Business schools exist for one reason. Every finance, operations, marketing, and entrepreneurship course teaches Rising Capitalists the industry's golden rule: to maximize “shareholder value” — an intentionally soulless phrase that evokes Gordon Gecko and Miami Vice.
I always thought this was weird. Surely businesses can do more than generate immediate profits. They can employee people, invest in communities, and develop next-generation technologies.
Businesses can do those things. They have the ability. They can, y'know, do good things that do not end up on the balance sheet.
But if the singular goal of business is to maximize profits, as capitalist prophet Milton Friedman preached, corporate leaders must deprioritize all efforts that do not advance this single metric.
This emphasis was more than Friedman-like ideology. It actually became law.
Don’t blame me for XYZ, the corporate chieftain would declare, I’m just following the (fiduciary) law!
I remember arguing with my business professors over this point. Shouldn’t a business generate social, innovation, and — yes — capital returns? Why does the business-academic complex assume those forms of return are mutually exclusive?
And if businesses didn’t invest in their communities and produce future-forward innovations — neither profit generating from quarter to quarter — would those responsibilities flow to government or some other organization?
Would that be better for a two-tier market economy?
Of course, when politicians suggest that businesses exist for reasons beyond financial profit, they are labeled red-hearted commies. But our society lionizes white-collar leaders, so people take notice when Jamie Dimon’s commits himself to "customers, employees, suppliers, communities, and, yes, shareholders."
After worshipping the P&L gods without question for most of their careers, business leaders are starting to break ranks.
They are encouraging others to follow their lead:
Just as we are committed to doing our part as corporate CEOs, we call on others to do their part as well. In particular, we urge leading investors to support companies that build long-term value by investing in their employees and communities.
Perhaps business leaders will focus more energy on the most significant problems in society, including the existential one, and modernize the business-for-good narrative.
Free enterprise is the most powerful way to increase peace and prosperity. But only when its North Star goal is more imaginative than serving a single constituency.