Why Is Profit Maximization an Inappropriate Goal?
While making a profit is a common goal for a business, a profit maximization goal is often viewed as unethical because of its impact on key stakeholders. Companies that seek to maximize profit may treat employees unfairly, harm the environment, mislead customers, and alienate suppliers.
Since labor is one of the key costs for a business, limiting labor expenses is vital to profit maximization. Companies that treat employees as cost drains typically pay low wages and offer limited benefits. This approach may lead to low morale and could also negatively impact the company’s public image.
Fulfilling informal social and environmental responsibilities also costs money. Therefore, companies that maximize profits may cut corners in recycling, renewal and reuse of resources. They may also avoid expenses that prevent pollution and other negative effects on the environment. The company may also not participate in socially responsible programs, such as volunteerism and community service programs.
Profit maximization can also conflict with a customer-centric approach, which means companies may mislead customers to generate revenue. Lack of transparency can damage long-term goodwill with customers, which can have dire financial consequences in the future. If companies try to cheat suppliers, negotiate aggressively or delay payments, they also risk the loss of their most trusted suppliers.