"Why do businesses exist? To earn profit? Or to serve a purpose? For the shareholders?

or for
the society?" Alex Edmans discusses the importance of social responsibility of a business.

Business does exist to generate profit. However, corporate social responsibility is as important
as generating profit. Businesses exist to serve a purpose. Not only to provide customers quality
service and products, but as well as serve its people and the community. Putting employees first
will bring out a better income since they will efficiently do their work, the product quality
improves, which will affect the influx of customers, and will naturally be followed by profits.

Serve a purpose and then profits will follow.

But what proves this is right? Alex Edmans did a study to knowe if employee's well-being
causes good performance or rather good performance allows the company to spend on
employee well-being.

The results of his study shows that the hundred best companies to work for in America from
1984-2009 are companies who treated their employees better than their rival companies.

This proves that management should change its way of thinking about their workers. This is
easier said than done because treating your employees better also means greater costs. Since
the conventional view that what the employee earns, is what is taken from shareholders exists,
companies often opt to please their shareholders by paying employees less while making them
work harder-just to squeeze all profits possible.

However, Edmans study results suggest otherwise. That treating employees well actually pays
off in terms of firm value. Paying employees better, having a positive environment and offering
good benefits will enable companies to hire better people and will cause employees to be loyal
to the company.

Caring about society is not at the expense of profit but rather supports profit. Companies that
do well in social responsibility does pay off in high return. Some of the most important factors of
a company's value are its corporate culture, customer loyalty, innovative capability that are not
shown in financial numbers. Thus, we should look beyond the short term and the quantitative,
and instead look into the long term and the qualitative.

Just because social corporate responsibility cannot be quantified, does not mean it cannot be
measured. Businesses exist to serve a purpose and only by doing so will they generate profits
in the long run. To generate profit, a company must have a purpose.