Purpose of Business

TWO VARIANT VIEWS

• Profit-Only Perspectives (Associated with
Shareholder Theory - Neoclassical theoretical
paradigm) – Narrow approach

• Profit-Plus Perspectives (Associated with

Stakeholder Theory) – Broader approach
 Profit-Only Perspectives
• Friedman (1970) the purpose of business is “use its
resources and engage in activities designed to
increase its profits …”
• Soros (2000) the single purpose of business is to
make money, other purposes merely distract from
this
• Sternberg (2000) “The defining purpose of business
is maximazing owner value over the long term by
selling good and services” Business purpose is not to
create employment nor to promote common good
 Profit-Plus Perspectives
• Drucker (2004) Profit is not the absolute goal of business. The
purpose of business is to create a customer
• Goodpaster (2003) : The corporation has to be a good citizen
• King (2001) Business is part of the global and the local
communities, its purpose is to contribute as a good citizen
• Zadek (2004) The purpose of business is not profit only, but
include human and moral factors
• Post (2002) Business has multiple purposes, including making
profit and contributions to its different stakeholders
• Krueger (1997) Business should make profit but also
contributing to an economically stable society, businesses
should be engine of growth to relieve poverty