Should Business Owners Break Up Companies for Profit? The Ethics of Corporate Breakup in Wall Street (1987)

In the 1987 film Wall Street, the infamous character Gordon Gekko broaches the idea of buying and then dismantling Bluestar Airlines for a profit. At first glance, this action appears morally questionable and even harmful to stakeholders. However, the ethical complexities surrounding corporate breakup go deeper, intertwining with fundamental issues of capitalism and business ethics.

The Ethical Dilemma in Wall Street

In the film, Gekko purchases Bluestar Airlines and swiftly initiates disassembling the company to maximize his own profit. This scenario highlights how, in real life, many venture capitalists and business owners are faced with similar decisions. While breaking up a company may be legally permissible, whether it is ethically justifiable remains a contentious issue.

The writers made Gordon Gekko's actions appear unethical deliberately. They juxtaposed the financial gain with the humanitarian impact, questioning the morality of prioritizing personal wealth over the well-being of thousands of workers and their families. The line, "A man isn't judged by the size of his wallet. A man is judged by the size of his heart," underscores the ethical dimension that the writers intended to explore.

Creative Destruction and Economic Realities

The concept of "creative destruction" is crucial here. It refers to the process by which existing companies are replaced by new ones that are more productive or efficient. In theory, this leads to a more dynamic and innovative economy. However, in the real world, it often means that some companies are simply not viable and need to be restructured or liquidated for the betterment of the overall market.

Situations like Gekko's actions in the film are not unique. There are real-life instances where companies have been taken over and dismantled to maximize value for shareholders. The question arises: is this ethical or merely a necessary evil in a competitive business environment?

Ethical Considerations in Business

The fundamental issue is whether a corporation should prioritize the happiness of stockholders or the satisfaction of its customers. While ensuring stockholder satisfaction is often seen as a priority, focusing solely on financial metrics can have negative consequences. For instance, a company might cut costs to drive up stock prices, leading to lower quality products, employee dissatisfaction, and high turnover rates.

A notable example of this approach is Enron, which is often cited as a cautionary tale. Enron prioritized its stock prices above all else, leading to unethical practices and ultimately its downfall. This raises the question of whether the short-term financial gain for shareholders justifies the long-term damage to other stakeholders.

Alternatives to Corporate Breakup

In situations where a company is not viable, alternatives to a complete breakup should be explored. Nationalization, restructuring, and rebranding are all options that can keep a company operational while addressing its underlying issues. In the case of Bluestar Airlines, if it is struggling, selling off its assets rather than dissolving the entire company might be a more responsible approach.

The moral considerations are further complicated by the historical examples of systems that prioritize the state over market forces, such as the Soviet Union. These systems often resulted in inefficient allocation of resources and economic stagnation. Balancing between these extremes is necessary for a healthy economy.

Conclusion

The decision to break up a company for profit is a complex ethical issue that touches on the core principles of capitalism and corporate responsibility. While the Wall Street premise might be dramatized for storytelling, the underlying questions remain relevant. As shareholders, managers, and employees, we must continually consider the impact of our actions on not just financial gains but on the broader community and long-term sustainability.

By exploring the ethical dimensions of corporate breakup, we can better understand the trade-offs at play and strive for a more equitable and responsible business landscape.