Every business has a responsibility to its owners and shareholders to increase its profits, but successful businesses also help provide for the community. Financial managers don’t often think about the business’ social responsibility to increase profits. However, while their main concern may be making money for themselves and their company, their efforts will often generate revenue within the community, providing benefits which business owners and shareholders may never consider.
A business’ stakeholders include all those who have a stake in the success of the business. This includes stockholders, customers, employees, suppliers, local government and the community at large. A stakeholder value perspective places worth on social responsibility above profit. However, if the business is not profitable, it cannot provide for its valuable stakeholders. Thus, the business has a social responsibility to all involved to increase its profits. As long as the business works to balance the needs of all stakeholders, it should have no problem meeting its social responsibilities.
Tax revenue generated by successful businesses helps build the infrastructures that businesses use. Without roads, utilities, phone lines and other infrastructure, most businesses would not be able to operate. However, businesses are not the only entities that use this infrastructure. The community also benefits from high quality infrastructure, which is more difficult to maintain without the existence of successful businesses in the community.
When businesses increase their profits, they often create new jobs. Employees benefit from these jobs, and the community benefits from the money spent by these employees. When employees are able to spend money and pay taxes, they indirectly contribute to schools, libraries and other public institutions. Individuals who work for successful organizations often choose to contribute part of their disposable income to the community. This is a positive byproduct of a successful business. As long as the business’ employees are able to retain their jobs, they will have access to disposable income, which they may then use to help their community, of their own free will.
While the needs of the community are important, business leaders must not sacrifice the business itself simply to meet some ideal of social responsibility. The needs of the community must be balanced with the needs of the organization. Companies should never be forced to give money to the community. If the business fails, then its contributions to society will end. Thus, the business’ main objective should be to make money for its owners or stockholders. As long as this happens in a legal and ethical manner, the social benefits of increasing profits will follow with little effort on the part of the business.