What is the business of business?

Companies have, in one form or another, been around for centuries, but their purpose is changing. And it’s a change we need.

The history of companies is often traced back to 1600 when the East India Company was established. It became immensely powerful through trade and its interests in the Indian sub-continent. Remarkably, it also had its own large private army.

What we regard as the modern limited liability company has its roots in the nineteenth century. Over decades, fortunes were made with the rise of large corporations in industries like railroads, oil and steel.

With minimal labour laws, working conditions were often poor. But this period also gave rise to businesses that did care about living conditions and workplace safety. Port Sunlight in England was created as a village to house workers for a manufacturing business which later became Lever Brothers and then Unilever. Bournville (also England) was a village for Cadbury workers. Providing green space and improved living conditions differentiated these businesses from many large industrial corporations of the time.

Fast forward to later in the twentieth century and we find the current philosophical framework for companies was cast by the work of economist Milton Friedman. In 1970 he argued that the single purpose of companies is to make money for their shareholders. They must operate within the framework of the law, but their mission is profit maximisation. There is no room for a social purpose.

See more of John's article here:-

https://www.stuff.co.nz/business/opinion-analysis/122980244/monday-thoughts-what-is-the-business-of-business



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GENERAL INFORMATION ONLY

This information is general information only and does not take account of your individual investment objectives or financial situation.
Pathfinder Asset Management encourages all investors to seek independent financial advice prior to making investment decisions.