The Price of Profit

Much of our professional life is spent quantifying success. Every business is involved in some aspect of sales in the sense of exchanging dollars for product, so the "bottom line" way of assessing productivity - that is to compare revenue versus expenses - is the universally established way to measure success. Clearly, the greater the profit, the healthier the company. Or is it?

As witnessed by the recent BP disaster - one that is by no means an isolated event - has the business model singularly fueled by profit become too hazardous to our health? At the risk of oversimplifying, the public company model that values profit above all else supports the kind of cost-cutting that places men and environment at too great a risk. I am sure many more details will be uncovered regarding cost-cutting strategies that provided short-term profits to investors and other stakeholders. Tragically, the long-term risks of these policies were ignored.

It is easy to cast BP as an environmentally corrupt company, but to be fair to BP and thousands of other companies who operate within the public company model, the constant pressure to generate profit above any other value supports the kind of reckless behavior recently (and historically) witnessed. Oil producing companies probably do need greater rules, restrictions and safeguards (banking industry too?), and we and our environments do require greater assurances that oil can be mined without undue risk - given that we can accurately compute the risk of such complex conditions.

However, "the problem" if you will, is much greater than BP. I am not referring to the politics of oil, or coal, or any of the other dirty industries upon which our culture and lifestyle depend. I am referring to the standard business model whose sole emphasis is profit. Even so-called "green" companies must sustain a profit in order to continue in their noble causes. The corporation is an organism without a conscience; a conceptual machine driven by humans who in turn drive machines, other animals, consume resources, and produce profit for stakeholders. It is not surprising that when we look we find abuse proliferating in the corporation.

Unlike the criminal who defends his actions as the result of an abusive childhood, the corporation offers no defense for its actions. In spite of concise mission statements and media campaigns heralding community values, the true mission of any corporation is profit, and any action that increases expenses without offsetting profit is strongly reconsidered. Undoubtedly, BP managers made bad decisions regarding cost-cutting and our environment will pay the price for many years to come - in addition to the men whose lives were lost. However, when we take a moment to examine the reasons that BP and any other company make the decisions they do, it is to maximize profit, often at the expense of long-term interests.

It is the nature of public companies for stakeholders to make such demands on corporate personnel. Certainly CEO's have a choice: to comply, or find a different job. Would they find a company that truly values their employees, the environment, contribution to public welfare, etc.? Well, maybe there are some companies that do this, but the core value proposition of a company of profitability places altruism in direct conflict with the genetic predisposition of a corporate entity - that of generating profit.

Only when the profit motive changes will the behavior of the company change.