A in society. In the talks of Edmans,

lot of attention has been paid to businesses in terms of their responsibility
to society as the corporations gain the dominant position in society. Since
businesses by corporations have a large influence on various stakeholders in
society(Freeman, 2002), it is highly critical to consider the purpose of doing
businesses in society. In the talks of Edmans, he brought about an important
argument about the profit and purpose of businesses. Then, he concluded the
discussion by the statement “Businesses exist to serve a purpose, and by doing
so, and only by doing so, will they generate profits in the long run. To reach
the land of profits, follow the road of purpose”. In this context, purpose means
something businesses can contribute to society such as customer loyalty,
employee satisfaction, and so forth. Profit is what Friedman(1970) described as
the responsibility of the corporation. Edmans reached this concluding remark
above based on several claims he had made.

     First of all, he mentioned that it’s
impossible to exactly calculate the benefit of ethical behaviors. On the
contrary to the perspective of Friedman that do cost-benefit calculation,
Edmans claimed that there’s no way you can numerically calculate the cost and
benefit of the each ethical conducts. Secondly, he emphasized the corporations
that take responsibility to society with purpose will gain high profitability
in the end by introducing several corporations with moral purposes such as
Marks & Spencer. Simon, a former chairman of Marks & Spensor, had made
decisions of providing nutritious meals to all employees at nominal prices even
though it was costly because he really cared about workers. This seems to be
contradicting to the Friedman’s calculation view but Edmans insists that Marks
& Spensor achieved excellent reputation and profitability. In addition to
this, he introduced his research on employee well-being that explain the higher
employee well-being the better the corporations’ performances are. Through this
discussion, he concluded that even if you cannot exactly calculate the benefits
of ethical conducts, socially responsible behaviors by the corporations will
lead to profitability in the end since profits will naturally follow later.
Moreover, Corporate Social Responsibility which serves purpose of businesses is
consistent with the profit of corporations and investments in CSR is not just
an expense in the long term. Based on argumentations, he had reached his
conclusion above.

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     I generally agree with his view on the
relationship between purpose and profit of businesses to an extent that CSR can
support the profitability of business. This is because CSR and profitability is
not zero-sum since “doing good does not necessarily rule out making a
reasonable profit” (Handy, 2002). Rather, “behaving more responsibly can make a
firm more profitable” (Vogel, 2005). Certainly CSR may not lead to the
short-term profit maximization but CSR activities can be beneficial for
corporations to create positive visibility, reputation, and consumer trust
(Crouch, 2011). Those positive corporate image or identity built through CSR
activities will be beneficial because they can produce appealing
pictures(Alvesson, 1990). Hence, it can be said that CSR activities can be
consistent with business profitability from the perspective of image management.

     Moreover, he perceives that caring social
responsibility is not something the corporations do when they can afford and
rather profits will come later as a result of following purpose. This
perspective of CSR seems to be in contrast to Friedman’s shareholder theory
that “the only responsibility of managers was to increase shareholder value”(Vogel,
2005). Yet, if CSR bring about more profitability, his view isn’t far away from
Friedman’s view that “the only responsibility of a business is to increase its
profits”(Jones, et al, 2005). The distinction between these views is that
Friedman tends to be short-term perspective on profit-maximization and Edmans
tends to have long-term perspective. Since business is continuous, the amount
of maximized profits depends on the period. I believe that following purpose of
business will enable the business more profitable when the purpose is something
satisfy societal needs as George Merck tried to save life by utilizing science.
According to Porter and Kramer(2011), businesses which create both economic and
societal values will be more successful in the long term than short-term
profits. Consequently, doing business with good purpose will lead to the
profitability in the long run. 

     However, there is a several points I’m
concerned with regard to the purpose and profitability. Edmans argues that in
order to earn the profits in the long run, it is important to follow the road
of purpose. Ideally his claim may be valid because socially responsible
conducts will attract and motivate workers. But, in reality the situation may
not that simple. This is because for small to medium sized companies, there is
a difficulty with financing the business for a very short-term. Even if those
companies have good purposes, it’s difficult to continue to do business with
their purposes as long as they can earn enough profits to continue businesses.
This does not necessarily deny the significance of having purpose of business
but it’s questionable if all companies are capable of prioritizing socially
responsible conducts over the short-term profitability from the beginning of
operations. In theory, business with purpose may bring about the profit in the
long-term but this may be challenging in practice for the companies that don’t
have enough capital to run operations.

conclude the arguments, Edmans claimed that doing business with purpose and
socially responsible business conducts are important as opposed to Friedman’s
shareholder theory. Edmons’ belief is based on several assumptions which are
impossibility of calculation of every benefit, cases of Marks & Spencer and
his research on the relationship between employee satisfaction and performance.
I agree


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