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What is the real purpose of a business?
Category: Economy | By SDR, 12-Oct-2019 | Viewed 564  Comments 0 | Source Mark Anielski

More than the Triple Bottom Line

Mark Anielski

What most of us learned in business school was the premise that the primary obligation of a business is to maximize profits and shareholder value for its shareholders or investors. But are corporations or is a business legally responsible for maximizing profits or is this mythology?  
Peter Drucker

The late economist Milton Friedman famously wrote that "the social purpose of a business is to earn profits". In fairness to Milton Friedman, he was an economist, not a lawyer.

How immoral is it to choose social and environmental goals over profits?

The late business management guru Peter Drucker once noted that executives who try to act morally by choosing social and environmental goals over profits are, in fact, immoral. Drucker said, without reservation, "If you find an executive who wants to take on social responsibilities, fire him. Fast!"
Mark Anielski

There are expectations that directors of corporations use their best business judgment in what is in the best interests of the corporation but there are no clear legal statements which define "best interests."

Was it Wall Street's short-term and somewhat irrational focus on quarterly performance results (earnings) which ultimately led investors, corporate managers and directors to exercise judgment only in short-term interests. 

If the legal charters which gives businesses license to operate provide no clear direction on financial, social or environmental responsibility, then we are dealing with a serious void in accountability. 

This ultimately presents an important opportunity for a new generation of businesses to establish clear statements of responsibility of the corporations that could relate to contributing to the well-being of society and the natural environment. 

I'd like to add reference to B Corporations (which began in 2009) that is a step in the direction I'm suggesting. There are now over 230 Canadian B Corps. 


What if citizens and households had a role in defining the purpose, roles and responsibilities for businesses and corporations (both private and publicly-traded) in their communities?

Mark Anielski

is an economist, author of the award-winning book The Economics of Happiness: Building Genuine Wealth and his new book An Economy of Well-being: Common Sense Tools for Building Genuine Wealth and Happiness. For 10 years (2002-2012) he was professor of corporate social responsibility and social entrepreneurship at the University of Alberta's School of Business.

For more information:
Mark Anielski

Editor's note: Mark Anielski often writes in the first person based on his personal experiences. This is an abstract of his full article on the topic of Business Purpose.

You can access the entire article at: http://ragm.org/docs/What%20is%20the%20purpose%20of%20a%20business_374.pdf
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