Make A Profit Or Serve Society?

[Bear Up North]

I read an interesting article today in a business magazine. The article's author was asking the question: Should a company, large or small, focus on making a profit or serving society.....or strike a balance by doing both?

He highlighted a few companies that for the first years of their existence, sometimes as many as a dozen years, they only focused on making a profit. Only after they were established did they start to divert some of their profits to more social undertakings, such as corporate sponsorships of charity events or being better custodians of the environment.

His point was that a company cannot "give back" if it doesn't have anything to give back. Would that term "anything" have a number or a percentage? At what point do profits become obscene? Can a company make "obscene" profits (meaning a lot of people want their product or service) and still give a lot back to social undertakings?

And where do stockholders and stakeholders fit?

This Bear doesn't have answers to these questions. I understand the term "profit". I know what a company "should" do to be socially responsible. I just can't figure out where a balance would be.

Bear

[BKM]

Well, my (perhaps shallow) understanding is that one of the major purposes of "corporate charters" was that the public would get some benefit from granting the benefits of limited liability (and the tax benefits and other legal protections). Of course, these public benefits also can be tied very directly to profit as well, so there is no inherent conflict.

Balancing act is the weasel answer that works for me.

[abrowne]

There is a definite right to profit, but its hard to reconcile exactly where that right ends with regard to harm of the public, "externalities," and greed.

[donk]

For more info on this topic visit www.americanapparel.net ( t-shirt company) also try http://adbusters.org/metas/corpo/bla.../shoeinfo.html.

AA is definitely in it for the $$$ and uses teh ethical payment of its manufacturing workers as a hook for those not interested in its array of colours.

Adbusters, is well, adbusters, pompous and self promoting.

And while I am not a fan of adbusters or their approach, I do own the shoes as I believe in the cause more than I dislike the messenger. The anti nike thing is a bit old and annoying. I also own other shoes produced in the same factory (fluevogs)

AA makes a good product and is not that much more expensive than comparable fashion units. Plus the owner is canadian.

[Michele Zone]

The short version: I am tired of Being Good. I want money now, dammit.









Of course, if people would pay me to Be Good, I could keep doing that.

[dobopoq]

I recommend the book, "The Ecology of Commerce" by Paul Hawken. At least in terms of environmental friendliness and sustainability, the book explains how there doesn't have to be a dichotomy between profits and the health of people and the environment. The problem with our laws is that as abrowne alluded to, the true cost of externalities are not directed back to their source. The role of government should be to incentivize ecological, sustainable behavior, and whenever possible, to discourage externalities by taxing those create who them at and in relation to their source.

Bottle deposits are a perfect example of how government can righteously force people and corporations to recognize the true economic value of a bottle, by mandating a refund of 5 or 10 cents for returning a bottle for recycling. It raises the cost of the product for the consumer which reduces sales for the business, but the positives far outweigh this negatives. The effect of the bottle deposit is quite noticeable to me in relatively litter-free Oregon where it is enforced, compared to Maryland (a non-bottle-deposit law state), with many a junked up street.

If what you mean by "serve society", is charity then I am not so sure. To misquote Adam Smith slightly, (he would say something like this): "The baker does not bake bread for the benefit of the hungry. He bakes bread to earn a living. But through the invisible hand, he benefits others as he benefits himself." The benefit you get from helping others altruistically is mostly of a spiritual nature, and thus not anything a corporation or business could ever survive by doing. There's nothing immoral about making a profit; That's what's necessary to make a living. As long as government is not coopted or bought by business (unfortunetly not the case for the U.S.), then govenment can ensure fair competition, and thus business owners and corporations need feel no guilt about mere profits thus earned.

[abrowne]

I recommend the book, "The Ecology of Commerce" by Paul Hawken. At least in terms of environmental friendliness and sustainability, the book explains how there doesn't have to be a dichotomy between profits and the health of people and the environment. The problem with our laws is that as abrowne alluded to, the true cost of externalities are not directed back to their source. The role of government should be to incentivize ecological, sustainable behavior, and whenever possible, to discourage externalities by taxing those create who them at and in relation to their source.

Bottle deposits are a perfect example of how government can righteously force people and corporations to recognize the true economic value of a bottle, by mandating a refund of 5 or 10 cents for returning a bottle for recycling. It raises the cost of the product for the consumer which reduces sales for the business, but the positives far outweigh this negatives. The effect of the bottle deposit is quite noticeable to me in relatively litter-free Oregon where it is enforced, compared to Maryland (a non-bottle-deposit law state), with many a junked up street.

If what you mean by "serve society", is charity then I am not so sure. To misquote Adam Smith slightly, (he would say something like this): "The baker does not bake bread for the benefit of the hungry. He bakes bread to earn a living. But through the invisible hand, he benefits others as he benefits himself." The benefit you get from helping others altruistically is mostly of a spiritual nature, and thus not anything a corporation or business could ever survive by doing. There's nothing immoral about making a profit; That's what's necessary to make a living. As long as government is not coopted or bought by business (unfortunetly not the case for the U.S.), then govenment can ensure fair competition, and thus business owners and corporations need feel no guilt about mere profits thus earned.

I own that book but have not yet read it - picked it up for $2. I'll get to it after I finish Kotkin's The City (good history & information, horrible analysis - what a nutter this Kotkin is), The Idiot, Shake Hands with the Devil, Salt Fish Girl, A Short History of Progress, The Edible Woman, and Oryx & Crake. I am a slave to the scribbles of madmen!

