Profits Really Do Matter; So Does the Society Within Which We Generate Them

Ian Davis, worldwide managing director of McKinsey, has a thoughtful piece over at The Economist attempting to mediate a truce between the evangelists of "Corporate Social Responsibility" and the Milton Friedman-ite school that "the business of business is business."  Starting from the premise that "It is time for CEOs of big companies to recast this debate and recapture the intellectual and moral high ground from their critics," Davis rightly points out that taking an absolutist stance at one extreme or the other (as some readers feared I had) is neither intelligent nor a guide to action, and suggests a way to recast the debate.

What's wrong with "business is business?"  For starters, if taken too literally it invites firms to overlook or ignore societal trends and emerging consensus's at their peril.  Merely mentioning the oil exploration and tobacco industries proves the point, as do the still-evolving public expectations of the pharmaceutical sector, the fast food industry, and big-box retailers.  Pretending that societal shifts are not germane to corporate strategy is an exercise in managerial malpractice.

Meanwhile, the CSR camp has its own set of blinders:  Calling for firms to report on diversity and sustainability, or to strike superficial and transitory partnerships with NGO's, is likewise divorced from what drives corporate strategy, and since firms know this, they typically park their CSR-responsive personnel safely out of the line of fire in harmless backwaters such as corporate communications or investor relations. And one must add that overlaying the entire CSR movement is also the repellent whiff of lugubrious and self-righteous jeremiads.

What "high ground" does Davis suggest?  Rather than having CEO's beat the rather pallid drum of "shareholder value," he suggests:

"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."

And the defense of profits?  Profits are the signal that the firm is providing goods or services that society genuinely values, and doing so by using resources at least as efficiently as anyone else. 

Noble?  Indeed. 

Now what has this to do with law firms, you're asking?  It is to recall, lest we forget in worshiping before the altar of profits-per-partner, that the profession has a noble heritage in advancing the provision of justice—and that we can afford to remind the public of that at times.