The Ethics of Profit Maximization

Paper Summary:

This paper stresses that the various mathematics-driven theorems for profit maximization in an ideal business world do not account for the "real" workplace, where decisions must be made that take into account the moral and ethical repercussions of the firm's activities. The author cites the Williamson model to understand the tradeoff between profit and social responsibility, focusing on two components: The executive's willingness to forego profit for the amenity, and the effects of the amenity on profit. The paper points out the importance of supporting the family life of workers because the long-term effects of these kinds of policies are that a firm retains valuable employees, which impacts its profit maximization potential.

Table of Contents
Changing Theories of Profit Maximization
Static Theories in Imperfect Settings
Social Responsibility

From the Paper:

"The social responsibility of business has received a great deal of attention in recent years. A large literature on the subject has emerged, evaluating the implications for profits, stock returns, and even individual careers. One strain of literature provides prescriptions for businesses, attempting to dictate the appropriate behavior of business with regard to socially responsible actions. At first glance, the divergent view of businesses' obligations to society seems unrelated and contradictory. It is difficult to identify the attributes of acts to be characterized as socially responsible. A popular management text says that there is no single agreed-upon concept of social responsibility for business firms and managers. Views of what constitutes a socially responsible act range from "profit making only," to "going beyond profit making," to "a social obligation, beyond that required by law and economics" "

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