legal duty; a coordinating force rather than a vice, because it operates within fixed rules and under the constant gaze of spectators.

Yet we ought never to behold the governance of a great corporation without the most suspicious attention. People of the same trade, when they meet together, are tempted toward contrivances which end in a conspiracy against the public. A conglomerate of this size, spread over many employments, may achieve by internal acquisition what combinations and cartels once attempted by open agreement. The praise lavished on the departing chairman speaks constantly of owners, never of customers or labourers. That is natural; owners write the letters and hire the professors. But the impartial spectator, whose judgment I sought to describe in The Theory of Moral Sentiments, cannot rest content with the sentiments of one interested party. He must ask whether this empire has grown by better service to the public, or by the more artful practice of living upon other people’s money.

This question cannot be resolved by reciting the magnitude of the fortune. The wealth of a nation consists not in paper claims, but in the annual produce of its land and labour as consumed by its people, and above all by the labouring poor. A company worth a trillion, if it merely shifts claims and does not increase the plenty or cheapness of goods and services, is to that extent a splendid castle built upon sand. If, on the other hand, it gathers savings that would otherwise lie idle, directs them toward more productive undertakings, accepts the risk of loss as well as the chance of gain, and does all this without artifice or fraud, then its profits are a part, and not a deduction, of the national wealth. The just appraisal of this succession must turn on whether the new guardians continue such useful functions, or convert a market instrument into a machine for exacting tribute.

There is also the more delicate matter of moral reputation. The retiring chairman speaks elsewhere, it is said, of his desire that his country should stand for more than mere wealth. This is a sentiment with which every humane person must sympathize, yet it is peculiarly tempting to those who already possess great riches. As I remarked of the poor man’s son, dazzled by palaces and pageantry, men often labour all their lives under a deception, mistaking the admiration of others for true tranquillity. The elaborate effort to preserve a corporate “culture and values” through a filial guardian suggests a mind anxious not only to be rich and praised, but to be praise-worthy, to appear before that internal spectator as a man who did something more than accumulate.

In so far as the succession has been deliberate, gradual, and publicly explained, it avoids the worst errors of the man of system, who rearranges human beings as if they were chess pieces and not creatures with their own principle of motion. No legislature has here attempted to direct private people in the employment of their capitals; rather, one great proprietor has attempted to secure that, even when his own hand is withdrawn, the various springs and wheels he long ago put in motion will continue to promote, as in many other cases, a public benefit that was never their primary intention. Whether this invisible hand will continue to guide the enterprise toward the good of consumers and labourers as well as of owners must be watched, not assumed.

I therefore regard this retirement neither as a miracle of virtue nor as a calamity, but as a prudent experiment in the government of a modern commercial empire. If the new arrangement maintains open competition, treats workers with justice, and seeks profit in serving the public rather than in manipulating it, then the impartial spectator may, without impropriety, bestow a moderated approbation. If, however, the company’s vast power is turned to the vile maxim of the masters of mankind—all for ourselves, and nothing for other people—then no elegance of culture, nor any filial piety, will prevent posterity from judging that the great succession was only a quieter way of keeping the pieces of the chess-board in the same hands.