A Debate Between Mr. John Ruskin and Mr. Andrew Carnegie
Commentator: Backdating Stock Options, that is the subject of our discussion and debate
today on our program. The business world has been immersed in discussion over the
ethics of this strategy, and whether or not it should be allowed. With me today, I have
two authorities on business to discuss this very issue, Mr. John Ruskin, and Mr. Andrew
Carnegie, both of whom have commented on creating wealth and the best practices for
So, Mr. Ruskin, I will start with you. How do you see this issue?
Ruskin: I won’t go as far as to say that I am surprised by it, nor will I go as far as to say
it is appalling behavior. However, I am one to study the effects of such behaviors on
organizations and society as a whole, and will say that I don’t believe that backdating
options is good for the creation of wealth.
Commentator: How so? Isn’t backdating stock options a way to help executives stay on
top and be competitive?
Ruskin: It comes down to the fact that backdating these options to buy stock is merely
the way that executives can increase their wealth solely for the purpose of mortal
luxury. They are doing this in spite of any concern to investors in the company, and
even sometimes doing so while the industry in which they operate and the market and
profitability of their business is decreasing. These are ill gotten gains obtained most
often at the peril of many.
Carnegie: If I may, I am going to have to disagree with Mr. Ruskin on a few issues.
I argue that the purposes of backdating options are not always solely to benefit these
industrialists with some form of “ill gotten” gains, as my colleague Mr. Ruskin has
stated. These backdating procedures are in place by executives to keep the businesses,
and the directors, as well as the employees a few cases, competing amongst themselves
and the other companies. Let us not forget, Mr. Ruskin, that the Law of Competition is
in play here, which is absolutely central and essential to the advancement of society and
mankind. Individualism is the best and most fertile field, which always produces the best
fruit, and this fosters individualism.
I think also that Mr. Ruskin has not correctly suggested the idea that these procedures are
somehow adrift from the desires and considerations of the stockholders. In most cases,
these modes of increasing the value of the options have been accepted by the voters as a
means for the option to be exercised at its greatest value and return.
Commentator: Then, aren’t there ethical and moral consequences for gaining greater
wealth in this way, or is this something that, as interest was for so long, will eventually be
viewed as not only acceptable but necessary?
Ruskin: I would never hope such a thing would be seen as necessary, or advantageous
for society, business or mankind. I am somewhat surprised at Mr. Carnegie, whom I
respect as a fellow gentleman and colleague in the science of economic thought, because
he forgets that there is at all times present the question of justice. Backdating stock
options puts a negative value to the wealth gained, and therefore draws downward on
the economy. Already, we are seeing this effect in the figures that show the amount
of money that was lost, or misreported, by these programs. Corporations are having to
go back and restate their financial statements to the public, and the majority of those
reissued statements show a correction for hundreds of millions in losses.
Is putting the benefit and favour of one man ahead of another the proper thing, if the rules
and measures by which it is achieved are not justly or nobly stated, or not fully disclosed
to all parties involved? In my view, this is selling the dying man the loaf of bread.
Although there exists no illegality in the least, one is commercially rich and the other is
commercially poor, and without reason, as I have said, due to the fact that in most cases,
the executive never made the company’s stock rise, or ever increased the market share
during that period of time. Let Mr. Carnegie not forget, and society also, that “Many joys
can be given to men which cannot be bought for gold.”
Commentator: Mr. Carnegie, how does one respond to this idea, and is your view one
that sees these practices as becoming acceptable or necessary?
Carnegie: One could argue the point of whether or not these practices are necessary, or
whether or not they are moral or should eventually be made illegal. I won’t pretend to
know the answer, nor will I sit as a judge of that issue. We’ll let time and the overall
markets dictate that, and they will decide whether or not these things are acceptable.
The rudiments of business are such that sometimes can have the appearance of being
immoral or unjust. But I believe that such costs of injustice within the system, many of
which are allowed injustices, are far outweighed by the benefits that can be produced
as the individual is given his right to obtain, and aspire to new heights, “with none to
make afraid.” As such, I don’t believe laws or legislation should be introduced on such
matters. I strongly advocate the free play of economic forces. The laws and fundamental
theories surrounding the governance of Corporations, and the very purpose for a charter
for such from a State or governmental body, has always been to allow for private
governance of internal business affairs. This is part of the legal right the millionaire
has to his money. He has the right to control it. If the shareholders and directors of that
organization have voted such to allow for these actions, and know about their existence,
then they should be allowed to continue, as they have the rights entrusted to them to
govern the trade and rules of their property and issuance of stock. I would argue that this
inequality of environment and concentration of business is helpful to the overall aspects
of society. The wealth of a few is always beneficial to society if the wealthy know how
to use their wealth correctly.
Commentator: Mr. Ruskin, Mr. Carnegie makes the point that the millionaire must
have the right to control his money, and that these corporate boards and shareholders
are merely voting to allow for these programs by way of corporate law which allows for
corporations to govern themselves with articles and bylaws. How then, Mr. Ruskin, can
we take away from these advantages, and take away such opportunity from the rich? I’ll
give you the last word.
Ruskin: Many men of business hardly know the meaning of what it is to be rich, and
frankly cannot govern themselves to make such decisions without help from outside
thought. I have dealt with the likes of Mr. Carnegie’s argument before. Are these so
called stocks really their stocks, just as I argued in my book that the heathen leads forth
to say “These are MY jewels”?
economy. The blood that comes from fever resembles the ill gotten wealth of these
executives. The grounds have already been made known by which we can judge the
great question of justice, and so Mr. Carnegie’s argument of the need for markets to
determine such is not applicable to this argument. What we need is a system that is
made that will help to develop an honest man. One that will deal with these men, and
send the clear message to the others in the arena of business that if they persist in such
things that we as a society will deal with them just as cunningly as they stole from us and
our economy when backdating their options to reap a seemingly better one.
Remember that economic wealth is the blood of that
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