Is it problematic if companies are exclusively interested in profit maximisation?
According to Friedman’s framework, businesses have only one social responsibility that is the doctrine of maximising its profits following the rules and laws of competition without fraud or deception. This view holds that businesses should not be implicated in social issues, given that they are not appointed with the understanding of dealing with social matters (Friedman, 1962). On one hand, this standpoint accounts profit as the business priority and advantage which drives economic natural selection, in fact, increasing the total cost of product while lowering return on investment would lower profits. That, is contradictory with the managers responsibility of creating and maintaining a practicable business that can contend the market (Alexander, 2007). This is also supported by the statement that “economic and legal responsibilities are ‘required’ while the ethical responsibilities are simply ‘expected’, and the discretionary/philanthropic responsibilities are ‘desired’”(Caroll, 1979).
However, on the other hand, the Friedmanian business case, which may be relevant in the short term, can result problematic in the long term. Profit maximisers become the optimal survivors in a situation of perfect competition, where companies have no market power (Shaffer, 1989). This means that businesses should run in function of abiding economic performance by avoiding momentary conduct that is socially and environmentally damaging. The maximisation of profits does not take into account the integration between business and society. In fact, financial profitability should be seen not only for self value but as a reflection of the interests of society (Porter and Kramer, 2006). The arguments in favour of implementing morally practices fail because they do not counter-act the decision making process focused on maximising profits as the primary value, and give no short-term benefits to businesses(Alexander, 2007). What should be prioritized is the ideal environmental sustainability as a primary filter. As proposed by Simon (1993), economics assumes that people maximise utility beyond financial profits, and that economic gain is not the dominant human motive. Similarly, for Davis (1960), corporations require to have obligations beyond profit maximisation by reason of enjoying larger economic and social influence in society.
The concept that environmental sustainability is preferable to the filtering value of maximising profits derives from an eco-centric view. The notion that defines an action good if it benefits the larger society as humans are members of a larger bionic community (Leopold, 1966; McGaa, 1990, 2002). In conclusion, there is evidence that companies with higher sustainability standards outperform considerably their opponents in the long run, both in terms of performance and stock exchange. The advantage is substantial in divisions where instead of firms, the customers were individual clients (Eccles et al., 2011).