# The Profit Paradox: Inseparability of Maximization and Prioritization in Corporate Strategy

Ceyhun Elgin

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# The Profit Paradox: Inseparability of Maximization and Prioritization in Corporate Strategy

Ceyhun Elgin‡

## Abstract

This paper challenges the notion that businesses can maximize profits without making profit their top priority, arguing that profit maximization inherently requires profit prioritization. Through a comprehensive analysis of theoretical foundations, empirical case studies, and potential counterarguments, the study establishes the inseparability of profit maximization and prioritization. The paper concludes that profit maximization logically and practically necessitates profit prioritization, supported by theoretical economic models and empirical evidence from corporate behavior across various industries. This research offers a novel perspective on the relationship between profit maximization and prioritization, providing a deeper understanding of corporate decision-making and challenging prevailing notions of balanced stakeholder approaches. While the study primarily focuses on for-profit corporations in market economies, potentially limiting its applicability to other organizational forms or economic systems, it has significant practical and social implications. The findings suggest a need for greater transparency in corporate governance regarding the trade-offs inherent in profit maximization and more effective regulatory approaches that acknowledge the reality of profit prioritization. This research contributes to ongoing dialogues about the role of business in society, highlighting the tensions between profit-seeking behavior and other societal objectives.

**Keywords:** Profit maximization; Corporate ethics; Stakeholder theory

## 1. Introduction

<footnote>‡ **Address**: Bogazici University Department of Economics. Natuk Birkan Kat 2 Bebek 34342 Istanbul, Turkey. E-mail: ceyhun.elgin@bogazici.edu.tr</footnote>
In the domain of business ethics and economic theory, a contentious debate has long persisted regarding the relationship between profit maximization and profit prioritization. The controversy regarding the role of profit maximisation has been relevant in the business ethics and management literature for several decades (Friedman, 1970; Freeman, 1984; Jensen, 2002) Some scholars argue that these concepts are orthogonal and therefore it is possible to pursue profit maximisation and not necessarily profit at the expense of other values (White, 2017). This view suggests that the concept of profit can be optimised with reference to the ethical and stakeholders' concerns. However, this paper presents a contrasting viewpoint: Thus, profit maximization and profit prioritization are inextricably combined, with the former entailing and implying the latter.

The primary argument of this paper is that the mere process of profit maximization presupposes that profit is one of the priorities for companies. This prioritization is not just something that happens often or is an ancillary benefit, but is rather a core and essential step in the process of profit maximization. For a firm to achieve its objective of earning profits, it must always make choices that would benefit it financially as opposed to any other possible outcome or value.

The assumption that firms universally seek to maximize profits requires more substantiation. While it is widely accepted in neoclassical economics, empirical evidence suggests variations in how businesses approach profit. For example, companies such as Patagonia challenge the traditional profit-maximization thesis by prioritizing environmental and social goals alongside profitability. A review of empirical studies by Tirole (2010) on corporate behavior shows that many firms balance profit with other objectives, such as long-term sustainability or corporate social responsibility. Furthermore, data from Frey and Osterloh (2001) demonstrate that firms may deviate from strict profit maximization in favor of stakeholder satisfaction, especially when non-monetary incentives and employee motivation play significant roles in decision-making. While these cases may not represent the majority, they highlight that profit maximization, as posited by Friedman, may not be a universal business objective across all timeframes or corporate structures. To address this critique, the paper acknowledges the refined reality of corporate goals while maintaining that profit maximization remains the dominant principle in market-driven businesses.

