The core purpose of business

15/04/2013 § 2 Comments

Why do people keep repeating that the core purpose of business is to make money? Sue George did it today in the Guardian.  bit.ly/16YPL  She said: “...the core purpose of any business is to make money – without profit there can be no corporate social responsibility (CSR)…“.  This is a bit like saying that the core purpose of a human being is to eat, because without food people can’t be nice to others. Picture 6

People are conflating the content of business (exchange, innovation, creativity) with the vehicle (the organisational form). Since the typical legal form for a business is a limited company, and since the ultimate power in a company is in the hands of the shareholders (they appoint and can dismiss the board) people assume that (a) the purpose of a limited company is to serve shareholders and therefore (b) the purpose of business is to make profits to give to shareholders.

Most people creating new businesses are not, it seems to me, driven by the core purpose of making money. They have a passion to heal the sick so they start a pharmaceutical company. They are passionate about engineering so they start a car company. And so on. But they have to choose a legal form and they are advised to use a limited company because this is how you raise money. And sooner or later the logic of the structure prevails and rather than following their original passion they start serving investors’ passion to maximise their returns. Either that, or the entrepreneur is replaced because he or she is not prioritising investors’ interests sufficiently.

We seem to have forgotten that business, or enterprise, has been around a lot longer than the limited company, which has only existed in its current form since 1855.  We forget the wisdom of Shakespeare, who revealed the ultimate sadness and alienation of those like Shylock in the Merchant of Venice who seek happiness through pursuit of wealth. We forget the wisdom of Kahlil Gibran “It is in exchanging the gifts of the earth that you shall find abundance and be satisfied. Yet unless the exchange be in love and kindly justice, it will but lead some to greed and others to hunger.”

Doesn’t that summarise our age rather nicely – some are lead to greed and others to hunger (see the front page of today’s Financial Times, “Commodity traders reap $250bn harvest“, if you want to see evidence of the extremes of greed in today’s world). What price kindly justice in today’s businesses?

So long as we accept that the purpose of business is to make money we can justify all sorts of unhealthy, unjust, unsustainable and simply  greedy behaviour in pursuit of that purpose. Acceptance of this falsehood lies at the heart of the current unsustainable behaviour patterns of most businesses: pushing to persuade people to buy and discard goods they don’t need; to eat food when they are already full and overweight; to borrow more money than they can afford.

What do I think is the purpose of business? Maybe there is no one core purpose for business, just as there is no one core purpose for human beings. I have no doubt there are some businesses that have been set up with the core aim of making profit. But inevitably in time these businesses will prove hollow and unsatisfying – for their staff, their customers and even ultimately their owners. Those that survive and thrive will have tapped into something deeper. They will connect with true wealth – truth, integrity, compassion, love.

I believe the days when people can casually say that the purpose of business is to make money are numbered. Let us all hope so.

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§ 2 Responses to The core purpose of business

  • Finn Jackson says:

    If the core purpose of business was to make money then it would be the absolute duty of all directors to shut down their businesses and reinvest the capital into something that made more money (for example, derivative trading, gun running, drug trafficking, …).

  • Tom Hitchman says:

    The first “Purposes of Incorporation” of Sony:

    “to establish a place of work where the engineers can feel the joy of technological innovation, be aware of their mission to society, and work to their heart’s content.”

    Found on Mihaly Czikszentmihalyi’s TED presentation of ‘Flow, the secret to happiness’ 13:45

    There is a more details of this purpose in the following book, found on googlebooks ‘Making Innovation Work: How to Manage It, Measure It, and Profit from It’.

    Best

    Tom

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