Business Principles

Anyone who starts a business has a responsibility to the entire community in which the business operates. Customers, employees, suppliers, and even competitors are affected by a single business. Therefore, a business that fails creates an economic loss that is shared by others in society. For example, an unsuccessful business probably owes money to other firms that will also suffer a loss because they cannot collect. In fact, a business that cannot collect from several other businesses may be placed in a weakened financial condition and it, too, may fail. Successful businesses also have economic and social responsibilities.

Source: Adapted from Business Failure Record. The Dun & Bradstreet Corporation, 1992.

The privilege of operating a business with the potential of making a profit also carries a number of obligations to a variety of groups that serve and are served by the company. Many years ago, an executive of a major business association described the many responsibilities of business owners:

• TO CUSTOMERS: That they may have the best at the lowest cost, consistent with fairness to all those engaged in production and distribution

• TO EMPLOYEES: That their welfare will not be sacrificed for the benefit of others, and in their employment relations, their rights will be respected

• TO MANAGEMENT: That it may be recognized in proportion to its demonstrated ability, considering always the interest of others

• TO COMPETITORS: That there will be avoidance of every form of unfair competition

• TO INVESTORS: That their rights will be safeguarded and they will be kept so informed that they can exercise their own judgment respecting their interests

• TO THE PUBLIC: That the business will strive in all its operations and relations to promote the general welfare and observe faithfully the laws of the land.

Just as every business has an obligation to the community, the community has an obligation to each business. Society should be aware that owners face many risks while trying to earn a fair profit on the investment made in the business.

Consumers should realize that the prices of goods and services are affected by expenses that arise from operating a business. Employees should realize that a business cannot operate successfully, and thereby provide jobs, unless each worker is properly trained and motivated to work. The economic health of a community is improved when groups in the community are aware of each other’s obligations.