Making a Good Company

A company’s profitability is one of the most basic evaluations of business success.

In order to stay afloat, a business must at least bring in enough money to break even. In addition, the owners and employees want compensation commensurate with their effort and skill. As such, most people consider the drive to make profit to be a central part of business.

However, being socially responsible above and beyond what is legally necessary and being profitable are not mutually exclusive terms for a corporation. In fact, in many cases a ' good company' can be more profitable than a standard company, especially in the long term.

First, we may examine the rate of employee satisfaction and employee turnover. The traditional model of a corporation assumes that employees should be paid as low a wage as is the industry standard. However, in a 'good company', employees are paid higher sums than they would be in competing firms, and are given other perks.

In one firm, the New Belgium Brewery Company, employees are given perks such as free massages, the ability to bring pets or children to work, and (to defy all economic principle) even a free lunch. Such employee perks result in lower rates of turnover and absenteeism, which in turn save the company money, as finding new employees is an extremely expensive and time consuming process.

Furthermore, if employees feel rewarded and valued, they are more likely to produce exceptional work for the company than an employee who is made to feel average or replaceable.

Finally, it is important to note that programs to encourage employee loyalty need not be expensive – simple perks such as office parties can build the type of employee loyalty that saves employers money in the long run.

In addition to the dynamics within a company, a 'good company' can use its ethical standards to create a stronger brand to consumers. By taking pains to communicate their ethical behaviour to the consumer, companies can gain the support and trust of larger groups of people.

In the case of the Star Kist tuna company, using tuna from dolphin-safe suppliers drove up the price of their tuna. While they sold more expensive tuna than their competitors, people recognized the positive social commitment of Star Kist, and Star Kist sales actually increased.

This was in contrast to the free-rider theory of economics, which states people will choose the least expensive product, and which is a key idea behind traditional companies. As consumers become more and more socially and environmentally conscious, the benefits of positive image become more important for firms that wish to remain competitive.

On an even larger scale, the activities of a company can fundamentally alter the marketplace in which it functions. In some cases, years of legal yet ethically questionable behavior can impact the long-term welfare of a firm. In one example, credit card companies and mortgage companies built a business model based upon people buying more than they could afford – certainly not a good company model.

In the credit crunch, traditional companies who did just what the law required (despite it being ethically murky) created problems for themselves in the long term. A good company, which always looks out for the good of its customers and community, would be much less likely to find itself in such a situation.

On the same track but on a local scale, companies which use their economic power and social influence to help build stronger communities have the opportunity to build a large customer base as well as create stronger local markets overall. Consider a real estate investment company which operates apartment buildings. Traditionally, the company would slash operating costs as much as possible while keeping units filled.

In a newer model, the company's decision to improve their property and donate money for parks in the community would drive up property prices in the area, and add more profit to the company.

While it could be argued that these expenses would take a long time to recover, small improvements and modest donations to the community can go a long way and it would not be unforeseeable such expenses could be covered in a year or so of operating. Furthermore, when the company decides to sell the property, they would reap great benefits.

As demonstrated by these areas of creating commercially and ethically successful companies, not only is the notion 'good companies' are economically disadvantageous shown to be a fallacy, but we can see that corporate social responsibility can actually give companies a positive financial advantage.

Email the writer: