"A Corporation exists to increase value to the shareholders." This comment was pretty much ingrained to me at B-School. Granted, I went to a Business School that held to the principal of creating sustainable prosperity worldwide, and tried to balance this teaching, but in financial courses, this is what it comes down to. Corporations' sole purpose is to ensure that its owners will see the value (ie. price) of their stock increase on a quarterly basis. Many corporate CEO's can attest to the fact that reaching that goal quarterly is a significant challenge which they understand can be the difference between keeping or losing their position. I compare CEO's to professional sports' coaches. They are there for the win. When they do win, people adore them. Often it takes only one loss, and they completely lose the lose the loyalty and goodwill of their "fans". The problem is that corporations earnings can be cyclical, and a demand to maintain increasing quarterly profits is attainable only at high moral, social, or even environmental costs.
I contend that a corporation exists to increase the value to the stakeholders. The stakeholders are all those members of society who have a "stake" in the corporations well being. No, they cannot all be given equal voice when making decisions, because otherwise the corporation will become stagnant, but all of their best interests must be kept in mind. Among these stakeholders are the stockholders. I still believe that a business exists to make money, to grow and increase profits. I don't hate wealth. As a matter of fact, I believe that a certain level of wealth would be very welcome by everybody... even the most socialists. Investors have given their money to a business, and they haven't done so for philanthropic reasons. They have done so because they hope to get a positive return from their investment. They want to make money! They have every right to do so. But in doing so, they still need to expect that it will be at the consideration of the rest of the stakeholders. If a business cannot make great profits while considering its stakeholders, perhaps they should consider investing in businesses that can.
Employees are another set of stakeholders. Businesses should hope to improve the lives of those that contribute directly to the businesses success. May I add, it is good business to do so. I remember listening to my dad's explanation as to why he encouraged and even financed education among his employees. They became better employees the more educated they were. Many went on to complete high school degrees, followed by college, and in a handful of cases, followed by graduate degrees. My dad would be questioned about how it served the purpose of the business when those who pursued graduate degrees went on to take executive roles in other companies. "How it serves the businesses purpose? Now the CEO or COO of this and that company is a good friend of our company. He appreciates us, and wants to continue to do business with us. We helped him get to where he is today." It is good business to treat your employees as assets and not liabilities. Employees may have great ideas to make the business grow. In service industries they are often the first contact with your clients. In manufacturing industries, a goodwill toward the company can result in higher productivity. Treat them well. Pay them well. Help them grow. This is a corporations responsibility.
Clients and the community at large represent an important stakeholder. There are businesses that shouldn't exists. Nonetheless, it is not always the businesses job to be dictating to clients what is in their best interest. Clients can make choices, and if there is a real market desire for those choices, why shouldn't honorable corporations try to meet this need? For instance, we all know that fast food is not healthy. Nonetheless, I like most people in society today, love a fast food burger with large fries and a soda. If one of my favorite chains decides that they will only serve baked veggie burgers, and carrot sticks, I will take my longing for fast food elsewhere. I don't care how many documentaries are made telling me the evils of fast food, or processed foods, I as a consumer will still choose to eat what I feel like eating at that moment. A savvy business person will see that, and sell me what I want. He will try to sell me as much as I'm willing to buy. That is his job. Nonetheless, if he knows that he can improve those fries by cooking them in non trans fat oils, that are better for my health, perhaps he should do so. If he can substitute chemical ingredients for natural ones. Even better. If he can stay away from my kids elementary school, I would really appreciate it. At the very least, if he knows that something can potentially kill me that I am unaware of, he should keep me in mind. (I use he, because unfortunately today, most CEO's making these decisions are still male. As a father of three young girls, I look forward to using the term she).
In my opinion, a corporation exists to increase the value for all stakeholders