Stakeholder Claims And The Evasive Nature Of The Common Good

I was attracted to the ‘Treatise on Human Nature’, not by the original thought portrayed in succinct words by David Hume, but by the power of reasoning in the realm of conflicts that abound when one has to deal with decisions concerning the odds of one against the many as stakeholder claims mount in a conflict of interest. Hume in his characteristic style gives us a hint, not the solution to the conundrum, but still carries the essence of what human nature is steeped in. I have always wondered how difficult some choices are when to separate the right from the wrong proves so difficult as every position could have an equal and opposite position that could have the same poignant reason to be valid, how then could societies converge on what the common good entails and what the majority could benefit from, that the minority had to willingly sacrifice. The core to this puzzle as Hume says, is engulfed in the concept of reasoning, which both from the individual or the societal standpoint is a journey that must deal with human actions that are ‘contrary or conformable’; the merit or demerit of actions could be self-contradictory as they are influenced by the propensities of the human mind, but reason has no such influence and therefore must be segregated as a distinct mental trait that makes progress possible in spite of actions being retrograde at times. I quote from Hume the two important passages to highlight this aspect.

“Reason is the discovery of truth or falsehood. Truth or falsehood consists in an agreement or disagreement either to the real relations of ideas, or to real existence and matter of fact. Whatever, therefore, is not susceptible of this agreement or disagreement, is incapable of being true or false, and can never be an object of our reason. Now it is evident our passions, volitions, and actions, are not susceptible of any such agreement or disagreement; being original facts and realities, complete in themselves, and implying no reference to other passions, volitions, and actions. It is impossible, therefore, they can be pronounced either true or false, and be either contrary or conformable to reason.

“This argument is of double advantage to our present purpose. For it proves DIRECTLY, that actions do not derive their merit from a conformity to reason, nor their blame from a contrariety to it; and it proves the same truth more INDIRECTLY, by showing us, that as reason can never immediately prevent or produce any action by contradicting or approving of it, it cannot be the source of moral good and evil, which are found to have that influence. Actions may be laudable or blamable; but they cannot be reasonable: Laudable or blamable, therefore, are not the same with reasonable or unreasonable. The merit and demerit of actions frequently contradict, and sometimes control our natural propensities. But reason has no such influence. Moral distinctions, therefore, are not the offspring of reason. Reason is wholly inactive, and can never be the source of so active a principle as conscience, or a sense of morals.”

To sequester actions from reasons, is however a very difficult proposition, as one is guided by the other and therefore the human nature is fallible in distinguishing between the good of one claim against many and the power of reason had helped to bring parity at times to the overarching need of a balance that restores the needs of one section of the society against the needs of the other sections.

I was also curious how the individual needs stacked against the society, the indomitable aspirations of individual habits against that of the many and delved into these debates amongst the early Greek Philosophers which have been brilliantly captured in the writings of Plato in his immortal work, ‘The Republic’. But even Plato struggled with his journey in the construction of the State or the Republic as there were many roads that had to lead to this idealistic State that he wanted to build; the convergence of some of the contradictory ideas led him to believe that perhaps the greater good of all peoples was higher than the demands of justice that the Republic had to stand for as justice had to side with one against many, but reason for the greater good did not necessarily have to. This is evident in his travails of understanding the needs of the ‘suffering servant of God’ against that of the ‘Sun of Righteousness’, or the quest for human perfection in seeking justice against the tides of divine perfection, which is the greater moral good.

At the end I am in doubt that Plato succeeded in creating an imperfect ‘Republic’ that had to clamber under the veil of Truth to define knowledge and wisdom that were in perennial conflict with that of reason and that biased needs of the different sections came in the way of Justice to be administered and perhaps Plato sought the solution in the apparent imperfections that denuded the influence of righteousness as a single minded pursuit; his Republic remained a Platonic ideal, far drawn from the realms of conflicting demands of the larger polity.

One must define what the common good is and here I would take refuge in the general Theory of Value, where Perry equated value with interest or simply ‘an object of interest’. But this object of interest could mean different things to different people, whereby the absoluteness of value is lost. If one considers the society to be one where human beings have tried to build a pool of common interest, the different modes of organization of the human interest would necessarily entail conflict of interest, thereby creating and destroying value as the case may be. This aspect of organization of the human interest to reflect the constituent selfishness while vying for the common social interest brings out the tension of all times.