While the concept of profit maximization has long been a cornerstone of economic theory, its application in business practice raises important questions. Adam Smith's invisible hand may justify self-interest benefiting society, but the distinction between theory and practice remains critical. Profit maximization, as a theoretical framework, presupposes rational actors in competitive markets. However, when translated into business practice, the prioritization of profit above all else can distort the original intent. The issue, then, is not profit maximization per se but how it is operationalized in real-world corporate governance. This operationalization often leads to profit prioritization, where financial outcomes are placed above other societal or ethical objectives. The tension between maximizing shareholder value and addressing broader stakeholder concerns reveals that the challenge lies more in the practice of profit prioritization than in the abstract idea of profit maximization itself. Therefore, the practical manifestations of profit maximization merit deeper scrutiny, particularly concerning their ethical implications for business operations.
Profit maximizing behavior is reflected in various aspects of business management, from strategic management to the management of daily processes. Some people have criticized this view by claiming that profit maximization is not the only goal that firms cannot achieve concurrently with other goals such as social responsibility or welfare of the employees. Although these goals are not mutually exclusive, this paper shows that in a perfectly competitive world, these other goals are indeed secondary to the primary objective of profit maximization. The equality that is observed is often an organizational one, which means that it is a planned decision that is made to maximize the long-term profit, rather than an actual equal importance of the values. This perspective refutes the idea of the business being able to truly maximize the profits while at the same time not having profit as their primary goal. It implies that such efforts to distinguish these ideas might stem from a misunderstanding of the concept of profit maximization in the real world. In this paper, the author shall demonstrate how theoretical arguments, empirical research, and case studies show that the maximization of profits entails choices and actions that unambiguously privilege profit. Understanding this relationship is crucial for several reasons: First, it offers a more realistic orientation for assessing corporate conduct and action planning. Second, it forces business and other relevant stakeholders to be more honest about their actual goals and the costs of pursuing them in terms of wealth accumulation.

As we go deeper into this topic, we will explore the theoretical underpinnings of profit maximization, examine real-world examples that demonstrate the inseparability of maximization and prioritization, and address counterarguments to this perspective. Through this analysis, we aim to provide a compelling case for reconsidering how we view the relationship between profit maximization and prioritization in modern business practices.

# 2. The Theoretical Foundation of Profit Maximization

## 2.1 Historical Context

The concept of profit maximization has deep roots in economic thought, evolving alongside the development of capitalism and market economies. Understanding this historical context provides valuable insights into why profit maximization became so central to business theory and practice.

The idea of profit as a driving force in economic activity can be traced back to early mercantile systems. However, it was during the Industrial Revolution of the 18th and 19th centuries that profit maximization began to take shape as a formal business objective. As factories and mass production methods emerged, business owners sought ways to increase efficiency and returns on their investments. Adam Smith's "The Wealth of Nations" (1776) laid important groundwork for the concept of profit maximization. Smith's notion of the "invisible hand" suggested that individuals pursuing their self-interest (often in the form of profit) would inadvertently benefit society. This idea helped legitimize the pursuit of profit as not just an individual goal, but as a driver of societal progress. The late 19th and early 20th centuries saw the rise of scientific management, epitomized by Frederick Taylor's work. This approach, focused on maximizing efficiency in production processes, aligned closely with the goal of profit maximization. It provided practical methods for businesses to increase their profits through optimized operations.
The formalization of profit maximization as a central tenet of business theory gained momentum in the mid-20th century with the work of economists like Milton Friedman. Friedman's influential 1970 essay "The Social Responsibility of Business is to Increase its Profits" argued forcefully for profit maximization as the primary, if not sole, responsibility of businesses.

Adam Smith's concept of the 'invisible hand' in "The Wealth of Nations" (1776) laid the foundation for profit maximization theory. Smith argued that individuals pursuing their self-interest in a free market would inadvertently benefit society as a whole. However, it's important to note that Smith's views were more delicate than often portrayed. In "The Theory of Moral Sentiments" (1759), he emphasized the importance of moral considerations in economic behavior. This tension between self-interest and social welfare in Smith's work foreshadowed later debates about profit maximization and corporate responsibility. As the theory developed, economists like Alfred Marshall in "Principles of Economics" (1890) formalized the concept of profit maximization mathematically, while others like Frank Knight in "Risk, Uncertainty and Profit" (1921) explored its implications for entrepreneurship and market dynamics. These theoretical developments set the stage for profit maximization's incorporation into business practice and ethics.

