Psychological Egoism and Large Bonuses for Bankers - Coursework Example

Psychological Egoism and Large Bonuses for Bankers Introduction Psychological egoism is a term used to refer to claim that people always act in their own self interest. This claim argues that people act in their self interest even when they engage in altruistic acts. This argument states that even when people act in helping others, they do so because doing that makes them feel good or because they want to remove some form of pain (usually emotional pain) (Landau, 2012). Psychological egoism is different from ethical egoism which postulates that people should seek to maximize their own personal advantage (Pojman, 2011, p87). In this regard, unlike ethical egoism, psychological egoism is descriptive of how issues are rather than what things are supposed to be. Rationale for Psychological Egoism and Large Bonuses for Bankers According to LaFave (2011) if the psychological egoism is true, then ethics are in trouble. However, this view has received a varied number of views with regard how valid it is. An area where the psychological egoism has been seen to operate is in business especially with regard to what is today called corporate social responsibility. Many professionals argue that corporate social responsibility is hypocritical as it is a way to increase market for the firm rather than being guided a true need to help the society. The banking industry especially in advanced economies such as the US has received the most criticism with bankers being seen as devils agents who only look to advance their interests while the customers and the general public suffer. Bankers have since been accused of amassing their wealth by giving themselves hefty bonuses even in times when the business is not doing exceptionally well. In other places like the UK, the government tried to limit the amount the banker can get annually (Desai, 2011). In this regard, some have come to protect bankers by saying that there is nothing wrong with them getting bulky pays and bonuses because of a number of reasons. One is that business should be capitalistic rather than social and the second is that that it is expected that people will seek to maximize their self interests and advantage. The question that has come to be asked is whether bankers can use psychological egoism to defend the reason why they take large bonuses. To answer this question comprehensively, it will be beneficial to understand a number of influential factors about psychological egoism. To begin with, it is vital to understand that psychological egoism is descriptive rather than a prescriptive theory. It does not refer to what things ought to be but refers to what things truly are. With regard to the question at hand, this has an advantage and a disadvantage. First, the fact that all philosophers agree that psychological egoism is descriptive means that it is possible to have some common ground. If psychological egoism is descriptive of human behavior, it can then mean that this is natural and this is what people will always do. In such an argument, bankers can argue that they deserve the hefty bonus because this is what everybody will be seeking in one way or the other based on the fact that everybody seeks their own good one way of the other. They could argue that getting massive bonuses is a more open way of operating business rather than pretending to act in the interest of the public while having other hidden agenda. In this regard, bankers can argue that since men naturally seek their own good, business executives who fail to get the maximum benefits will seek to maximize their self interest in other ways that may not be as open as having well documented bonuses. On the other hand, the fact that psychological egoism is descriptive can also be used against bankers by saying that it only describes how things are rather than giving a prescription of what is the ideal way for such executives to behave. Some could argue that it is necessary to act around a prescriptive theory that gives a better solution to the current problems in the social context. There is a common agreement among even professional psychologists that when people engage in altruistic actions they feel good. However, whether this can be used to argue that people only do good to feel good themselves is an issue that is worth of debate. For instance, is the good feeling that comes after helping a person a byproduct or is it the main reason that a person will help another? If it can be determined that the good feeling is the greatest things that a person will be seeking by helping another person, then it can be extended to support the psychological egoism argument. However, in light with the concern of the bankers being accused of amassing too much wealth while the customers suffer from the losses, the psychological egoism takes another dimension that may not require the person to consider the fact that people feel good after engaging in altruism activities. First, according to Rappaport (1999, p.4), the main function of a business is to produce profit to its capital owners, which then mean that everything that goes with that should be taken care of. Bankers make a lot of money for the bank and this implies that they should be in a position to get their fair share for contributing to this. This way, bankers must be take advantage of their hard work. If bankers are not able to get remuneration that they need from the bank, they attention may be reverted to other areas which would lead to different results and this would lead to a failing business. In line with the psychological egoism theory, it can be argue that these bankers are people who have invested a lot of resources in order to qualify to be in where they are and therefore, according to Reiff’s (2013, p.157) argument, they deserve to maximize their advantage and self interest. On the other hand, those businesses that fail to address this issue can end up needing to focus on other concerns that are not part of chief functions of the firm. For instance, if a banker had invested so much of their resources such as time, education, money and other necessary recourses to become who they are, if they do not get enough remuneration, psychological egoism will dictate that they have to get different ways to maximize their advantage. This can be especially exceedingly dangerous because in this kind of a scenario; it becomes that that the executives can only now have other non formal channels of maximizing their achieving their self interests. This can lead to internal fraud and other negative issues that may require the firm failing to operate smoothly. At the same time, it becomes extremely necessary for the bonuses to be able to manage the way its staff and executives are pained. In accordance to ordinary human motivation theories, people’s behaviors are affected by the rewards as well as the punishments that are likely to come from certain actions. If the bankers are motivated, they are more likely to increase their performance, bonuses act as a way to motivate them to perform better to guarantee their bonuses. Since bonuses nobly come as a result of god performance that leads to increase profits that can then be used to reward the bankers with enormous bonuses, they will want to perform better and increase the profits of the banks as a way to increase get their bonuses. There are however arguments that have been set against psychological egoism. Some psychologists believe that people should be motivated by the call for doing the correct thing as well as what is the common good. In this kind of thing, it becomes that the person should not be motivated by their self interest but the greater good of the larger community. Conclusion Those who believe this would argue that bankers cannot use the psychological egoism to defend their hefty bonuses. They argue that when individual work for the greater good of the society, the society becomes a better place for everybody as opposed to when the individual works for their own good. This argument is harder to prove but on the surface it appears to be fine. It might be better to have some firm of balance to make sure that business executives such as bankers should not take home generous bonuses while the business is failing. According to Marius (2012, p.152), during the previous economic recession in the united states of America, bankers gave themselves enormous bonuses while so many of their customers were losing their savings due to the failure of most banks after so many mortgage owners defaulted. This can be used as a typical argument against the application of psychological egoism theory to defend the vast bonuses that executives take home. Bibliography: Desai, P. (2011). From Financial Crisis to Global Recovery. Columbia: Columbia University Press. LaFave, S. (2011, July 13). Psychological Egoism and Ethical Egoism. Retrieved March 13, 2013, from Psychological Egoism: http://instruct.westvalley.edu/lafave/Egoism.html Landau, R. (2012). Ethical Theory: An Anthology. Hoboken, NJ: John Wiley & Sons,. Marius, A. (2012, NA). What Role Have Banks In Financial Crises? Retrieved March 13, 2013, from rebs: http://www.rebs.ro/articles/pdfs/38.pdf Pojman, L. &. (2011). Ethics: Discovering Right and Wrong. London: Cengage Learning. Rappaport, A. (1999). Creating Shareholder Value: A Guide For Managers And Investors. New York City, NY: Simon and Schuster. Reiff, M. (2013). Exploitation and Economic Justice in the Liberal Capitalist State. Oxford : Oxford University Press. Read More