Drucker on corporate responsibility

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The third task of management is managing the social impact and the social responsibilities of enterprise. None of our institutions exists by itself and is an end in itself. Every one is an organ of society and exists for the sake of society. Business is no exception. Free enterprise cannot be justified as being good for business; it can be justified only as being good for society.

Business exists to supply goods and services to customers, rather than to supply jobs to workers and managers, or even dividends to shareholders. The hospital does not exist for the sake of doctors and nurses, but for the sake of patients whose one and only desire is to leave the hospital cured and never come back. Psychologically, geographically, culturally, and socially, institutions must be part of the community.

He argues that the role of the firm is to create a customer, not profit.

Finally, there is need for proft – otherwise none of the objectives can be attained. They all require effort, that is, cost. And they can be financed only out of the profits of business. They all entail risks; they all, therefore, require profit to cover the risk of potential losses. Profit is not an objective but it is a requirement that has to be objectively determined in respect to the individual business, its strategy, its needs, its risk.

From The Essential Drucker: The Best of Sixty Years of Peter Drucker's Essential Writing on Management. I read this a few weekends back and would recommend it to anyone who wants a great introduction to Drucker’s writings, or to someone who wants a quick refresher on all those Drucker papers and WSJ articles you read years ago. Lots of great one-liners.

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