I’ve always maintained that it’s stupid to think that a company’s purpose is to maximize its profits, in any version of the term. Now, everyone is jumping on the bandwagon that the current economic situation is due to an excessive desire for profit. From many quarters, including business schools, we hear voices calling for a new approach to economic activity.

Profit maximization for companies is a contradictory objective because the attempt to achieve it destroys the conditions that make profit maximization possible. If you want to maximize profits, you’ll probably want to fire people. If you fire people just because it makes more profits (or at least that’s what you think), those who remain will probably begin to distrust you and… This is just to mention a few ideas of the many that could be said.

Saying that the purpose of a company is to maximize profits is like saying that a person’s purpose is to breathe. It’s one thing for a person to be unable to live without breathing, and another for this to be their purpose. It’s one thing for a company to be unable to survive without generating profits, and another thing to say that profits are the company’s reason for existing. Satisfying a customer’s need should be the guiding principle of a company. The better this need is met, the better a company fulfills its purpose. And, by doing it well, the more money it will make.

Source: Miguel A. Ariño