Changing Profit

August 29, 2016 at 9:04 pm | Posted in Books, Economoney | Leave a comment
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A standard corporation is structured to be bottom-line driven. Ethics or environmental concern can only be engaged if it can be showed to improve profit. Often, they are purely marketing efforts. But if consumers demand healthier products, the corporations will comply. If consumers demand cheapest, that drives out most all other concerns. Some markets become a race to the bottom.

As corporate businesses have grown larger and become more ubiquitous, they’re having a disastrous effect on local economies, the environment, ethics, employment, and the long-term viability of social structures. Civilizations have not historically lasted when the income ratio (highest to lowest) becomes as great as it is now.

Add in the effects of technological revolution and you lose the need for full employment. Without work in our culture, you loose your role in society. This is especially difficult for youths if they cannot get established. They can become alienated and without motivation to support the community. Other social forms like gangs and protest become prominent.

But more recently, new models for business have arisen. One is B-Corps, corporations that can have built-in ethical or environmental principles. Business that can act in the interests of society along with profit generation.

A Canadian variation is the Community Contribution Company (C3) which caps profits and channels the surplus into social causes.

But what about designing a business that is not for profit at all? Non-profits have been around for as long as for-profits, but the not-for-profit style of enterprise is distinct from charities.

As the authors of a new book on the subject (How on Earth: Flourishing in a Not-for-Profit World by 2050) note “A successful not-for-profit enterprise includes paying employees, managers and CEOs fair salaries. This idea is not a sacrificial business model.

why don’t you just advocate for social enterprise or for Benefit (B) corps? We think those business terms don’t tell us about what happens to the profit, and they don’t tell us about the ownership of the company.

Not-for-profits can be purely purpose driven, and not distracted by any need to maximize profit.

Many of us may not be fully aware of how these pressures of profit generation guide our lives. The ubiquitous marketing and the culture of consumerism are core pieces of the for-profit system because for-profit companies have to grow every year.

This pressure leads industries to always work at creating new markets and new needs. We see a broader trend of “manufacturing needs” through marketing, convincing us that we’re not good enough and that we need to buy more. In a world of mostly not-for-profit companies, all businesses would be purpose driven and wouldn’t have the same pressure to constantly expand their bottom line to compensate for extracted value.

It’s a fascinating idea – companies and thus jobs driven by meaning and purpose. Business that supports community rather than preying on it. A massive reduction in junk. A winding down of massive companies that have more influence than elected governments.

We’ll see.
David

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