However, the distinction between profit maximization as a theoretical concept and profit prioritization as a business practice is crucial to our analysis. While profit maximization as an idea has its roots in economic theory and can be seen as a simplifying assumption for modeling firm behavior, profit prioritization represents the real-world manifestation of this concept. The problem, we argue, lies not solely with the theoretical idea of profit maximization, but primarily in how it translates into business practice through profit prioritization. This prioritization often leads to decisions that favor short-term financial gains over long-term sustainability or societal benefits. For instance, Lazonick and O'Sullivan (2000) demonstrate how the shift towards shareholder value maximization in the late 20th century led to increased corporate downsizing and reduced investment in long-term capabilities. Similarly, Margolis and Walsh (2003) highlight the tension between financial and social performance in corporate decision-making. Thus, while the theoretical concept of profit maximization provides a useful framework for understanding firm behavior, its practical implementation through aggressive profit prioritization is where many of the ethical and societal challenges emerge.

This historical trajectory helps explain why profit maximization became so deeply ingrained in business practice and economic theory. It reflects a long-standing belief in the power of self-interest and efficiency to drive economic progress, as well as the increasing sophistication of management techniques aimed at boosting financial performance.

## 2.2 Theoretical Framework

The concept of profit maximization stands as a cornerstone in economic theory and business practice, serving as a guiding principle for firms operating within capitalist systems. This subsection investigates the theoretical underpinnings of profit maximization, exploring its definition, implications, and the inherent prioritization it necessitates. By examining these aspects in depth, we can better understand why profit maximization and profit prioritization are inextricably linked.
Profit maximization, at its core, is the strategy by which a firm aims to attain the highest possible level of profit. This concept has its roots in classical economic theory, with early economists like Adam Smith laying the groundwork for understanding the motivations of businesses in a free market. Smith's notion of the "invisible hand" suggested that individuals and firms, by pursuing their self-interest (often in the form of profit), inadvertently benefit society as a whole.

As economic theory evolved, the concept of profit maximization became more rigorously defined. Neoclassical economists, building on the work of their predecessors, developed mathematical models to express this principle. In its simplest form, the theory posits that a firm should continue to expand its operations as long as marginal revenue exceeds marginal cost. This point, where marginal revenue equals marginal cost, represents the profit-maximizing level of output.

The theory of profit maximization assumes that firms are rational actors operating with perfect information in competitive markets. While these assumptions have been critiqued and refined over time, the core principle remains a fundamental aspect of microeconomic theory and business strategy.

In modern business principles, profit maximization is often expressed as the primary objective of for-profit entities. It serves as the driving force behind numerous business decisions, including resource allocation, pricing strategies, and investment choices. The theory suggests that by pursuing maximum profits, firms not only benefit their shareholders but also contribute to overall economic efficiency through optimal resource allocation.

The very nature of maximization implies a form of prioritization. When a firm seeks to maximize any objective—be it profit, market share, or social impact—it inherently places that objective at the pinnacle of its priority list. In the case of profit maximization, this means that profit becomes the primary criterion against which all business decisions are evaluated.

This prioritization is not merely a semantic argument but a practical reality of business operations. When faced with multiple options, a profit-maximizing firm will consistently choose the option that yields the highest profit, even if other options might offer different benefits. This decision-making process inherently prioritizes profit over other considerations, such as environmental impact, employee well-being, or community development.

Consider, for example, a company deciding between two production methods. Method A offers a higher profit margin but has a greater environmental impact, while Method B provides a lower profit margin but is more environmentally friendly. A firm truly committed to profit maximization would choose Method A, despite its environmental drawbacks. This choice clearly demonstrates the prioritization of profit over environmental concerns.

It's important to note that this prioritization doesn't necessarily mean that businesses will always make short-sighted decisions that harm other stakeholders. In many cases, considering the long-term implications of decisions can lead to choices that appear to balance multiple objectives. However, in a profit-maximizing framework, these choices are ultimately justified by their
potential to generate greater profits in the long run, rather than by the intrinsic value of the other benefits they provide.

The prioritization inherent in profit maximization manifests in various aspects of business strategy and operations. Let's explore some key areas where this prioritization becomes evident:

First area in this regard is the domain of pricing strategies. Firms often employ sophisticated pricing techniques to extract maximum value from consumers. Dynamic pricing, for instance, adjusts prices in real-time based on demand, allowing companies to capture more consumer surplus. Similarly, price discrimination strategies, where different prices are charged to different consumer segments, aim to maximize overall profit. While these strategies can sometimes benefit consumers (e.g., through discounts), their primary purpose is to increase the firm's profitability, often at the expense of uniform pricing or customer goodwill.

