The Ethical Firm - What Is the End Goal of a Business?
I’ve thought about this too much. What is the end goal of a business? There’s no secret that finding a company that aligns with one’s values has proven more difficult as time goes on. As an MBA student, I’ve heard this far too many times from my classmates: “The end goal of a business is to make money.” What a joke, we all know how that story ends.
“If there is one feature of modern capitalism that people find most repellent, it is this obsession on making profits. — Has any worker for any company ever got up in the morning, thinking ‘today I’m going to maximize shareholder value’? — The purpose of business is to meet its obligations to its customers and its workforce” — Paul Collier
Now, don’t get me wrong. Money is needed to run a business, but it feels a little inappropriate for money to be its only goal. Take a look at this information by Paul Collier from his book The Future of Capitalism – Facing the New Anxieties: “In Britain over the past thirty years, [the pay of CEOs has accelerated], it has risen from 30 times that of their workers to 150 times; as such, they are a model of restraint compared with their American counterparts, whose pay has risen from 20 times that of their workers to 231 times.”
Let that sink in for a second. Does the CEO need to be paid that much? Especially when their employees are barely making ends meet. Wouldn’t it be better for the company to have highly motivated and happy employees?
As Paul Collier mentions in his book, the end goal of a business is to meet its obligations to its customers and its workforce. A business needs money to run; thus, money is just the means to the goal and not the goal itself. The actual value of a business lies in its ability to improve the lives of those it touches.
I’ve met people from a lot of companies in my lifetime. And though some of their companies were much better than others and their mission statements varied as much as there are colors in the rainbow, the underlying feeling they gave off was that their goal was to turn out profits for shareholders. And who can blame them? When every meeting with the board of directors centered around the topic of money.
Now, I’m not saying that the companies these people worked for were awful. Most people working in these places were genuinely passionate about their jobs and areas of expertise. But it felt like higher-ups, directors, and managers stalled personal growth and empowerment based on what was best for the company and its owners and not on what was best for their workforce. All I’m saying is that I’d love to see people at the heart and center of decision-making for once.
The case for Egoistic Altruism
Wouldn’t we live in a better world if we all were a little better off? And I know what you may be thinking: “But Danny, I’m the owner, and it is my business. I placed my livelyhood on the line, and now that it took off, I should be able to rip the benefits.”
Yes, and no. There’s an argument to be made about Egoistic Altruism. By being good to those around you, life improves for yourself as well. If everyone around you has what they need to live a good life, then, chances are, the crime rate in your city can go down; thus, you’ll have to spend less money on private security, and more importantly, it gives you peace of mind. That by itself is priceless. That is the end goal of a business.
Here’s a video from Kurzgesagt — In a Nutshell; I think they do a better job in explaining what Egoistic Altruism is all about.
To end with this post. I do believe money should not be the end goal of a business. I think it should only be the means to achieve its end goal. A business capable of meeting its obligations with its customers and employees can make a lot of difference.
If you’d like to read the book I mentioned earlier in this post, The Future of Capitalism – Facing the New Anxieties by Paul Collier, you can get a copy from Amazon by clicking right here.
What do you think? What should the true end goal of a business be? Let me know
Like always, until next time,
Danny Bribiesca