But let me go back to my original enquiry of the claims of common good against the claims of certain sections when there are multiple stake holders to the cause.  Here I would go back to Nietzsche and to one of his immortal work, ‘Beyond Good and Evil’, where we would see some insights or the broad principles on which to rely on while we examine these deep questions of our current times.  It is indeed necessary to reflect on Nietzsche, the biggest critique of Plato, in trying to decipher the puzzling questions concerning good and evil and there is no better treatise than his book to refer to.

But Nietzsche had dismissed Plato almost as perfunctorily as he did the Vedanta as is evident in this passage, “dogmatic philosophy has been a caricature of this kind–for instance, the Vedanta doctrine in

Asia and Platonism in Europe. Let us not be ungrateful to it, although it must certainly be confessed that the worst, the most tiresome, and the most dangerous of errors hitherto has been a dogmatist error–namely, Plato’s invention of Pure Spirit and the Good in Itself. But now when it has been surmounted, when Europe, rid of this nightmare, can again draw breath freely and at least enjoy a healthier–sleep,

we, WHOSE DUTY IS WAKEFULNESS ITSELF, are the heirs of all the strength which the struggle against this error has fostered. It amounted to the very inversion of truth, and the denial of the PERSPECTIVE—the fundamental condition–of life, to speak of Spirit and the Good as Plato spoke of them.”

In fact Nietzsche goes one step further in making a caricature of the earlier tenets that exalted in explaining the greater common good, as is evident in these lines, ‘There is something in the morality of Plato which does not really belong to Plato, but which only appears in his philosophy, one might say, in spite of him: namely, Socratism, for which he himself was too noble. “No one desires to injure himself; hence all evil is done unwittingly. The evil man inflicts injury on himself; he would not do so, however, if he knew that evil is evil. The evil man, therefore, is only evil through error; if one frees him from error one will necessarily make him–good.”–This mode of reasoning savors of the POPULACE, who perceive only the unpleasant consequences of evil-doing, and practically judge that “it is STUPID to do wrong”; while they accept “good” as identical with “useful and pleasant,” without further thought. As regards every system of utilitarianism, one may at once assume that it has the same origin, and follow the scent: one will seldom err.—Plato did all he could to interpret something refined and noble into the tenets of his teacher, and above all to interpret himself into them–he, the most daring of all interpreters, who lifted the entire Socrates out of the street, as a popular theme and song, to exhibit him in endless and impossible modifications–namely, in all his own disguises and multiplicities.”

Later Nietzsche introduced the topic of utility and maximizing utility as a means of achieving greater common good, “As long as the utility which determines moral estimates is only gregarious utility, as long as the preservation of the community is only kept in view, and the immoral is sought precisely and exclusively in what seems dangerous to the maintenance of the community, there can be no “morality of love to one’s neighbor.”

Utility and maximizing the utility as a means for the greater common good was espoused by no other than Jeremy Bentham in his seminal work, ‘An Introduction to the Principles of Morals and Legislation’. He went on to proclaim the first principles of morality in the delineation of utility function for the greater common good, “By the principle of utility is meant that principle which approves or disapproves of every action whatsoever, according to the tendency it appears to have to augment or diminish the happiness of the party whose interest is in question: or, what is the same thing in other words, to promote or to oppose that happiness. I say of every action whatsoever, and therefore not only of every action of a private individual, but of every measure of government.

“By utility is meant that property in any object, whereby it tends to produce benefit, advantage, pleasure, good, or happiness, (all this in the present case comes to the same thing) or (what comes again to the same thing) to prevent the happening of mischief, pain, evil, or unhappiness to the party whose interest is considered: if that party be the community in general, then the happiness of the community: if a particular individual, then the happiness of that individual.

“The interest of the community then is, what?—the sum of the interests of the several members who compose it. It is in vain to talk of the interest of the community, without understanding what the interest of the individual is. A thing is said to promote the interest, or to be for the interest, of an individual, when it tends to add to the sum total of his pleasures: or, what comes to the same thing, to diminish the sum total of his pains.”