The problem with talking about benefit is that we are referring to different ideas within the same word - i.e. profit (a brutal, absolute sort of benefit - much more one sided) vs. behaviour (your work is consumed so that you may consume, in turn - a justification of existence, of sorts).

I do think that we must structure our laws to reflect the type of behaviour we want to see. Corporations are not people and in this regard we immediately have difficulty thinking of them, for we often have trouble understanding things that are not human. Corporations are managed by humans but do not necessarily act as humans would. A Corporation is a privileged being and should not be considered self-justifying. It has the obligation to work within the bounds we provide - so long as we actually provide bounds.

I'd like to see a variant of true-cost accounting come into use. I'd like to see products' entire life cycles being the responsibility of the manufacturer, so that they do not sit idle in landfills. I'd like to see realistic product pricing - but I recognize the danger of quantifying the air pollution created by manufacturing, for example, a set of tires. Pandora's box of the millenium...

[el Guapo]

I believe you set a strict policy of moral boundaries you will not cross, you operate within these boundaries, and make them a part of the corporate culture, and then you let the profits fall where they may. I know of only a few small businesses that operate this way. I know of only Ben and Jerry's and maybe a few other liberal firms that claim to have close policies. I'm sure there are a few conservative firms, but I am not aware of any.

I've never understood people that are very openly dedicated to their religion, yet as, let's say in their job as a – realtor - they screwed the living daylights out of people everyday. You don't check your personal values at the door of your office. If you can't make a profit with your values intact you need to consider another line of work.

[boiker]

I don't think you can quantify obscene profits. Because it's all relative.

I'd like to see profits funneled back the consumer in the form of lower prices. Or I'd like to profits funneled back to the often times underpaid employee as wages.

In capitalism, it seems that too much is never enough and growing profits for the sake of growing profits is justified.

In my personal finances, I can see my end goals, and they don't revolve around an every increasing salary even when I am comfortably debt free, clear of a mortgage, and balanced with bills.

[BKM]

I believe you set a strict policy of moral boundaries you will not cross, you operate within these boundaries, and make them a part of the corporate culture, and then you let the profits fall where they may. I know of only a few small businesses that operate this way. I know of only Ben and Jerry's and maybe a few other liberal firms that claim to have close policies. I'm sure there are a few conservative firms, but I am not aware of any.

I've never understood people that are very openly dedicated to their religion, yet as, let's say in their job as a – realtor - they screwed the living daylights out of people everyday. You don't check your personal values at the door of your office. If you can't make a profit with your values intact you need to consider another line of work.

You mean, you are NOT reassured when you one of those damn fishes on the business card or sign?

As for Ben and Jerrys: their values can be amusing. "RGBH_Free Milk" is trumpeted on the ice cream packages. Said packages contain 32 grams of SATURATED fat per package, though. Somehow, this seems to be a bigger problem than hormones in milk. (Although they do produce excellent lower fat frozen yogurts, too) Pet peeve of mine, the hormone-free fat bombs

A more general economics question: in the good old days of American economic primacy, for every dollar gained by "the working class" in real wages or living standards, the elite gained something like $817. Today, that number is $18,000. An interesting analysis in the New York Times-the only people who benefit from most of the major mergers promoted by the mainstream press in breathless tones are the CEOs (huge golden parachutes and fees and special payouts built in) and the technical support staff (bankers, lawyers, brokers, etc>) Everyone else (stockholders, workers, communities) are screwed.

[jimi_d]

A more general economics question: in the good old days of American economic primacy, for every dollar gained by "the working class" in real wages or living standards, the elite gained something like $817. Today, that number is $18,000. An interesting analysis in the New York Times-the only people who benefit from most of the major mergers promoted by the mainstream press in breathless tones are the CEOs (huge golden parachutes and fees and special payouts built in) and the technical support staff (bankers, lawyers, brokers, etc>) Everyone else (stockholders, workers, communities) are screwed.

Well, there has to be a balance on boards. Germany is going in the right direction in having Union Reps on boards of companies. The way I see it is that every company is effectively subject to three groups of influences, each of whom share the common short-term interest in screwing over the other two. These are (1) the shareholders, (2) the workers, and (3) the customers. Group 1 is traditionallly dominant in the American model. As company size grows, group 3 increasingly approximates to the general population. In traditional European models, a two-way adversarial situation has existed between groups 1 and 2, which of course agree on wanting as much money as possible from group 3. Equal representation of all three groups would be a far better way of running companies - for instance, it would most likely allow pay restraint without industrial unrest. The three ways in which two-to-one majorities could be reached would interact to create a stable and responsive social and economic situation.

[circusoflife]

I recommend the book, "The Ecology of Commerce" by Paul
Bottle deposits are a perfect example of how government can righteously force people and corporations to recognize the true economic value of a bottle, by mandating a refund of 5 or 10 cents for returning a bottle for recycling. It raises the cost of the product for the consumer which reduces sales for the business, but the positives far outweigh this negatives. The effect of the bottle deposit is quite noticeable to me in relatively litter-free Oregon where it is enforced, compared to Maryland (a non-bottle-deposit law state), with many a junked up street.

Ever heard about the CAN BAN that Denmark had for along time until the EU had them change it in 2002?

No soft drinks or beer in cans, only bottles which were re-used up to 35 times before melting.

[abrowne]

It's common to have reused beer bottles. I see them all the time. You can tell because they are scuffed in certain areas from the production lines. It's a shame that the EU seems to be a homogenizing force... its whitewashing all that was once unique.