Just what is the business of business? What should be the primary focus of decision-making in business? If you are like most then you likely agree with Milton Friedman’s thinking—which many graduates of business school tacitly learn—that the clear-cut answer is profit. After all, we have a free enterprise private property self-interest maximizing economic system, so of course profit is the thing! We conduct business to make a profit and maximize shareholder value; otherwise why bother focusing so much on the corporate quarterly profit reports! As noted by Friedman, “the criterion of performance is straightforward!”
The only constraint is to conduct business—engage in open and free competition—without deception or fraud. The only question remains is who decides what is deception? How do you distinguish between deception and strategic wizardry? Is it deception only when others find out and just a slick profit generating strategy otherwise?
Joseph Stiglitz noted “sometimes financial companies (and other corporations) say that is it not up to them to make the decisions about what is right and wrong. It is up to government.” So as long as there is no law against it those in authority (often referred to as ‘the leadership’) in a corporation have the obligation—according to Friedman’s line of thought—to carry out any action that will maximize return to company’s shareholders. And to make sure there are few if any constraints on their actions, corporations invest large quantities of money—yes it is invest since it is part of the obligation of those in authority not to spend the owner’s money on non-profit generating endeavors—lobbying government officials (i.e. citizen’s representatives) to structure and pass legislation enabling them to do as they desire.
Let’s Critically Think
What responsibilities does a manager, as the agent of the owners of the enterprise, have? Does private free enterprise really mean separate and distinct from public concern? Are there any implicit responsibilities? Or is it just what the owners explicitly require? If it is to the business alone, then is not the business’ concern intertwined with society itself? Didn’t the recent Wall Street banker’s shenanigans put their corporations at significant risk because of the interdependence of their actions with society? Aren’t the responsibilities of society and business reciprocal? If not, why was it necessary for society to bail out troubled private (yes private) companies? Does individualism (really) mean no individual responsibility to the collective? Is it appropriate for private enterprise to have its cake and eat it too—to share benefits without sharing the burden?
Is it time to accept the challenge and take responsibility for changing our experiences, or is it best to wait for someone to save us from us?
Let’s bring to light two basic facts. We are participants in the creation of our very own reality. To a large degree—more than we’d like to admit—our experiences are our own doing. And we get what we get largely because the system is perfectly designed to produce it. This is often expressed by the adage if you continue to do what you did then you will continue to get what you got. How can we blame it on rogue leaders—unethical, unconscionable people in authority—when the system itself fosters such narrowly focused people rising to the top of their organizations? Effective leadership is ethical leadership, thus requiring acting consistent with our ‘I-We’ nature—it is not all about Me. In the conduct of business considerations are not only private self-interest considerations.
Economic activity is not free and independent of everything, especially not society. As evidenced by the most recent assault on the citizens of society at the hands of Wall Street investment banks, economic activity does not simply influence society it interpenetrates the very fabric of society. We mustn’t forget that economics is a social science! Thus the practice of economic activity—the conduct of business—at base must be socially responsible. The concern for growth in profit alone is not enough!
Progress is not adequately served if the probability of profitable gain is the only decision-making criterion in business. What else should those in authority include among the criteria?