The Utilitarians, with John Stuart Mill in the forefront, came to view this denouement of the utility maximization function as a means of furthering the cause of common good in a society. In his book, ‘Utilitarianism’, Mill explained in the second chapter, the fundamental principle:

“The creed which accepts as the foundation of morals, Utility, or the Greatest-Happiness Principle, holds that actions are right in proportion as they tend to promote happiness, wrong as they tend to produce the reverse of happiness. By happiness is intended pleasure, and the absence of pain; by unhappiness, pain, and the privation of pleasure.”

Utilitarians defined happiness in the context of sum total happiness, not that of one single agent in the given situation. But this relied on incentives for human actions to be so directed that it brought greater good to prevail or conterminously lesser good or evil to subside. It also preordained the linkage of actions and consequences of actions as a harbinger to the basic principle of happiness as envisaged by Bentham. Thus this created a tension to the understanding of justice in the context of ethics in larger societies and John Stuart Mill in ‘Utilitarianism’ explored this; one would see him quoting from Kant’s Metaphysics of Ethics, “So act, that the rule on which thou actest would admit of being adopted as a law by all rational beings”, to prove a point that it was not so simple a question to deal with in the first place as rational acceptance or rejection had its limits. In his last chapter he finally would end with a definition of justice, which appeals to the ‘higher reason’ and thus is ranked much higher in the pecking order than utilitarian actions:  “Justice remains the appropriate name for certain social utilities which are vastly more important, and therefore more absolute and imperative, than any others are as a class (though not more so than others may be in particular cases); and which, therefore, ought to be, as well as naturally are, guarded by a sentiment not only different in degree, but also in kind; distinguished from the milder feeling which attaches to the mere idea of promoting human pleasure or convenience, at once by the more definite nature of its commands, and by the sterner character of its sanctions.”

Somewhere we are drawn into the concepts of optimality intuitively, when we try to test the hypothesis that creating a moral position of justness when conflicting rational choices abound, one must be guided by an optimal that attempts to create a denouement that is better for the whole than for some of the parts. This conflict between some parts and the whole could be seen to be dealt by Pareto in his Optimality, where he proved that when allocation of goods and services in a given society moves to its more efficient condition then a better allocation can only be achieved if it does not create one better off while making the other worse off. This equilibrium condition could well be extended for all material wants of the society and thus it could be an equivalent of a welfare condition based on the same principles of optimality. The point to be noted here is that the most efficient condition does not say whether a just distribution could be attained therefore and thus we have an apparent contradiction that an efficient outcome is not necessarily a just outcome or to put it in the context of economics, the ‘free market’ which is based on the principles of efficiency while converging on the optimality syndrome is never a sufficient repose for ‘just’ outcomes to be so derived.

The original principles of justice taken from Kant’s ‘Formulation of Metaphysics’, Rousseau’s ‘Social Contract’ and Locke’s ‘Second Treatise of Government’ created the Rawlsian space of ‘Justice as fairness’. It was in Rawls, in his ‘Theory of Justice’, that we finally had to wait for almost two thousand years after Plato to get a more modern view that could deal with reasoning and justice through the introduction of the ‘Veil of ignorance’ or the ‘Original position’ that is bereft of all ignoble biases that an individual or the society could be steeped in dealing with justice as fairness.

I find this odd that what Rawls achieved as a social thinker of our times, many thinkers in the area of political philosophy had come very close to but could not still put in so brilliant succinctness as in these two simple principles:

“Each person has an equal claim to a fully adequate scheme of equal basic rights and liberties.

“Social and economic inequalities are to be arranged so that they are both:

(a) To the greatest benefit of the least advantaged, consistent with the just savings principle, and

(b) Attached to offices and positions open to all under conditions of fair equality of opportunity

‘Greatest benefit to the least advantaged’, as Rawls showed, could only be achieved when the society started with an opening condition, which he called under the ‘Veil of Ignorance’ (in a hypothetical situation similar to the original social contract), when every constituent is devoid of the knowledge that would give him the greater advantage than the other and when fairness of opportunity would rule. Rawls explains this position as, “No one knows his place in society, his class position or social status, nor does anyone know about his fortune in the distribution of his natural assets and abilities, his intelligence, strength, and the like. I would also assume that the parties do not know their conception of the good, or their natural propensities. The principles of Justice are chosen from behind a veil of ignorance. This ensures that no one is advantaged or disadvantaged in the choice of principles by the outcome of natural choice or by the contingency of social circumstances.”

