what is the purpose of a company

The cover story in this month’s Inc magazine is entitled Go Ahead and be Evil over the photo of Kevin O’Leary, aka ‘Mr. Wonderful’ on Shark Tank. The article comprises a healthy debate on whether or not a company should be philanthropic.

Now, being an entrepreneur in continuous learning mode, this is a topic to ponder. The question comes down to this: Should businesses of today be solely focused on profits or should we include social responsibility?

what is the focus of our business

Statistically Millennials almost unanimously believe companies should have a larger purpose beyond raking in profits. Who can argue that point? All successful companies have a driving purpose, some more honorable than others. Further, who can blame the generation being robbed by their elders leaving them with a pile of debt? I digress.

The Inc article debate gets intense between O’Leary and Adam Lowry. Mr. Wonderful argues strictly in favor of profit focus while Lowry stands firm that businesses should “save the earth” (my words, not exactly his).

To a Christian business owner such as myself, the dialog is misdirected. It is not about profit vs. social objectives, it is about stewardship. Personally I have been entrusted by a Higher Power with the reins of a successful company, a high caliber team, great suppliers and loyal customers. With that vision, should my company view include charity? I realize that many businesses out there include noble objectives in their business plan earmarking profits partially toward worthy causes. Problems arise however trying to balance this social motivation facing the ebb and flow of the market economy. What does the societal outlay say to the staff that labored for the company facing deep cuts during a downturn?

Kevin wins the day in my view so allow me to quote him here (page 55 – March 2016 Inc Magazine):

Here is the truth: the DNA of a business is to maximize returns to its shareholders, so they are incentivized to reinvest their capital and start new businesses, create new jobs, and provide innovative products and services that improve lives.

When you contort a business to change this mission, you destroy the very essence of what makes America great…And when a CEO takes on a social mission that doesn’t serve all constituencies, that’s a recipe for disaster.

If you’re going to adopt a social mission, it has to pay for itself. A business that disadvantages it’s model with expenses that don’t add value for owners get beaten by more efficient competitors. This is the Darwinian nature of competition.

The fair debate is this: Who should pay for it and where should the expense live—on the income statement or as a gift from shareholders after they have been paid their dividend?

The final question: Is being a good steward acting evil? Not so in my book!

Jim MullaneyJim Mullaney

READ MORE: If you like this article, you should read, “Are You a Fit for Small Giants?”

Jim Mullaney is President and CEO of Edoc Service, Inc. a “Fast 55” virtual company based in Cincinnati, Ohio.