Cadbury Eggs and Capitalism

Copyright © 2003, Glenn Story

This past Sunday was Easter.  This is the first year my kids didn’t get some Cadbury eggs.  Chalk it up to a bad economy and the fact that they’re growing up.  Still, it is the end of an era.

In case you don’t know, Cadbury eggs are a chocolate covered confectionery, the inside of which is a sweet combination of secret ingredients that actually looks like the inside of a hard-boiled egg:  a yellow “yolk” surrounded by white, both portions made of sweet goodness. My kids make ecstatic noises whenever they even discuss Cadbury eggs.

I saw a TV program yesterday about the history of the Cadbury Company.  It was founded by the Cadbury family in mid 19th Century England.  It started as a tea shop and branched into cocoa.  The Cadbury family is Quaker; they determined to run their business in a fashion consistent with their Christian ideals.  First, they insisted on making a quality product.  They gave their factory workers a decent living wage.  They used a portion of their profits to improve the quality of the area in which the factory was located and they even started a program to teach reading and writing to the poor urban children in their community.  They mounted a campaign to make the jobs of chimney sweeps (mostly poor children) safer.

Cadbury continued to be a family-run business until the mid 20th Century.  During World War II the British government required English companies to retool for making military equipment.  As Quakers, and thus pacifists, the Cadbury family refused.  Eventually they relented to the extent that they began making gas masks, but even then it was not done under the Cadbury name.

In the 1950’s, after being repeatedly buffeted by fluctuations in the commodity price of cocoa the Cadbury company decided it needed to diversify.  To do that, they needed additional capital.  So they “went public”.  They sold stock and converted from a family business to a publicly owned corporation.  They have a board of directors, stock holders, and all the rest.  The first CEO was a member of the Cadbury family, but now even he is retired, and there is no longer any connection between the Cadbury family and the Cadbury Company besides the name.

Cadbury has merged with a soft drink company.  This allowed them to reduce their work force.  They have also automated their factory, further reducing the number of workers.  I doubt if they still contribute to literacy programs.  In short the Cadbury company is not as benevolent as it was when run by the Cadbury family.

Yet, is it surprising?  The problem with public companies, I assert, is that they are amoral.  Not immoral;  this is not a tirade against “big business”.  Amoral:  neither operating in a moral nor immoral manner.  Worse, they are required by law to be so.  A public corporation is run by a board of directors which, in turn, is accountable to the stockholders.  The board has a legal responsibility (called a fiduciary responsibility) to conduct business in a manner that maximizes profits.  To squander money on charities or workplace safety is excusable only to the extent required by law or justifiable on some profit basis.  To do otherwise is “fiscal malfeasance” and subjects individual board members to the threat of stockholder lawsuits and even criminal prosecution.

Let me give an example.  Suppose a company has a choice of “plan A” which will achieve some objective and be friendly to the environment, but will cost $10,000,000.  “Plan B” on the other hand will pollute the air, or some local river but only cost $100,000.  In the absence of environmental legislation, I argue that a board of directors faced with this choice is legally obliged to go with “Plan B”.  To do otherwise would a breach of fiduciary responsibility.

Thus the people that call for a “free market” unfettered by government regulation are simply wrong.  It is foolish to assume that the good of society corresponds with the profitability of an individual company.  As long as boards of directors are bound by law to maximize the latter, we must continue to have other means of looking out for the public good.  Those other means certainly include government regulation.  In any political system short of anarchy the government has a legitimate role of protecting the short and long term welfare of its people.  That role with respect to business just as certainly includes protecting the environment, workplace safety, and decent wages, among others.

Consequently, the question should not be whether the government should regulate business, but rather to what extent?  Is it reasonable to require a company to spend an additional $9,900,000 (as in my example above) on environmental protection?  That is a question we can discuss, as opposed to “should government require any amount of environmental restraints on business?”

Currently it is fashionable to ask “What would Jesus do?”  An apt question, especially at Easter time.  I’m pretty sure He wouldn’t serve on any corporate boards.  He probably wouldn’t even own stock.  In fact He might not participate in the American economy at all.   But then He always did set high standards.     For those of us not up to that level of perfection, we should at least encourage our government (at all levels) to reign in the excesses of business, and not think we’re doing something un-American in the process.

In any case, go buy a Cadbury egg.  (They’re probably on sale now that Easter is over.)  And know that it came from a good company that cared for its product, its workers, and its society.

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