Rawls draws this hypothetical position to posit a ‘just condition’ for the society where every individual agrees to the principles by which they are to be governed, no other condition would satisfy on the contrary.

This leads me to look at the pluralism that abounds in our society today and the conflicting claims of various stakeholders in one common ground of play where a common booty is to be shared. There are on one hand many conflicting ideas that have to be dealt with reason and on the other many conflicting interests to be so confronted that a better denouement than the one achieved would leave less value created for the sum total of the constituents. But this is very difficult as would be evident in my examples given below.

I was hearing the speech given by an eminent Statesman of our times, General Hugh Shelton, who was the Chairman of the Joint Chief of Staff in the U.S. Government and served two Presidents of the likes of Clinton and George Bush Junior. He was talking on Leadership to a group of managers in Mumbai and I was so privileged to attend. I later asked him what it meant to a leader when he is confronted with a puzzle as follows:

There is one piece of cake that a mother has to share and there are three children who have greater or lesser claims but their degree cannot be judged that easily unless some objectivity is introduced. Do we not have a similar situation when a big bank over-leverages itself and destroys its institutions of lending, which constituent should be saved first before the other amongst the many stakeholders including the common tax-payer who may not be associated with the particular bank? What choice is to be exercised by the leader in this case to create the ranking of the beneficiaries? The General, as astute as he was, left me with a sobering thought that the question was not so easy to answer.

How does a company solve these puzzles when confronted with the choice of application of the surplus funds? Can this be simply solved by the right incentives or the design of a structure of decision making that is based on a reward system that would benefit all the stakeholders in a just manner? Is that condition possible to be achieved?

Do we have an equivalent of a ‘Veil of Ignorance’, when such judgments are made? How does the society discern between what is best for the common good against the best for some of the sections? Does the free market distinguish between an efficient outcome and an outcome that creates overall greater wellness? What about the short and long term? Is there proper public system of rules for this?

I must again go back to Rawls and he defines the core principles to be governed by the following, taken from the immortal work, ‘Theory of Justice’:

‘The basic structure is a public system of rules defining a scheme of activities that leads men to act together so as to produce a greater sum of benefits and assigns to each certain recognized claims to a share in the proceeds’.

Here the underlined phrases each understood separately as parts of the whole sentence, gives the whole a different higher meaning. It is almost similar to a game theory denouement where only under one condition the overall good is attained, while under all the other conditions, one wins at the cost of the other. It is in this maximization of overall good that the core principles of justice are laid.

This core principle is understood by the world of business by a balanced score card approach, where just not the interests of the shareholder, but the customer, manager, employee or the supplier (including the interests of banks, government) interests have to be fulfilled to create the greater common good. This harmony or the apparent lack of it in current times explains in some way the denuding influence of a single minded pursuit of narrow interests of one stakeholder that do not go hand in hand with the interests of the rest of the stakeholders. The continuation of such an outcome goes against the principles of justice as every shareholder is enmeshed in a mirrored role of a customer or an employee or sometimes the government or simply a common man with a voting right.

This core principle is as valid for public institutions as private, for society as a whole and for private individuals working in a cooperative, for all non-profit institutions as well as for profit. The real question is do our institutions of today stand the test of reasoned scrutiny and how does that work transparently? Here again I am going back to Hume, to his original thinking that delineated ‘reason’ from ‘action’ and there lies our solace even today that society must reason first; action is secondary.

I would like to end by praising the institutional framework of hundreds of thousands of year old institution, the Family, that holds in it the right to reason and to dissent while upholding the principles of goodness for its members. No wonder, while every other institution had been shaken, it holds itself firmly to its root, drawing strength from its intrinsic structure of equanimity in dealing with conflicting interests and in its inherent ability to draw conclusions from dissenting voices; there are no better examples of reasoned scrutiny that had stood the test of times for so long amongst the institutions of the world.