Burgess COMMENTARY

Peter Burgess

Jesper Lowgren Jesper Lowgren Digital Transformation. Digital Strategy. Digital Platform Builder. Influencer. Author. Speaker Is profit vs. purpose yesterday's conversation? Management Today preview image Management Today

What is the purpose of a business? The obvious answer is to make money for shareholders. A company’s owners appoint its board, which appoints its executive team, which hires and fires the rest of the people that make up the organisation....

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Jeff Mowatt Jeff Mowatt Jesper. It is true that purpose driven businessess are few and far between. The conversation about shareholder primacy is by no means something of yesterday. it's being brought up repeatedly today by business leaders. The purpose of business is where it began for us, with an argument against shareholder value. It continues to gain traction: https://www.linkedin.com/pulse/people-before-profit-jeff-mowatt Show less Like1 3d

Jesper Lowgren Jesper Lowgren Hello Jeff I completely agree. My point is not so much about the past, but the role of purpose in the future. My hypothesis is that in a world with insane change, a profit-focus will not be enough to remain relevant and competitive, and purpose will be essential. Like1 3d

Jeff Mowatt Jeff Mowatt Glad to hear it! The arrticle also refers to Russian oligarchs in the context of short-termism. Academics and business leaders like Paul Polman say that a new model of capitalism means business which contributes more than extracts, yet in deeds, he and others of the B team have aligned themselves more closely with oligarchs. http://www.p-ced.com/1/node/503 Show less Like1 3d

Stephen DeKuyper Stephen DeKuyper I don't think the argument should be profit vs. purpose because profit itself is a purpose. The tension arises when it is the main or only purpose of a company. A more fitting question might be 'are purposes other than profits legitimate?' To which many more people are now answering 'yes', although many still answer 'no'.

But it should also be asked whether profits are or can be a means to other purposes? It is hard to attain other purposes, such as human development or social change, if a company is bankrupt. Profits can be a good reflection of the success of a company. Is the company providing a product the market wants in an efficient way? Even if we make something other than profits the main purpose of a company, profits still have an important part to play.Show less Like1 3d

Jeff Mowatt Jeff Mowatt Indeed, Stephen. As my late colleague pointed out, business must make profit or it will cease to exist, It's how that profit is used that makes the difference. It can be applied to resolve a wide range of social problems. Hence the term profit-for-purpose: http://www.managementexchange.com/story/re-imagining-capitalism-new-bottom-line Show less Like2 3d

Mark Haas Mark Haas Let me submit for consideration that shareholder wealth being the purpose of a corporation is, in itself, a fallacy. Starting almost a century ago, with the Dodge Bros vs. Ford decision, in which the court presented a tortured logic that corporations were to serve primarily the shareholders, it has taken a lot of effort to finally move away from that position. Increasingly, business leaders, including no less than Jack Welch, now say that 'maximizing shareholder wealth was a stupid idea.'

I fundamentally disagree with the premise that shareholders are the purpose of a business, but not every business has a Paul Polman at the helm. Fortunately the rise of benefit corps and their ilk provide legal, if not social, cover for companies to reject profit 'uber alles' pressure from shareholders. Business will get there eventually. If we consider profit as encompassing the triple bottom line and over a longer period than a quarter or fiscal year, we have less of a tradeoff to make. Show less Like1 1d

Jeff Mowatt Jeff Mowatt Mark Haas, This is entirely the point. In 2009, B Labs weren't thinking too much about shareholder value. Their argument was that business could do good through conformance without changing the model. I introduced them to the business model which applies profit for social benefit, which had not yet come up on radar. https://economics4humanity.wordpress.com/2012/10/13/the-uk-b-corporation/Show less Like 1d

Peter Burgess Peter Burgess Jasper, Jeff, Mark and Stephen ... a lot of good points. As I see it there is a big change in process with environmental and social responsibility now on the agenda in a way that it was not a decade ago. The metrics are still rather primitive, but many initiatives are in play to make impact metrics more useful, including my own work with http://truevaluemetrics.org. The capital markets are struggling to understand what the move to responsible investing is going to mean, but I am prepared to predict that most of the bulls and the bears are really sheep when it comes to following the market! Show less

AN EARLIER DRAFT MESSAGE BY PETER BURGESS ... NOT SENT
Jasper, Jeff, Mark and Stephen ... my take on the role of the corporation in the modern economy is fairly simple. In order to have a good quality of life and standard of living there have to be processes that will convert the bounty of nature into the products (goods and services) that we need and want. The corporate organization is a very efficient way of doing this, mobilizing all the resources needed to do what needs to be done.

For most of history more product produced resulted in better quality of living and the limiting factors were, in addition to the state of technology, access to land (natural resources), availability of labor and the financial capital to fund the transactions. There has been a tension between these factors of production since the beginning of economic history. Throughout history, people have migrated, in some cases with the support of armies, in order to improve things. INCOMPLETE