Business, what is the point?

There is a fundamental argument of what the purpose, the end goal, of what business should be. Milton Friedman, a world renowned economist, said, "The social responsibility of business is to increase its profits," he also said that corporate executives have no other responsibility than to "make as much money for their stockholders as possible." Milton believed that ethics would lead people to do the right thing, a laissez-faire market would self-regulate, and the citizens of that country would be taken care of because of the spill over from job creation and wealth.



This idea is not new. Adam Smith argued, in his legendary book, The Wealth of Nations, "in consequence of the division of labour... in a well-governed society, that universal opulence which extends itself to the lowest ranks of people." More or less, the more specialized and advanced the country is, the better off the citizens of that country will be. The poor here in the States have a much better life than those in say, Haiti, they are afforded with better clothing, food, shelter, etc.

Not long after Smith, people started to expand across America and the industrial revolution was taking off in Europe and America. This was a time of great innovation and progress, at the heavy cost of wasteful use of the earth and loss of lives. Product waste was dumped in rivers and lakes. Pollution was a norm for profitable business practices.

During the 1980's financial instruments and investments changed the way people did business. It was a fast growing time. In the 1987 movie Wall Street, Michael Douglas plays the fictional character of Gordon Gekko, a successful and power hungry stockbroker. The video below illustrates the attitude that America held.




This attitude, money is ALL that matters, had not really been challenged until the 1990's, when unethical behavior and environmental calamities came to forefront of the publics eye, until we had to face the facts - business is more than just profits. Regulation had just pushed large corporations overseas, who would rather pay a lesser cost than being accountable.

Business leads the way for mankind, it is more mobile, efficient, innovative, and productive than the government. Government policies and decisions are often born from the business world, and there are considerably more people involved in business than the government. The upcoming generation is much more conscious of their carbon footprint. Corporations have seen that, and for reputable purposes or genuine care, they have altered their approach.

Take for instance Starbucks mission statement: "to inspire and nurture the human spirit - one person, one cup and neighborhood at a time." Pretty lofty goal for a company that sells coffee. However, they are serious by creating many initiatives, from recycling to clean water projects (they offer their score card and reports since 2001). Another initiative is that Starbucks has vowed to only buy their coffee beans that are wholly part of fair trade (fair trade is ethical treatment of everyone within the supply chain, from farmer to distributor, everyone gets a fair price, working conditions, etc.) to ensure that these domestic and foreign markets are better off in their communities.

There are other companies that are doing similar things (Microsoft, Merk and Co, People Water, Toms, among many more) and it has made the world a better place. Small businesses to large corporations should not be given a pass on making ethical decisions. We need to demand from ourselves and others a sense of accountability, to give back to the future that will follow us. There is a better way to make a profit.

Impact Investing.



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