Can we have companies whose ultimate goals are not to make money?
Few weeks ago, Disney announced a sleuth of new TV shows and movies in an event called “Investor Day”. I found the event name to be rather strange. Do these investors care that the new Ant-man movie is called “Quantumania” as a reference to when the main character in the previous movie said “they really put quantum in everything!”? Do these investors care when it was announced that Hayden Christensen will come back as Darth Vader in the new Obi-Wan series? Or that Pixar is making a movie about the fake real astronaut who Buzz Lighyear the toy was based on? I don’t know about the investors, but I am very sure the fans went crazy about these announcements! So why wasn’t the event called “Fan Day” instead? Why do companies care so much about their investors anyway?
Well, as far as I can remember, the goal of corporations is always to make profits for shareholders. Some companies pride themselves as being customer centric, or innovation driven, or technologically advanced, but all of these ultimately serve to allow the companies to make as much money as they can. However, in the book “The Future of Capitalism”, in the chapter about Ethical Firm, Paul Collier argued that this was not always the case, and it doesn’t have to be.
The book talked about “Imperial Chemical Company” whose mission statement used to be “to be the finest chemical company in the world”, but later changed it to “to maximize shareholder value”. The switch proved to be disastrous to the company as its performance went off a cliff and was later taken over. Mr. Collier then posed this question: “Has any worker for any company ever got up in the morning, thinking ‘today I’m going to maximize shareholder value’?”. As an employee myself, I can’t help but agree with Mr. Collier: working for a company that is aiming to be the best company in the world is far more inspiring than working for a company whose sole purpose is to make more money for shareholders.
Mr. Collier then mentioned an idea put forward by the British Academy: profitability is not the objective [of corporations], it is a constraint that has to be satisfied in order to meet its obligations to its customers and its workforce on a sustainable basis. When I first read this sentence, I could not believe what I was reading. “Profitability is not the objective”; what heresy is this?? But then the more I think about it, the more sense it makes. Take Disney for example. When the fans are excited for future shows / movies, they create buzz and excitement that are infectious to other fans or future fans. This of course will drive profit for the company. And when the fans are not happy, even a massive franchise like Star Wars could stumble.
The statement does not say that profitability is not needed. It says that profitability is the mean not the end. Companies need to be profitable so that they can keep existing so that they can continue serving their workforce and their customers. What an enticing and radical idea! Perhaps if more companies embrace this idea, the world will actually be a better place.
