Is there more to business than profit maximization?

Profit maximization, the idea that you should strive to get as much benefit as you can out of the time and money you put into a commercial endeavor, has been a mainstay of our business paradigm for generations. It’s easy to see why. What sane person would want anything less than the maximum benefit they can get for their efforts?

Values define the ends we find worth pursuing and the means we find appropriate to pursue them. Profit maximization is, thus, a value. It ties into principles of sustainability and efficiency. Combined, these values strengthen our society—we want our efforts to be sustainable, and in a world of finite resources, we need to increase efficiency so we can do more with less. Profit maximization is a means to achieve this.

As a value, then, profit maximization has a vital role in our society. Yet, as I’ve argued before, society requires a multiplicity of values to thrive. Some might say our society has become too focused on profit maximization to the exclusion of other values. The result of this exclusive focus has led our commercial activities to degrade and pollute our environment, dehumanize and abuse employees, manipulate and cheat customers, among other ills. To improve, we need to place profit maximization within a rich web of values rather than venerate it above all others.

Recently, a group of nearly two-hundred CEOs of major American corporations signed a statement agreeing that in addition to shareholders, corporations owe a duty to customer, employees, suppliers, and local communities. If this sentiment is genuinely held by business, then this has the potential to shift our society to become one that embeds profit maximization within a matrix of values. I believe there is tremendous potential if we can make that change well.

There is a chance we might make this change poorly, though. For example, companies are owned by shareholders, the most powerful of which sit on the board of directors along with the company’s senior managers. It is the board of directors that subsequently guides the company’s actions. Thus, when a company chooses to enact its duty towards employees, customers, and communities, it will be influential shareholders and CEOs who decide how to do that. Alternatively, governments may choose to regulate how companies fulfill their duty to society, in which case these decisions will sit in the hands of powerful politicians. Will we really be able to pursue the multitude of values our society needs if decision-making is restricted to those in power? Rather than allowing powerful shareholders and politicians to speak on our behalf, I think the values of employees, consumers, and communities will be best served if we can speak for ourselves.

Remember, our goal should not be to eliminate profit maximization, as it has significant societal benefits, but rather to embed it in a matrix of values. To truly achieve this, other stakeholders need to have the capacity to influence commercial interests. How do we balance the values of different stakeholders, however, without tearing companies apart with internecine squabbling or concentrating decision-making in the hands of the powerful?

I believe there are already models of how this might work. Germany, for example, requires companies to reserve a certain number of seats on the board of directors for employees. Here in Canada, at the university I work at, our board is comprised of our primary funders—i.e. government representatives—as well as faculty, support staff, students, and members of the community. Every group who has an interest in our institution has a seat at the table where we make decisions.

I believe the best way for our society to fully express all the values it needs to thrive requires we put people with different value positions in conversation with each other so we can chart a path forward through discussion and negotiation. What are your thoughts?

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