Next comes resource allocation. In a profit-maximizing firm, resources are typically allocated to the most profitable divisions or products. This can lead to situations where potentially beneficial but less profitable areas of the business are neglected. For example, a pharmaceutical company might allocate more resources to developing and marketing lifestyle drugs with high profit margins, rather than investing in treatments for rare diseases that, while socially valuable, offer lower financial returns.

Thirdly, we should also talk about labor practices. The pursuit of maximum profits often leads to cost-cutting measures in labor management. This can manifest in various ways, such as outsourcing to lower-wage countries, minimizing benefits, or resisting unionization efforts. While these practices may negatively impact worker welfare, they are justified under a profit maximization model by their positive effect on the bottom line.

Fourth, R&D investments in profit-maximizing firms are often directed towards projects with the highest potential return on investment. This can lead to a focus on incremental improvements to existing profitable products rather than riskier, more innovative research that might have greater long-term social or scientific value but less certain profitability.

Finally, last but not least, many firms choose to pay fines for environmental violations rather than invest in cleaner technologies when the fines are less costly than the required investments. This clearly prioritizes profit over environmental stewardship, demonstrating how profit maximization can lead to decisions that may have negative externalities.

## 2.3 The Logical Necessity of Prioritization in Maximization

The inseparability of profit maximization and prioritization is not just an empirical observation but a logical necessity. To maximize any function, including profit, one must prioritize that function above all others. If a firm were to consistently choose options that do not maximize profit in favor of other objectives, it would, by definition, not be maximizing profit.

This logical relationship can be expressed mathematically. Let P represent profit and O represent all other objectives. A profit-maximizing firm will always choose actions that satisfy:
Max(P) subject to constraints

If the firm were to choose actions that maximize some combination of P and O, it would be
engaging in a different objective function, such as:

Max(αP + βO) where α and β are weights

This latter function is not profit maximization but rather a form of multi-objective optimization.
True profit maximization requires α = 1 and β = 0, which is the mathematical expression of profit
prioritization.

Understanding this logical necessity helps to clarify why attempts to separate profit maximization from profit prioritization are fundamentally flawed. It's not that businesses can't pursue other objectives alongside profit, but rather that in a true profit maximization framework, these other objectives must ultimately be subordinate to or in service of the primary goal of maximizing financial returns.

The inseparability of profit maximization and prioritization has significant implications for discussions of business ethics and corporate social responsibility (CSR). Many modern businesses claim to balance profit-seeking with other objectives, such as environmental sustainability or social impact. However, the theory of profit maximization suggests that in a truly profit-maximizing firm, these secondary objectives can only be pursued insofar as they contribute to long-term profitability of the firm.

This doesn't mean that profit-maximizing firms can't engage in socially beneficial activities.
Indeed, many do, recognizing that such actions can enhance their reputation, improve employee
morale, or mitigate risks. However, the profit maximization model suggests that these activities
are ultimately justified by their potential to increase profits, rather than by their intrinsic social
value.

This perspective challenges the notion of "doing well by doing good" that underpins much of modern CSR rhetoric. While it's certainly possible for businesses to create shared value, the profit maximization model suggests that when trade-offs must be made, profit will ultimately take precedence.

The theoretical foundation of profit maximization inherently includes the concept of profit prioritization. This is not merely an incidental correlation but a fundamental aspect of what it means to maximize profits. The very act of maximizing profit requires consistently making decisions that favor financial outcomes over other considerations.

This understanding has profound implications for how we interpret corporate behavior, develop business strategies, and formulate economic policies. It suggests that attempts to separate profit maximization from profit prioritization may be based on a misunderstanding of what profit maximization truly entails in practice.
As we move forward in our analysis, this theoretical foundation will serve as a crucial lens through which we examine empirical evidence of corporate behavior and evaluate challenges to this perspective. By recognizing the inherent link between profit maximization and prioritization, we can engage in more honest and productive discussions about the role of business in society and the potential need for alternative models of corporate governance.

