It’s a Choice
We have a theology in contemporary American capitalism whose doctrines include something like the following:
- The purpose of a corporation is to make money
- A corporation belongs to the people who own it, i.e., investors and shareholders
- Any money the corporation earns belongs to owners
- Any expenses that detract from money returned to owners are subject to questioning and criticism
This is a tyranny of capital. It is rarely satisfied and knows no limits. The more it is fed, the more voraciously it behaves. It has an expectation of more, more, more, and it frequently punishes those who cannot deliver more, more, more. It believes, and is virtually unchallenged in this, that it is the most important player in the game. Absent constraint, it would eat the world.
But here’s an inconvenient fact: This theology is a choice. It is not based in any physical laws of the universe. It is a mindset developed over time and propagandized to the point of indoctrination such that no one even realizes that it doesn’t have to be this way.
You cannot divorce economic activity from social good, because the whole point of economic activity is to create social good. Making money is a powerful incentive but isn’t an end in and of itself; no one can eat it or build shelter with it. What matters is what we do with the money and how we use it to create social benefit.
If our goal were simple survival, we could all be subsistence farmers. The motivation to organize and incorporate is to create wealth to support living at more than a subsistence level. At the point when the current beliefs are no longer supporting social good, then it is time to re-examine them and make a new choice.
Self-preservation, or survival, is the goal of most organizations, for profit or nonprofit. Income that exceeds expenses is a prerequisite of self-preservation. However, prerequisite does not equal reason for being. While I must breathe in every moment as a prerequisite for living, breathing is not my reason for living.
Prerequisite and purpose have been conflated in America. A reason for being is not simply to generate profit—that’s a reason for investing. The goal of the investor has cannibalized the goal of the corporation. They are not the same.
In one, the decision-making lens is how best to maximize income. In the second, the lens is how best to deliver the product or service, which then generates income as a byproduct.
This might seem like a matter of semantics, but in fact it is a distinct difference in intention. The intention of maximizing profits is a narrow intention to serve the needs of owners only, even if doing so is detrimental to other stakeholders—though in fact the needs of those other stakeholders aren’t a consideration except as expenses to be minimized. This creates tension or conflict among stakeholders, which is a drag on momentum.
There is a danger in appropriating the investor’s intention as the corporation’s intention, because it’s narrower—and that both creates risk and misses an opportunity. The risk it creates is that the decision filter does not discourage illegal or unethical behavior, and it actually encourages it when the likelihood of being caught is low or when the penalty for being caught, whether financial or reputational, is lower than the profit potential.
Business school ethics classes have been popularized in recent years as an antidote to mitigate this risk, but they do not actually address the underlying conditions that create the risk. Only by changing the intention does the risk diminish.
The missed opportunity is in failing to define a purpose that motivates and inspires all the stakeholders, not just the owners. A purpose is aspirational and unique to each business. When the purpose of a corporation is to provide a product or service that a market needs or wants, and to generate wealth while doing so, it creates social good that stakeholders beyond just the owners can more easily align with.
Because the universe responds to thought, more people aligned with and engaged in a purpose increases the magnitude of the intention to bring to fruition the possibility inherent in the purpose. This is an approach that offers greater potential for success—both in achieving purpose and in generating income—than a narrow focus just on profit.