This piece is an excerpt from Dr. Scott B. Rae’s book Doing the Right Thing: Making Moral Choices in a World Full of Options (Zondervan 2013, Colson Center imprint), pages 131-134. Book based on the Colson Center’s Doing the Right Thing film series. Used with permission.
What is the appropriate role for business to play in society?
British writer Charles Handy, writing in the Harvard Business Review in the aftermath of the accounting scandals that brought down Enron, WorldCom, and Arthur Andersen, asked the provocative question, “What’s a business for?”
It may be very interesting for those of you in business to ask that of your company: “What are we in business for?” Or if you’re not in business, think about asking that to your friends or neighbors who are.
I suspect you would frequently get a look that said, What a dumb question. The most common answer would undoubtedly be, “To make money.” Or they might put it in terms they learned in business school when asked, “What is the purpose of a corporation?” The answer would be something they likely memorized: “To increase the wealth of its shareholders.”
Handy agrees that businesses have a duty to return a profit to the shareholders, or the technical owners of a public company. But he suggests it is an incomplete answer to the question “What’s a business for?”
The purpose of a business, in other words, is not to make a profit, full stop. It is to make a profit so that the business can do something more or better. That "something" becomes the real justification for the business …
Handy exemplifies the spirit of Adam Smith, who defended self-interest vigorously but also compared business to the professions, such as medicine and law. His point was that the bottom line was not really the bottom line for these professions.
Rather, the goal was to serve the community, and if the service was provided with excellence, they could expect a reasonable standard of living. The income they derived from their service was an expected byproduct, not the goal. It was conceived as a moral role in society, to serve the common good. The idea that a business exists solely to make money is a more recent view, different from the traditional role that business had a moral role to fulfill in society …
Of course, profit is necessary for a business to continue to exist. Profit is also a very important market signal that a business is deploying its resources efficiently. If a company is losing money, that is a signal that something is wrong and needs to be fixed. Conversely, increases in profit indicate resources are being used more efficiently now than in the past …
So let’s be clear – what is a business for? It has two primary purposes – to serve the common good of the community with goods and services that contribute to human flourishing and to provide meaningful work that develops its employees.