What do businesses do with profits? What does your company do with profits? I'm just asking because I've never run a business and don't know what goes on. I'm also asking because I've a suggestion on how profits and losses should be accounted for in businesses. An alternative business model. Here it is.
Companies should be aiming for efficient and effective transformation of capital to output. To me, that means breaking even every time. Not creating or destroying wealth, just using inputs and transforming them into outputs according to demand.
I guess this could be achieved by better budgeting. Set up funds to address all conceivable effects that the business could be having on its environment. Better reporting on how companies use their profits. Being more ethical on how they use their profits. Build a best practices approach when formulating a business case for each budget. Profits and losses are distributed evenly across all stakeholders.
Look, forgive me if this is already done in industry, because I don't really know. I just thought I'd share it in case it isn't. There are probably flaws in my argument and I'm more than happy if you want to pick at them. Read on for my aside.
Aside: There should be a medium (say, internet) that names and shames unethical organisations, and governments, who exploit, or neglect:
* natural environment
* human welfare
- physical (e.g., starvation in third world countries)
- mental (e.g., media organisations keeping populations in the dark about current political and social issues)
- social (e.g., organisations who produce products that encourage destructive escapism)
- spiritual (e.g., organisations who encourage immoral behaviour)
It should be hierarchical, a bit like Google Maps, where you can zoom in to geographical regions and see the companies that exploit.
But then it raises another concern: how do you unravel the
illegal organisations that are even more responsible for exploitation?