R. Edward Freeman on Purpose and Profit in New Business Models

Gabelli100 | Sep 28, 2020 | Gabelli School of Business

By Claire Curry

Maximizing shareholder value and increasing profits is the “old story” of business.

During his presentation as part of the Centennial Virtual Speaker Series, co-sponsored by the Museum of American Finance and the CFA Society of New York, R. Edward Freeman, professor of business administration at the University of Virginia Darden School of Business, said that we need to create a new story.

“At a time when we’re still dealing with the aftermath of the global financial crisis comes the COVID pandemic and the search for racial justice,” he said. “We’re not going to solve these problems by trying harder to maximize shareholder value. We need a new narrative, a new way to think about business.”

Freeman discussed five key principles of the new business model, outlined in his latest book, The Power of And: Responsible Business Without Trade-Offs, co-authored with Kirsten E. Martin, and Bidhan L. Parmar. The first is prioritizing purpose and profit and the second, creating value for both stakeholders and shareholders. The message lies in the power of the word “and”: businesses can and should focus on balancing these dualities rather than trading one for the other.

“The good news is that it’s already happening,” he said. “I remain incredibly optimistic that we’re going to build a better world.”

Watch Freeman’s full presentation below.