Why people distrust companies that make profit

Why people distrust companies that make profit


Companies that seek profits are often
seen as immoral and harmful, even when they make massive contributions to
society. Researcher Amit Bhattacharjee of Rotterdam School of
Management, Erasmus University discovered that people assume profits are the result of bad business practices and often overlook market mechanisms that stimulate companies to add value to society. We had people evaluate 40 randomly
selected firms from the fortune 500 list. What we found from their evaluations was that they thought the most profitable companies were the ones that did the
most harm to society In another study we found that people think that adopting more harmful practices right now, so overcharging people, adopting
lower product safety standards, harming the environment more, that this is a good way for firms to directly increase their long term profitability. This is exactly the opposite of what we expect if we believe anything about economic theory, that in order to sustainably profit in the long run you need to do better than your competitors. so why do people judge profit so harshly and think that it’s inevitably going to lead to harmful outcomes for others? when we describe the same set of business practices and say that they were carried out by either a
for-profit or a nonprofit organisation they think that the same practices will
contribute less to society and do more harm, just from the mere presence of a
profit motive. In some sense, people realise that they
have choices in the market, that there is competition. But they don’t consider this information when they’re making judgments of profit. If we remind them that consumers have choices, then they change their judgment. People don’t think
about how the presence of reputational information, that people can share with
each other, changes the way that firms have to behave if they want to make
profit. It may come naturally for people to
think about profit as a reward, but it’s also a source of information. If a firm creates something like a much-needed vaccine, or a new green technology that
people really value and therefore buy, then these profits are a signal to them
that we should make more of these products, But our studies found that
people overlook the existence of this mechanism. When we remind them then, they
realise that profit has a role to play here and that maybe profit is not so bad. A firm that’s focused on long-term value creation might earn a good reputation
and also be seen as more moral by consumers. And it might even help
convince them that profit-seeking firms can help consumers and society.

You May Also Like

About the Author: Oren Garnes

1 Comment

  1. Many present-day business practices do, in fact, hurt company reputation. "When we find truth, constancy, fidelity, and love, we are happy; but if we meet with lying, faithlessness, and deceit, we are miserable." ~ Baha'i Faith

Leave a Reply

Your email address will not be published. Required fields are marked *