# 3. Empirical Evidence: Case Studies of Profit Maximization and Prioritization

While profit maximization is often assumed to be a universal corporate goal, empirical evidence suggests a more complex reality. A study by Graham, Harvey, and Rajgopal (2005) found that 78% of executives would sacrifice economic value to meet earnings expectations, indicating a focus on short-term profits rather than long-term maximization. Similarly, Brav et al. (2005) found that many firms prioritize maintaining dividend payouts over maximizing overall returns. These findings suggest that while profit is a primary concern for most corporations, true maximization may not always be the goal. However, the pervasive influence of profit maximization theory in business education and practice, as documented by Ghoshal (2005), creates systemic pressures towards maximization behavior, even if not all firms explicitly pursue it.

While the theoretical foundation establishes the logical inseparability of profit maximization and prioritization, empirical evidence from real-world business practices provides compelling support for this argument. This section examines several case studies that demonstrate how businesses that successfully maximize profits invariably prioritize profit over other considerations. We will also contrast these with examples of businesses that attempted to balance profit maximization with other objectives, often resulting in suboptimal financial performance.

## 3.1 Successful Profit Maximization: Amazon.com

Amazon.com serves as a prime example of a company that has consistently maximized profits by prioritizing them above all else. Founded by Jeff Bezos in 1994, Amazon has grown from an online bookstore to one of the world's most valuable companies, largely due to its relentless focus on efficiency, growth, and profit maximization.

One of the most controversial aspects of Amazon's business practices is its approach to labor. The company has faced persistent criticism for its demanding work conditions in fulfillment centers. Reports of workers facing extreme pressure to meet productivity targets, limited bathroom breaks, and physical strain are common (Sainato, 2020). While these practices have negative impacts on worker well-being, they contribute significantly to Amazon's operational efficiency and, consequently, its profitability. The company's prioritization of profit over worker comfort is evident in its resistance to unionization efforts and its continued use of algorithmic management techniques that maximize productivity at the expense of worker autonomy.

Amazon's tax strategies provide another clear example of profit prioritization. Despite generating billions in revenue, Amazon paid no federal income taxes in 2017 and 2018 (Kasperkevic, 2019). The company achieved this through a combination of tax credits, stock-based compensation, and strategic reinvestment of profits. While legal, these aggressive tax optimization strategies
demonstrate a clear prioritization of profit retention over potential public perception issues or
contributions to public coffers.

Furthermore, Amazon's approach to market dominance illustrates its profit-maximizing priorities. The company's willingness to operate at a loss in new markets to drive out competition, its use of data from third-party sellers to develop competing products, and its aggressive expansion into multiple sectors have all been criticized as anti-competitive practices (Khan, 2016). However, these strategies have significantly contributed to Amazon's long-term profitability and market value, showcasing how profit maximization often requires prioritizing financial outcomes over other ethical considerations or stakeholder interests.

## 3.2 Walmart: Low Costs at Any Cost

Walmart, the world's largest retailer, provides another compelling case study of profit maximization through clear prioritization. The company's business model, built on the principle of "everyday low prices," has made it a retail giant but has also led to numerous controversies that highlight its prioritization of profit.

Walmart's supply chain practices are particularly illustrative of this prioritization. The company is known for exerting intense pressure on its suppliers to lower costs. This often forces suppliers to cut corners, potentially compromising product quality or their own financial stability (Fishman, 2006). While this approach allows Walmart to offer lower prices to consumers, it prioritizes Walmart's profitability over the health of its supply chain ecosystem.

The company's labor practices have also been a subject of much scrutiny. Walmart has faced numerous lawsuits and criticisms regarding low wages, inadequate benefits, and anti-union activities (Greenhouse, 2015). These practices reflect a clear prioritization of profit margins over employee welfare. By keeping labor costs low, Walmart can offer lower prices and higher returns to shareholders, but at the cost of employee well-being and economic security.

Moreover, Walmart's expansion strategy and its impact on local economies demonstrate its profit-first approach. The company's entry into new markets often leads to the closure of local businesses, altering the economic landscape of communities (Jia, 2008). While this may provide consumers with lower prices, it prioritizes Walmart's growth and profitability over the preservation of local economic ecosystems.

