"Multinational Corporations, Self-Interest, and the Neglected Role of Empathy"
The neoclassical school has long promoted the pursuit of self-interest as a central tenet of the theory of the firm, a position justified with excerpts from Adam Smith’s The Wealth of Nations (1776) that suggest self-interest leads to a maximization of net social welfare. In this article, we contend that in a modern context where large multinational corporations (MNCs) dominate the global business environment, crucial relational elements of Smith’s thinking have been lost. More specifically, we argue that Smith’s proverbial butcher, brewer, and baker knew their stakeholders’ faces, which aroused empathy that influenced the businessperson’s considerations of self-interest and better aligned them with social welfare. However, employees of modern-day MNCs seldom directly interface with their many stakeholders, which diminishes the link between self-interest and social welfare. To illustrate this point, we compare an approximation of Smith’s small baker, Bloedow’s Little Bake Shop, with a large MNC bakery, General Mills. Through this comparison, we propose that theories of management can be made more reasonable when they consider the role of empathy in conjunction with self-interest and that the likelihood of promoting social welfare increases when the empathy of the MNC employees is aroused.