Wednesday, November 11, 2009

"Profit only-ness" is dangerously simplistic

"[Milton Friedman] was the apostle of the pure profit motive: 'There is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud'...

Today we live in a world where business has complex loyalties and responsibilities, and is subject to continuous pressure not only from shareholders but from government, media, special-interest groups, regulators and litigators. Friedman's view would now be considered dangerously simplistic. These days business must consider value from the perspective not just of investors, but of customers, employees, suppliers, communities and - increasingly - the environment too.
(Stephen Green, Good Value, p.10)

You hear businessmen & women, or those aspiring to be, keep saying that business is for monetary profit. That's what Friedman once said. But now, the landscape is shifting. People appear to care about morality of businesses. That does not necessarily means lower profits but what kind of profits. 'Profit' is no longer measured by monetary value alone.

Stephen Green, the chairman of HSBC, will be speaking at TTC tomorrow afternoon.

1 comment:

reasonable said...

If businesses want to do well for the LONG TERM, then they need to take into account the various other factors and try to please the various other interest groups in addition to shareholders. Even if they do not believe in the values held by other groups such as environmentalists and animal-rightists, it can give higher long-term profitability to businesses for businesses to do good PR with these groups and to at least pretend (if it is not for real) to value the interests of these groups.

So profitability may still be the ultimate real goal, just that now businesses need to know how to make use of other groups (e.g. environmentalists) to achieve profitability, or at least to do things to ensure these other groups do not become obstacles to profitability.

So the original "profit-only" thesis may still workable for those who chooses the "profit-only" model/value; all it needs is to modify the execution strategies to meet the "profit-only" goal. All it needs is to know how to be a good actor (using good PR) and how to be a good deceiver.

- devil's advocate