## 3.3. Contrasting Examples: Attempts at Balance

While companies like Amazon and Walmart provide clear examples of profit maximization through prioritization, it's instructive to examine companies that have attempted to balance profit-seeking with other objectives. These cases often reveal the challenges of maintaining true profit maximization while pursuing other goals.

Patagonia, the outdoor clothing company, has long been heralded as an example of a business that balances profit with environmental stewardship. Founded by Yvon Chouinard, Patagonia has
implemented numerous initiatives that seem to prioritize environmental concerns over pure profit maximization.

For instance, Patagonia donates 1% of its sales to environmental causes and has run campaigns encouraging customers to repair rather than replace their products (Patagonia, n.d.). The company has also invested in developing more sustainable materials and production processes, often at the expense of short-term profitability.

However, it's important to note that while Patagonia has been successful, its growth and profitability have been more modest compared to pure profit-maximizing competitors in the apparel industry (O'Connor, 2019). This suggests that while it's possible to build a successful business with strong values, true profit maximization often requires a more singular focus on financial outcomes.

The case of Patagonia presents an interesting counterpoint to the thesis of strict profit maximization. Founded by Yvon Chouinard, Patagonia has prioritized environmental and social goals, at times foregoing short-term profits for broader ecological impact. For instance, its 'Worn Wear' campaign encourages customers to repair rather than replace products, a practice seemingly at odds with maximizing sales. However, as noted by O'Connor (2019), even Patagonia's actions can be viewed as part of a long-term profit strategy. By building a brand identity centered around sustainability, the company attracts a loyal, values-driven customer base, which enhances long-term profitability. This reinforces the argument that even when companies appear to prioritize non-profit objectives, these decisions are often made with long-term financial sustainability in mind. The balancing act that Patagonia performs, therefore, illustrates the flexibility within profit maximization frameworks, but does not refute the broader thesis that profit remains the central priority for most firms, even when it is pursued indirectly.

The Body Shop, founded by Anita Roddick in 1976, provides another example of a company that attempted to balance profit with ethical considerations. The company was built on principles of ethical sourcing, opposition to animal testing, and support for community trade programs.

For many years, The Body Shop maintained strong ethical standards in its sourcing and product development, often at the expense of maximizing short-term profits (Entine, 2007). However, the company struggled to compete with larger, more profit-focused competitors in the beauty industry. This led to its sale to L'Oréal in 2006, a move that many saw as a compromise of its original ethical stance (Butler, 2017).

The Body Shop's journey illustrates the difficulties of maintaining strict ethical standards while attempting to maximize profits in a competitive market. While the company's ethical stance provided it with a unique brand identity, it also limited its ability to compete on price and scale with less ethically constrained competitors.
## 3.4 Industry-Specific Examples

Certain industries provide particularly stark examples of how profit maximization inherently leads to profit prioritization. The pharmaceutical and fast fashion industries offer compelling cases.

In the pharmaceutical industry, companies like Mylan (with EpiPen) and Turing Pharmaceuticals (with Daraprim) have dramatically increased prices on essential drugs, prioritizing profit over accessibility (Rockoff, 2016). These price hikes, while ethically questionable, are consistent with a profit maximization approach. Similarly, the industry's tendency to focus research and development on profitable "lifestyle drugs" rather than critical but less profitable treatments for rare diseases further demonstrates the prioritization of profit over public health concerns (Light & Lexchin, 2021).

The fast fashion industry, exemplified by companies like Zara and H&M, shows how profit maximization leads to prioritization of rapid turnover and low costs over environmental and labor concerns. Despite sustainability claims, the core business model relies on producing large volumes of low-cost, often environmentally harmful products (Remy et al., 2016). The industry is also notorious for poor working conditions in developing countries, prioritizing low production costs over worker welfare (Taplin, 2014).

## 3.5 Analysis of Empirical Evidence

The case studies and industry examples presented provide strong empirical support for the inseparability of profit maximization and prioritization. Several key observations emerge from this evidence:

Firstly, there is a consistent pattern across various industries and company sizes: businesses that successfully maximize profits consistently make decisions that prioritize financial outcomes over other considerations. This is evident in labor practices, supply chain management, pricing strategies, and approaches to regulation and taxation.

