Business, Purpose of

The Importance of the Question of Purpose

There are two reasons why determining the purpose of any organization or institution is important. The first is that the purpose of anything determines whether the activities of an entity are appropriate. Given the ethical maxim “Good is to be done and harm avoided” and given the fact that the purpose determines what counts as good, the purpose of any entity will determine when activities within that institution or entity are appropriate. In other words, the purpose of an entity furnishes us with the criteria of evaluation. For example, a knife has an end or a purpose. What makes a knife a good knife is how well it “fulfills its purpose”—that is, cuts. Analogously, a business is designed for some purpose, and what makes it a good business is determined by whether and how well it fulfills that purpose. If the main purpose is to maximize profits, then a business with a good bottom line that maximizes profits is a good business. But some businesses that maximize profit can act in an unethical fashion. This means that if there is a purpose over and above the maximization of profit, or shareholder wealth, we would need to determine what this purpose is in order to determine whether the pursuit of profit needs to be overridden by ethical considerations.

The second reason that determining the purpose of an object or entity is important is that the purpose furnishes criteria for determining whether the object or entity is well designed. Again, using the knife analogy, a knife is designed well if on account of the design, it is able to perform its function most effectively. Through experimentation, people have realized that a knife cuts well if it is designed with a strong handle and a sharp blade. In the case of business, if the purpose is to make a profit, the organization will be well designed if it fulfills that purpose and maximizes profit. It is evident how this purpose will greatly influence many diverse aspects of the organization, including perhaps the manner in which employees are treated and the allocation of resources. Further, the purpose of the business also determines and prioritizes the responsibilities of the people who are charged with managing the business. If the purpose of business is to make a profit, then the “excellencies” of the managers will be those qualities that enable them to improve the bottom line. However, if there are other purposes of business besides profit making and wealth creation, they need to be determined in order to be able to ethically evaluate business activities.

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