What's So Good About Business?

Instead of being defensive when people challenge business activities, benefits, and ethics, leaders should be more vocal about what they do right -- and how they help society.

Recently the two of us saw the new Michael Moore film Fahrenheit 9/11. The movie focused on the Bush administration, but also shined a harsh light on the business community. Moore reminded us over and over again that war is good for business. One scene portrayed a business conference as a feeding frenzy over opportunities to rebuild Iraq.

Many viewers will simplify and generalize the movie's message. In fact, one of us (VG) faced a troubling inquiry from his daughter after the movie. "Dad, why are you a business school professor?" she asked. "I mean, why do you want to help businesses? The executives do such bad things!"

Quick. You're in business. What if someone -- perhaps your child -- asks you the same question? What would you say?

VG's immediate response was, "There are a few bad apples in every barrel." But a day later, that answer did not seem convincing enough, and it got us thinking: How do you explain to skeptics what is good about business?

Even though we have different backgrounds and distinct political views, we agree that business is overwhelmingly a force for good. Two reasons far outweigh all the others:

Business activity raises the economic standards of living. To compete, companies must constantly find ways to make their businesses more efficient. And the more efficient a society is at producing products and services, the more that society can consume. (If even more economic consumption does not sound wholesome to you, you must be rich. Most of the world is not.)

Businesses create innovative products and services that enhance society. As living standards rise, we can afford to fulfill new needs. Businesses research our desires, invest in technology, and deliver the new and improved products and services that we want -- and need.

Thanks to the recent series of corporate scandals, business leaders the world over face the same challenge -- explaining to skeptics what is good about business. But how does our answer compare to those of other leaders? How are companies defining "social performance" in this age of increased public scrutiny?

We conducted a quick -- and admittedly unscientific -- survey by reviewing the annual reports and Web sites of a dozen large and well-known global companies. To assert strong social performance, here are the most common themes that business leaders are stressing:

• We have improved our governance practices, and our operations are transparent. We are not doing anything bad, and we have nothing to hide.
• We comply with and even exceed regulatory standards in areas such as the environment, health, and safety.
• We are philanthropic. We are involved in our communities.
• We provide jobs, and our company is a great place to work.

All of these activities are good. All of these activities help make the world a better place. But the resources dedicated to them is a small fraction of the resources dedicated to innovating and increasing efficiency overall.

So why don't we as business leaders talk about those activities? What message do we send employees? That if you really want to contribute to society, quit working long hours trying to develop that breakthrough product and get involved in some of our community programs?

The way that corporations define social performance reinforces a pervasive but deeply flawed assumption -- that if there is a direct tie between an action and a profit, then there can't be any social benefit. It is unfortunate that we refer to social sector organizations in the United States as nonprofits. One company's annual report described how their newly launched medical device led to a radical improvement in post-surgical outcomes -- but only to explain the company's improving business performance. Apparently, medical breakthroughs have nothing to do with social performance.

There are, of course, exceptions. General Electric and Motorola, for example, list innovation as a dimension of social performance. But the message is still diminished by the many less significant ways that these companies contribute.

Not a single company that we looked at made the case that it enhanced society by raising living standards and reducing poverty. Not a single company made the case that a social benefit can, and often does, result directly from the pursuit of profit. Most businesspeople could be better at making that case.

When someone asks, "How's business?" or "What are you working on?" instead of answering in terms of how you are going to make a profit, answer in terms of how you are going to make a difference. Instead of focusing on the race against your competition to expand into China, concentrate on how you will change the lives of millions of Chinese people by making needed products accessible and affordable and raising living standards.

The questions are being asked. Perhaps it's how we answer that's the problem.

Vijay Govindarajan and Chris Trimble are the founding director and executive director of the William F. Achtmeyer Center for Global Leadership at the Tuck School of Business at Dartmouth College. Additional information about Govindarajan and Trimble -- as well as additional Strategy & Execution columns -- are available in Online Insights.