Someone must come to the defense of business following what is but a veiled attack upon decades of how business has been successfully conducted.
It was recently reported that Business Roundtable, a lobbying group composed of people like Apple’s Tim Cook and Amazon’s Jeff Bezos, is changing the definition of the “purpose of a corporation.” Rather than just making a profit for shareholders, they believe a company or corporation or business must be involved in making social change and environmental activism and community improvements.
They state, that the “standard for corporate responsibility…. has changed — and now demands that companies benefit ‘all stakeholders,’ including customers, employees, suppliers, and communities.”
The group of 181 chief executives announced that it has redefined their “Statement on the Purpose of a Corporation” to include the promotion of “an economy that serves all Americans.”
There is surely a bit of elitism and hubris in this group, to imply that they are the ultimate authorities in defining business and setting acceptable standards, even as they seem to have no understanding or appreciation of the history of business and the long-standing dynamics of business.
Almost all businesses do serve everyone in their realm. That’s the little understood fact about capitalism – about the role of a business in a community. Big or small — selling magazines or automobiles or lending money — like ripples in a pond, in the process of just tending to business, the activities of a business support and improve its community.
Anyone looking at investing in a business that is making decisions based upon wanting to impact community welfare or environmental activism should give such a business a wide berth. The business is almost certain to eventually fail. Not that community and environmental impacts don’t play some role in how a good business functions, but when a business establishes as its goals the changing of society or agitating for environmental goals, those activities defray business resources, as well as diverting the attention of administrators from making a profit. All of which will eventually spell the demise of the business.
A business is a process that functions very much like a machine. It is not meant to have a heart, soul, personality, social conscious, or spiritual calling. Those are human attributes. A business is a machine structured to function in a very specific way to achieve very specific outcomes. How well it functions to that end is measured in terms of profit.
There are many other mechanisms and organizational structures that have been devised and can be used to pursue societal or environmental goals, which are exactly what many, many businesses and corporations have utilized in the past. They set up foundations or donate to non-profit organizations that pursue philanthropic goals the company sees as worthwhile. In doing so, the company owner or stockholders do not compromise the process of making a profit, by keep separate the decisions about how they choose to use those profits.
To give them some credit, these business sages do seem to recognize that doing the “right thing” can be the “best thing” for a business. They state, “Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term.”
That is true for all businesses, not just “major employers.”
If paying employees well, training them and making them happy working for the business, keeps good employees, then business managers are paying attention to business, and they are doing the “right thing” for the business, and they are more likely to succeed. Just as, to the degree the company functions in an ethical and responsible manner, it will be respected and trusted by their consumers, which again will contribute to the bottom line.
A business almost can’t avoid doing the “right thing” if they hope to be successful, and in so doing they can’t avoid benefiting the community.
So, it is not that these issues do not play a role in the operation of a business, but they must not be the goal of the business. Such expenditures and attention must be justified by how much they benefit the business – you know, how much they contribute to that horrible thing called “making a profit.”
Despite their narrow mission, every well-run business – of any size – delivers many very positive side benefits to the community. Besides the obvious jobs and livelihoods and products and services they provide, and the taxes they pay and the contributions they give to civic causes – it is through businesses that all new wealth is created, and that advancements in the standard of living are generated. And, most amazing, all of these great benefits happen incidentally to the operation of the business.
We do not need to redefine corporations.
The reality is there is nothing that serves human beings, the environment or society more than people tending to business. They have always been “serving all Americans.”