Do small businesses have a moral responsibility to create jobs?
Is a company’s social responsibility to community more important than the profits a company makes?
We’ve recently run across several articles, columns and blogs exploring these questions, which isn’t surprising given the importance of small business to creating jobs and the ineffectiveness of government policies to jump-start the economy.
We were especially intrigued with “The Business” column by John Bussey last month in The Wall Street Journal, describing the beliefs of Howard Schultz, the CEO of Starbucks. “Companies that hold on to the old-school, singular view of limiting their responsibilities to making a profit will not only discover it is a shallow goal, but an unsustainable one,” he said.
Bussey also quotes John Mackey, co-chief executive of Whole Foods. “From an investor’s perspective, the purpose of a business is to maximize profits,” Mackey said. “But that’s not the purpose for other stakeholders — for customers, employees, suppliers and the community. Each of these groups will define the purpose of the business in terms of its own needs and desires, and each perspective is valid and legitimate.”
Does this mean that in today’s tough economic environment companies should use profits to create jobs that might not be crucial to the business, if this serves the current needs of the community?
Yes, says New York Times columnist Joe Nocera. He wrote in a column this past summer, “With all their cash, companies shouldn’t be waiting for Congress to give them tax incentives to hire people. They should be trying to jump-start the economy — and fend off another recession — by making investments, and hiring workers that will lead to renewed prosperity.”
The country desperately needs to get people back to work. And yes, our national politics today are pretty divisive and not conducive to creating an environment where business feels confident about their future costs.
Options are few, but to ask businesses to create jobs without the necessary customer demand to justify such hiring seems like an inefficient use of resources and as short-sighted as business owners just focusing on the profitability of their company. Let companies invest in their company because there is a business case to support that investment, and invest in and give back to their community as businesses has done for generations.
Mackey’s admonition about the role of business in our society rings true to us. However, we would also add this: Businesses need to strike the proper balance between a company’s profit motive and satisfying the needs of stakeholders. Clearly, there will be tension between the competing interests.
It is the job of the leadership of the enterprise to work through these tensions and develop solutions that satisfy the owners of the company and the many stakeholders. This is a difficult challenge, but we see these different interests as not necessarily needing to be mutually exclusive.
Our community is very fortunate to be the home of many great companies performing lots of terrific work to enhance both the economic and social infrastructure in the county. Our community has been and will continue to be best served by small businesses that have long-term sustainable business models that serve all the stakeholders of the enterprise.
Creating that sustainable model is any businesses’ moral responsibility.
Pat Sisneros is the vice president of College Services at Everett Community College. Juergen Kneifel is a senior associate faculty member in the EvCC Business program. Please send your comments to entrepreneurship@everettcc.edu.
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