Purpose And Profits: R. Edward Freeman Emphasises Their Interconnection In Business Success

Edward Freeman addressed a stellar gathering of business leaders, academics, political leaders and others in his keynote speech on the theme 'Stakeholder capitalism, Business Ethics and Leadership challenges today”. The event was organised by University of Virginia Darden School of Management and BW Businessworld in New Delhi.

In his keynote address, R. Edward Freeman, Stephen E. Bachand University, Professor of Business Administration, University of Virginia, Darden School of Business, begins by reflecting on his journey, mentioning his PhD in philosophy and his father's humorous remark about the lack of "philosophy factories." He establishes a tone of optimism and idealism, drawing from his personal experiences and long-standing engagement with ideas about business.

Freeman quickly delves into the outdated view that business is solely about making money for shareholders. He critiques this traditional narrative, which focuses narrowly on profits and shareholder value, often at the expense of broader societal impacts. He argues that this perspective may have contributed to major crises like the global financial meltdown and growing inequality.

Freeman introduces the need for a "new story" of business, one that acknowledges the interconnectedness of various factors like societal, ethical and environmental. He references significant global challenges, such as climate change, inequality and political polarisation, which require businesses to think beyond short-term profits.

Drawing on his years of academic and practical work, Freeman stresses the importance of moving beyond the traditional view of business as driven purely by profit. He uses the analogy of red blood cells: while essential for life, the production of red blood cells is not the purpose of life itself. Similarly, while businesses must generate profits to survive, their ultimate purpose should be much larger serving stakeholders, creating value and making a positive impact on society.

He also touches on the power of entrepreneurship, emphasising that successful ventures are born from passion and a desire to change the world, not from the sole motivation of financial gain. Entrepreneurs like Steve Jobs and Bill Gates didn’t start their companies to get rich, but because they were passionate about their ideas.

Finally, Freeman addresses the need for businesses to balance profits and purpose. He asserts that profits are crucial for sustainability, but they must be aligned with a broader purpose that benefits all stakeholders like customers, employees, communities and society at large. He concludes by suggesting that companies must think deeply about why they exist, what they stand for and how they can contribute to the greater good while being financially successful. 

In essence, Freeman calls for a rethinking of capitalism to ensure that businesses contribute meaningfully to the world, creating a system where profits and purpose coexist for the benefit of society.