The social responsibility of business | Alex Edmans | TEDxLondonBusinessSchool
TEDx Talks・2 minutes read
Businesses can either exist to earn profit or serve a broader purpose for stakeholders, with viewpoints varying between profit maximization and corporate social responsibility. Examples from Simon Marks and George Merck highlight the impact of prioritizing employee welfare and social responsibility on business success.
Insights
- Businesses can either focus on earning profit or serving a broader purpose for various stakeholders, including society, customers, employees, and the environment.
- Prioritizing employee well-being and serving a purpose beyond profit can lead to financial success and increased firm value, challenging the traditional notion of profit maximization as the sole objective of businesses.
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Recent questions
Why do businesses exist?
To earn profit or serve a purpose.
What is the social responsibility of business?
To increase profit or serve a purpose.
How do socially responsible companies benefit financially?
By outperforming financially in the long run.
Can businesses prioritize social responsibility over profit?
Yes, through corporate social responsibility initiatives.
How do employee well-being initiatives impact company performance?
By leading to increased firm value and profits.
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Summary
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Businesses Serve Purpose Beyond Profit for Success
- Businesses exist to earn profit or serve a purpose for shareholders, society, customers, employees, and the environment.
- The conventional view is that businesses exist solely to earn profit, as profit drives decisions that benefit society, customers, and workers.
- Economist Milton Friedman believed the social responsibility of business is to increase profit, assuming ethical behavior positively impacts profits.
- Corporate social responsibility is another view where profit is a byproduct, and businesses aim to serve a purpose, create quality products, provide a healthy workplace, and preserve the environment.
- Simon Marks of Marks and Spencer exemplified corporate social responsibility by introducing nutritious meals for staff after witnessing a worker faint due to hunger.
- George Merck of Merck Pharmaceuticals prioritized saving lives over profit, leading to the production of penicillin and saving countless lives.
- A study on employee well-being showed that companies treating workers better outperformed peers by 2-3% annually over 26 years, emphasizing the importance of employee welfare.
- Costco's focus on employee well-being, despite higher costs, led to increased firm value and profits, challenging the conventional view of profit maximization.
- Investors can support socially responsible companies that prioritize employee well-being, as these firms often outperform financially in the long run, showcasing the benefits of serving a purpose beyond profit.
