An argument in favor or against putting profit

Director

Similarly to Argenti (1986), Milton Friedman (1970) argued that firms’ main responsibility is always to generate profits and create value for their investors (i. e. their owners), as as opposed to people, companies are artificial entities that have not any social tasks or moral obligations. Consideringg these considerations, it can be inferred that though Argenti (1986) does not clearly state that concepts such as values, responsibility and morals are incompatible with the business world, this individual certainly believes that managers should pay much more attention to income than interpersonal responsibility.

From a strictly teleological point of view, Argenti’s (1986) type of argument is unquestionably sound, because all businesses operating and competing in the industry world ought to generate profits to be able to survive and succeed. Consequently , it comes after that managers’ main goal and priority must be profit technology, which means that if they happen to have to choose between acting responsibly and maximising profits in order to make value for individuals who own the organisation, they should honor their responsibilities by protecting their employers’ interests.

However , from a more functional perspective, real life cases show that when managers focus entirely on profit and initial growth, they might end up producing irresponsible decisions, thus activating potentially catastrophic crises and failures. Regarding this, Kirkpatrick (2009) noted that in spite of it is magnitude and severe consequences, the 2007-2008 financial crisis was actually triggered with a handful of organizations whose profit-driven strategies triggered a global turmoil from which many countries around the world have not but fully restored. Considering the adverse impact that such situations have not simply on the general public but likewise on investors, it is apparent that focussing solely about profitability is usually not an successful long-term strategy. Furthermore, stats suggest that increasing numbers of people across the world are getting to be increasingly considering corporate governance and organization ethics, for the extent that the significant percentage of consumers have got claimed that they can would rather purchase from socially dependable companies than irresponsible ones. (Starr, 2013) This plainly indicates that corporate social responsibility and business ethics are highly very likely to affect businesses’ reputation and satisfaction, which is why managers should make an effort to make honest and responsible decisions to be able to achieve long-term profitability and success.

At this point, something arises: if perhaps not one in the above had been true, for what reason would a number of the world’s major companies waste materials their as well as resources submitting periodical company governance information aimed at reassuring stakeholders about their good techniques?

Apple and Nike, for example , have equally been negatively affected by scandals resulting from dishonest practices targeted at maximising earnings and minimising costs. (Adams, 2012, Daily Mail, 2011) As a result of that, they have had to modify their corporate approaches in such a way to ensure more transparency and durability across their very own respective value chains. This is because recent scams have sensitised consumers to concepts including business ethics and corporate governance, thus providing pressure businesses to ensure their suppliers are also socially responsibly, as “ignorance” is no longer considered to be an acceptable excuse among today’s requiring and knowledgeable consumers.

In light of these observations, it could be inferred that even though managers will try to increase profits and shareholder benefit, past business failures possess clearly proven that profit-driven strategies happen to be unlikely to lead to long-term profitability. In addition, with customers becoming increasingly demanding and concerned about environmental as well as social problems, it is crucial that managers should take into consideration the effect of their decisions on every stakeholders (including society, employees and the environment) in order to accomplish sustainable expansion and earnings.