Apple CEO Tim Cook was confronted at the annual shareholder’s meeting last week by a member of a conservative think tank, the National Center for Public Policy Research, about the company’s decision to use its resources for pro-social programs, such as worker safety and environmental initiatives. The representative demanded that Apple commit to doing only those things which increase the company’s profits and, by extension, shareholder wealth. Tim Cook strongly denounced the suggestion and proclaimed that if an investor’s only concern was their return on investment, they should take their money elsewhere.
This exchange highlights two fundamentally different schools of thought on how to run a business. On one side, there is the traditional notion that a business’s sole purpose is to make a profit and that business leaders should do whatever they can to grow their business. On the other hand is the more recent idea that companies can make money while—or even by—being socially responsible.
Of course it’s important for businesses to make a profit, but how much is enough? Maximizing profits comes at a cost. There is only so much money in the world and the more you take, the less there is for others. Companies rightly seek to avoid waste and increase efficiency to maximize their profitability. But the cumulative effect of such efforts among companies competing against each other for a bigger piece of a finite pie can have a net negative impact on society as a whole. Outsourcing. and low wages lead to high unemployment and a shrunken middle class which has less disposable income to spend on the products and services businesses provide. When companies see their revenue decline they will implement more cost-cutting measures to maintain their profit margins, which further exacerbates the problem. The result is a widening gap between the rich and poor, but this is only the first stage. With an eroding consumer base, it’s only a matter of time before the top collapses, too.
A business climate that undercuts its customer base will ultimately fail. Business leaders are too often driven by the lure of short-term gains and fail to see the bigger picture. If you’re only concerned about tomorrow, you’re probably not planning for the future. Is it justifiable for a business to pollute our air and water if it saves the company money and increases their profits? Is it fair to pay people less money for more work simply to increase your stock price? That seems to be the argument the NCPPR is making.
One place where I think this profits-above-all mentality goes wrong is in the value of doing the right thing. Public perception of a company can have a huge impact on long-term profitability. When a consumer chooses between different products, their decision-making process is not limited merely to the look, price or functionality of the item. The brand is important as well. Many consumers vote with their wallet and make purchases based on the reputation of the manufacturer. Shoppers stay away from the products of companies they know have shipped jobs overseas, polluted local air and water supplies or failed to adequately protect workers or consumers. Conversely, shoppers are more likely to buy products from companies who strive to protect the environment and donate money to worthy causes.
In short, these pro-social business practices are good for the corporate bottom line. I applaud Tim Cook and Apple for their principles. Apple goes beyond corporate social responsibility. They proactively take steps to make the world a better place. Companies like Apple set a good example for aspiring entrepreneurs and I will do my best to follow their example as I work to build my own business. I want to make a company that’s not only successful but acts as a positive force for good in the local community and the country at large.