Secondly, the empirical evidence highlights the significant trade-offs involved in profit maximization. In almost all cases, profit maximization requires trade-offs that reveal the underlying prioritization of profit. These trade-offs often involve labor conditions, environmental impact, or social responsibility. The willingness of profit-maximizing firms to make these trade-offs in favor of financial outcomes underscores the inherent prioritization involved in profit maximization.

Thirdly, the examples of companies attempting to balance profit with other objectives reveal the competitive pressures that drive profit prioritization. Companies that attempt to give equal weight to non-financial objectives often struggle to compete with firms that more singularly focus on profit. This competitive dynamic further demonstrates the practical necessity of profit prioritization in maximization efforts within current market structures.
Lastly, the empirical evidence suggests that the scale of a company's operations amplifies the effects and visibility of profit prioritization. The larger and more successful a profit-maximizing firm becomes, the more evident and impactful its prioritization of profit becomes, often leading to increased scrutiny and criticism.

The empirical evidence presented in this section strongly supports the theoretical argument that profit maximization inherently requires profit prioritization. While some companies attempt to balance profit-seeking with other objectives, the most successful profit maximizers consistently demonstrate a clear prioritization of financial outcomes over other considerations.

This evidence challenges the notion that businesses can truly maximize profits without making profit their top priority. It suggests that attempts to separate profit maximization from profit prioritization may be based on a misunderstanding of what profit maximization entails in practice, or may represent a different approach to business that does not fully embrace profit maximization.

Understanding this empirical reality is crucial for developing realistic expectations about corporate behavior, formulating effective regulatory policies, and fostering honest discussions about the role of business in society. It also raises important questions about the potential need for alternative business models or regulatory frameworks if we wish to see businesses consistently prioritize objectives other than profit maximization.

# 4. Cross-Cultural Perspectives, Challenges and Counterarguments

## 4.1 Cross-Cultural Perspectives

While profit maximization is often treated as a universal business objective, its interpretation and application can vary significantly across different cultural contexts. These variations provide important details to our understanding of how profit maximization is prioritized globally.

In many Western countries, particularly the United States, the shareholder primacy model has long dominated, aligning closely with aggressive profit maximization strategies. However, other cultures have traditionally taken different approaches.

For instance, in Japan, the concept of "kyosei" (cooperative living and working for the common good) has historically influenced business practices. This has sometimes led to a more balanced approach between profit-seeking and other stakeholder interests. Japanese companies have often prioritized long-term stability and employee welfare alongside profitability.

Similarly, in many European countries, particularly Germany and the Nordic nations, the stakeholder model of corporate governance has been more prominent. This model, which considers the interests of employees, customers, and communities alongside shareholders, can lead to a less aggressive approach to profit maximization.
In emerging economies, the picture is often more complex. Some countries have embraced Western-style profit maximization, while others have developed hybrid models that attempt to balance profit-seeking with development goals or cultural values.

These cross-cultural perspectives remind us that while profit maximization is a global phenomenon, its manifestation and prioritization can be influenced by cultural norms, governance structures, and societal expectations. Understanding these variations is crucial for a comprehensive view of how profit maximization operates in a global business context.

## 4.2 Challenges and Counterarguments

While the theoretical foundations and empirical evidence presented in the previous sections make a strong case for the inseparability of profit maximization and profit prioritization, it is crucial to address the challenges and counterarguments to this perspective. This section will explore several key challenges to our thesis, examining alternative viewpoints and theories that suggest businesses can maximize profits without necessarily prioritizing them above all else. By engaging with these counterarguments, we can further refine our understanding of the relationship between profit maximization and prioritization.

One of the most significant challenges to our thesis comes from stakeholder theory, a concept popularized by R. Edward Freeman in his seminal work "Strategic Management: A Stakeholder Approach" (1984). Stakeholder theory argues that businesses should balance the interests of all stakeholders, including employees, customers, suppliers, communities, and shareholders, rather than focusing solely on maximizing shareholder value.

