Should a business's sole purpose be to generate a profit?
The most controversial statement about the role of business in the last fifty years, or some might say even the last century, came in an essay published in the New York Times in 1970, written Milton Friedman.
He argued that a business’s sole purpose was to generate profit. He also stated that companies that adopt “responsible” attitudes are less competitive. In his 1970 article, Milton Friedman asked, “What does it mean to say that the corporate executive has a ‘social responsibility’ in his capacity as a businessman?” In his article, he concludes that: “The difficulty of exercising ‘social responsibility’ illustrates, of course, the great virtue of private competitive enterprise — it forces people to be responsible for their own actions and makes it difficult for them to ‘exploit’ other people for either selfish or unselfish purposes. They can do good — but only at their own expense.” Of course, times have changed and we know better now. Ignoring environmental problems and social problems within society can lead to inferior business as compared with socially responsible counterparts.
By poisoning their local communities because of pollution, companies face the problem of losing customers. Not providing means for a local education system might mean a lack of qualified workers. Qualified employees might be deterred when the company treats its workers poorly. However, companies don’t have anything to worry about. Companies are free in the globalized world to take advantage of a local community, and then move on to the next. Exploitation friendly tax rewards exist to promote competitiveness.
So Milton Friedman’s idea is still very prominent among business. However, his idea is not agreed upon by all in the business community. Quaker Oats president, Kenneth Mason wrote that: “Making a profit is no more the purpose of a corporation than getting enough to eat is the purpose of life. Getting enough to eat is a requirement of life; life’s purpose, one would hope, is somewhat broader and more challenging. Likewise with business and profit.
” He declared Friedman’s business idea “a dreary and demeaning view of the role of business and business leaders in society.” Companies, however, are more righteous now when it comes to social responsibility. In fact, two-thirds say corporate citizenship and sustainability are of growing importance for their businesses. It’s definitely progress. But it is indeed too slow, maybe not fast enough to save the planet from its environmental and social problems by which it is plagued. After more than four decades since Milton Friedman said that a businesses only responsibility was to make a profit, the conversation seems to wilt away from Milton Friedman’s favor.
Businesses it seems, can operate in a way that helps society but also brings steady returns to investors. In fact, businesses of the future must. Source: “Milton Friedman and the Social Responsibility of Business” by Joel Makower, on www.worldchanging.com