Profit/Profitability

The very essence of a Business Enterprise is Profit. How Enterprise is performing, is it on sustainable path and of course is it adding value to stakeholders. The word stakeholder is something that is quiet holistic and main priority here are the shareholders, which are a part of the stakeholders.

The success of the enterprise depends on the profit that it generates and the value that it adds to shareholders (in terms of dividends or returns). An enterprise consistently doing so, is deemed to be successful, becomes more investor friendly/preferred. The shareholders are extremely happy that their investments are well protected and they are getting good returns.

As said by Milton Friedman (an American Economist-Nobel Prize Winner) that the social responsibility of any business is to increase its profits. This became an oracle on share holder value. He also added to this all important thought that the business should operate within the Law. But in the frenzy of maximizing profit and shareholder value, what really happens. 

The purpose of a company is to address the problems confronting us as suppliers and shareholders, customers and communities, employees and retirees. In the process, it generates profits, but profits are not the purpose of companies per se. They are the product of their purposes. A very thoughtful article: https://www.thehindubusinessline.com/opinion/time-to-abandon-friedman-doctrine/article32670806.ece, appeared in Business Line a few months ago coinciding of 50years when Milton Friedman’s essay was published in the New York Times. It has rightfully argued that in this chase of profit where the Enterprises have headed, what has actually happened and how humanity and earth have been impacted by it.

Time to abandon this doctrine. Isn’t it.