The purpose of the business is to fulfill its responsibilities towards different stakeholder groups which are not only shareholders but also include employees, customers, communities, and the government. This means the business should try to earn attractive returns for its shareholders while ensuring it engages in ethical business conduct and follows all applicable laws. It should also provide fair compensation to its employees and create a pleasant work environment for them. The business should also invest in the communities in which it operates and similarly, it follows all applicable laws and pay tax to the government. The purpose of all businesses is same whether they are in the private sector or the public sector. Even though non-profit organizations do not aim for maximum returns, they are answerable to diverse group of stakeholders, just like for-profit businesses.
The purpose of the business is not determined by whether one is business owner, employee, or someone affected by the business in any manner. This is because the conduct and performance of the business is influenced by diverse range of stakeholders and, similarly, the conduct of the business also affects a diverse range of stakeholders whether positive or negative. For example, a business that doesn’t take measures to properly dispose of waste material from production activities may increase profits for shareholders but at the same time, it will impose costs on several stakeholder groups including communities and the government. The government may have to spend money on proper waste disposal and the cost will be unjustly borne by taxpayers. Similarly, the pollution may impose health and economic costs on the society.
Thus, the business should carefully evaluate the impact of its conduct on not just one stakeholder groups such owners or shareholders or employees only but on all stakeholder groups that may potentially be affected by a particular conduct or decision.