Is it true that a successful company has to make a profit? Before you answer, I invite you to think about this question: What is a company’s purpose in the world?
The purpose of all companies should be to contribute to society in a meaningful way for making the world a better place for everyone. But the rise of the shareholder capitalism has led companies to focus on short-term financial targets, even if it means cheating customers and cutting their most "valuable resources" with massive layoffs.
LinkedIn founder Reid Hoffman and entrepreneurs Ben Casnocha and Chris Yeh phrased it well in their book "The Alliance: Managing Talent in the Networked Age.."
"A business without loyalty is a business without long-term thinking. A business without long-term thinking is a business that's unable to invest in the future. And a business that isn't investing in tomorrow's opportunities and technologies -- well, that's a company that's already in the process of dying."
If you cut labor cost, your profit increases, and your investors are happy. But these investors will sell the shares. I’ve seen this reality and have come to a conclusion on what we want to achieve. We can make investors, clients, and employees all happy – not one over the other. This is our contribution to society.
But a company will never fail as long as it has these two things: 1. goods and services that people need and 2. happy employees.
We recognize we need to make a profit and if we fail to sustain ourselves, we won’t be able to continue the challenge to make the world a more equitable place. That’s the game we want to win.
Often college students ask me, “what’s your corporate social responsibility?” It’s more than just volunteering a couple days a year and donating money – corporate social responsibility is embedded in the way we run our entire organization.
It’s a KPI that makes us socially responsible leaders, not just profit generators. When we place the majority of value on shareholders, we are doing a disservice to our communities and driving greater income inequality.
If the market cap is high enough, shareholders might sell and generate a profit. But after they sell the stock, somebody else will buy that stock. Then we as a company have to continue slashing budgets and raising sales at any expense just to make a profit. But for what?
So I ask again, what is a company’s purpose and do we really need to pursue profit first?
When customers pay us because they are happy with our product and service, we can create a high quality of living for employees and their families while also paying our share in taxes to support community and infrastructure projects. With this power, we, along with other companies, are responsible for creating a more equitable society. There's a long way to go, but we're in this to win this.
Will you join us?