THE ROLE OF A CORPORATION, PART 3
By Gary Silverman, CFP®
Today I’ll conclude the series on the role of a company in society. Traditionally, a company owes its allegiance and its profits to its owners. On the other hand, since the company could not function without all the support from society (people and institutions), it is them that should share in that hefty pie.
Capitalism vs. Socialism. Worker vs. Company. Collective vs. Individual. Private vs. Government. Us vs. Them.
No, sorry, no time to get into all of that. Instead, I want to talk about a middle ground that has been around for a long time. Owners, having provided resources to the company deserve to be compensated for it. They did not invest, found, or loan as a charitable function. They expect to reap some of the benefits if the company is successful.
And it has always been “some” of the benefits. Yes, some owners and the managers they employ think that it is a “win” to pay their workers as little as possible with no benefits in barely livable conditions, but they eventually earn the dividends of their folly. Yes, providing for a workforce lowers profits in the short term; but it will reap rewards later by creating an environment of less turnover, a more motivated workforce, and happier customers (especially with customer-facing staff).
Paying suppliers a fair amount for what they provide can gain you quicker service, on-time deliveries, and better quality.
Building a product that meets and exceeds what you promised your customer and providing the service you’d expect for yourself earn you word-of-mouth goodwill (the best advertising there is) and future business.
Being flexible where fair and possible when it comes to your employee’s life-balance, caring for parents, dealing with ill children, opportunities for charitable outreach, education, advancement, gives you a chance for employees that others miss and can give you an edge in a tight labor market.
Your company can generate respect from the community, pride from your workforce, and less time fighting litigation, if it either refrains from hurting the environment or is honest about the harm and works to mitigate it.
Making the communities where your business is located better creates a richer life for your employees and customers. In turn, your company is rewarded with increased productivity from the employees and increased loyalty from the customer base.
Companies have known this for a long time. None of this was just discovered recently. The concept that being a good business is good business is not a new one. And being good at business reaps profits enough for all those concerned.
Is this perfect? Does every “good” a business does get rewarded? Do sometimes the bad ones win, and the good ones go bankrupt? Sure. This is a real world, not one of theories out of textbooks. But if business, labor, government, and constituents—all important pieces in the economy puzzle-- act like they are working toward a commonality of leaving all that they touch better than they found it, things will work out just fine.
Yup, I’m that optimistic.
Gary Silverman, CFP® is the founder of Personal Money Planning, LLC, a Wichita Falls retirement planning and investment management firm and author of Real World Investing