COMMUNITY BENEFIT
THE AD WAS HEARTWARMING AND SWEET. A local business was gifting thousands of dollars to various charities helping people in need. It was a wonderful example of business helping the community in a holiday time of need. Now I hate to be the mean old Grinch, but I’d like to ask a few questions.
The firm mentioned isn’t doing all that well. It’s surviving, hanging on through the ten year drought of the Michigan Lost Decade, but it isn’t real healthy. It hasn’t paid a dividend in a couple of years. Its stock price is pennies. Its workforce is downsized. Compared to its peers, it’s stable and healthy because it hasn’t gone out of business. Still, that’s a far cry from strong and profitable.
"Social Responsibility?"
So doesn’t that make the story even more heartwarming? Doesn’t that define what we call “social responsibility?” Isn’t giving back to the community the true goal of a business enterprise? Isn’t sharing the wealth a moral imperative? What exactly is the true purpose of a business enterprise?
My view? Simple: the highest purpose of a business enterprise is to make a legal profit.
"Make A Profit? That's it!!"
That’s it! Make a legal profit. Pay your lawful taxes. Compensate your labor according to their productive worth, as determined by the market. Distribute the profits to the owners, after retaining enough earnings to ensure the continued success of the enterprise. If you can do that, you’re doing better than most. What about social responsibility and giving back to the community? The simple answer: a successful business automatically does incalculable social good simply by operating.
A successful, profitable business provides something people value. Whatever it is, product or service, the successful business fulfills a need. The lives of its customers are enriched and made easier or more enjoyable by the product the business provides. Maybe it’s WalMart enriching the lifestyles of lower income people by providing goods for less cost, so they can have more of their limited wealth to spend on other things. Maybe it’s my corner hardware store where the people know every item in the store, or Home Depot where they carry cheap stuff in bulk. A successful product itself enriches society.
A Successful, Profitable Business...What Good Is It?
A successful, profitable business hires people. That creates jobs. The best thing you can do for someone is provide employment. But without success, no business can afford to hire anyone. No jobs. The societal good of creating jobs is best appreciated when there aren’t any. Folks with jobs spend money, buy goods and services, buy homes, pay taxes, and get the prosperity cycle moving upward and everyone benefits. Now that’s real social progress.
A successful, profitable business needs services and pays for them. This spreads wealth around to building owners, truckers, subcontractors, and ad firms. Successful businesses advertise, which supports the newspapers. It’s always a mystery to me reading published editorials denouncing evil greedy business, when businesses are the ones making it possible to buy that poison ink by the barrel.
You REALLY Want To "Spread the Wealth Around?"
A successful, profitable business pays taxes. This is how the services everyone wants--and lots of folks demand--are supported. The business enterprise doesn’t do its thing for the purpose of keeping us protected from crime and fire—but that’s the actual result.
A successful, profitable business spreads wealth around as efficiently as a seed machine. 20th Century Detroit was a wealth geyser, and that wealth gushed down to all levels, including poor African-Americans who fled the Jim Crow south. One of the great “wealth spreading” events was Henry Ford’s institution of the $5 day. But old Henry didn’t do that because the Ghosts of Christmas stopped by. It was 1915, Europe was aflame and the demand for product meant Ford needed a reliable source of good productive labor. The extra pay was for market value received, not for charity.
So for Social Good, Wealth Sharing, and Charity Too...
But while we’re speaking of charity, a successful business does indeed give to charity, both the enterprise itself and the individuals who have profited. But this is a by-product and function of the wealth earned by the enterprise. Without profitability and success, there’s no money to give. Ask all the local charities and non-profits what life is like without GM support.
So if you want social good, charity, and wealth sharing, the best thing to do is leave
the business alone. Left to itsown devices, businesses will do all the things the politicians and social activists want to see done. Only they’ll do it without the politicians and social activists, which may be the reason those groups are always eager to attack business.
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