Laws and other governmental regulations (it could be termed ‘hard regulation’) are necessary to frame the market and business, but they are insufficient. They generally come late and provide only minimal standards and
there is a risk of ineffectiveness in their application. Business faces social
demands, which are a certain informal regulation, a ‘soft regulation’. In
addition, companies can add self-regulation. These three forms of regulation frame the manager’s activity, but a fully responsible management
also entails ethical requirements, which are not always contained in the
regulations mentioned.
The purpose of business has to do with the role of business in society and
its social and ethical justification. With this purpose in mind, one can
determine whether its activities are appropriate. The purpose furnishes
criteria for determining whether the business firm is well designed and
well managed.
Proposals on the purpose of the firm include (1) maximizing shareholder
value; (2) satisfying the firm’s stakeholder interests; and, more recently,
(3) creating shared value. All of these seek justification in being good
for society, but they do not meet all of the requirements of the common
good. Some companies assume social goals, which can be combined with
financial objectives.
The business enterprise can contribute to the
common good through its intrinsic multi-ends related to providing products (goods and services), obtaining revenues and other outcomes, organizing work and resources, establishing relationships, acting as a social
player and striving for continuity.
The purpose of the firm can be defined as serving people’s needs through
its intrinsic multi-ends, which should be consistent with the common
good of the firm and of society. This generic purpose is the reference
for the moral legitimacy of the particular purposes presented by each
company.