Monday, June 06, 2005

Corporations and Social Issues

Interesting article by Ian Davis of McKinsey & Company as he describes how corporations should take a position between "the business of business is business" and Corporate Social Responsibility. A worthy read.

I like this description he gives of the role of a corporation in society:

A starting point may be for CEOs to articulate publicly the purpose of business in less dry terms than shareholder value. Shareholder value should continue to be seen as the critical measure of business success. However, it may be more accurate, more motivating—and indeed more beneficial to shareholder value over the long term—to describe business's ultimate purpose as the efficient provision of goods and services that society wants.

This is a hugely valuable, even noble, purpose. It is the fundamental basis of the contract between business and society, and forms the basis of most people's real interactions with business. CEOs could point out that profits should not be seen as an end in themselves, but rather as a signal from society that their company is succeeding in its mission of providing something people want—and doing it in a way that uses resources efficiently relative to other possible uses. From this perspective, shareholder-value creation or profits are the measure, and the reward, of success in delivering to society the more fundamental business purpose. The measures and rewards reflect the predominant values of the relevant society.

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