Proponents of stakeholder theory might argue that profit maximization can be achieved without prioritizing profit above all else. They suggest that by considering and addressing the needs of all stakeholders, companies can create long-term value and sustainable profitability. This perspective posits that businesses operate within a complex network of relationships, and neglecting any stakeholder group could ultimately harm the company's long-term financial performance.

For example, a company that prioritizes employee satisfaction might incur higher costs in the short term through increased wages or benefits. However, stakeholder theorists would argue that this investment could lead to higher productivity, lower turnover, and improved innovation, ultimately resulting in greater profitability. Similarly, a focus on customer satisfaction might require short-term expenses but could lead to increased loyalty and long-term revenue growth.

While stakeholder theory offers valuable insights into the complex nature of business operations and the importance of considering multiple perspectives, it doesn't necessarily negate the inherent prioritization in profit maximization. Even when companies consider all stakeholders' interests, they typically do so with the ultimate goal of long-term profit maximization. The consideration of stakeholder interests is often a strategic decision aimed at ensuring sustained profitability rather than a true equal prioritization of all interests.
Moreover, in situations where stakeholder interests directly conflict with profit maximization, companies that are truly committed to maximizing profits will ultimately prioritize financial outcomes. The empirical evidence presented in the previous section, particularly the cases of highly successful companies like Amazon and Walmart, suggests that when push comes to shove, profit-maximizing firms tend to prioritize financial outcomes over other stakeholder interests.

## 4.3 Corporate Social Responsibility (CSR) and Shared Value

Another significant challenge to our thesis comes from the concepts of Corporate Social Responsibility (CSR) and Creating Shared Value, as proposed by Porter and Kramer (2011). These approaches suggest that companies can simultaneously create economic and social value, challenging the notion that profit must always be prioritized over other considerations. However, critics argue that this approach doesn't fundamentally challenge the primacy of profit maximization in corporate decision-making (Crane et al., 2014).

CSR advocates argue that businesses have a responsibility to contribute positively to society, beyond just complying with laws and regulations. This can involve a wide range of activities, from philanthropic efforts to sustainable business practices. The concept of Creating Shared Value takes this a step further, suggesting that companies can enhance their competitiveness while simultaneously advancing economic and social conditions in the communities where they operate.

Proponents of these approaches might argue that they demonstrate ways in which companies can maximize profits without exclusively prioritizing them. For instance, a company might invest in renewable energy sources, which could be more expensive in the short term but could lead to cost savings, improved public relations, and new market opportunities in the long run.

However, while CSR and shared value initiatives can indeed create both economic and social benefits, they don't fundamentally alter the profit-maximizing nature of corporations. In practice, CSR initiatives are often undertaken with an eye towards long-term profitability, whether through improved public relations, employee retention, or risk management. The fact that these initiatives need to be justified in terms of their benefit to the company's bottom line underscores the continued prioritization of profit.

Furthermore, when CSR activities conflict with profit maximization, profit-maximizing firms typically limit or abandon these initiatives. This is evident in cases where companies have scaled back CSR programs during economic downturns or have been caught engaging in "greenwashing" – presenting an environmentally responsible public image while continuing environmentally harmful practices behind the scenes.

## 4.4 The B-Corp Movement

The emergence of Benefit Corporations (B-Corps) represents another challenge to our thesis. B-Corps are a new class of corporation that are legally required to consider the impact of their decisions on workers, customers, suppliers, community, and the environment, in addition to
shareholders. Proponents might argue that this model allows for profit maximization without profit prioritization.

B-Corps aim to use the power of business to solve social and environmental problems. They are required to meet certain standards of social and environmental performance, accountability, and transparency. This legal structure seems to provide a framework for businesses to pursue both profit and social benefit on equal footing.

However, while B-Corps represent a laudable attempt to balance profit with social responsibility, they still operate within a competitive market system that rewards financial performance. Even B-Corps must prioritize financial sustainability to continue their operations and social missions. The very need for a separate legal structure for such companies underscores the fact that traditional corporations are expected to prioritize profit.

Moreover, the B-Corp movement, while growing, remains a small fraction of the overall business landscape. The vast majority of large, influential corporations continue to operate under traditional structures that are more explicitly geared towards profit maximization. This suggests that while alternative models are possible, the dominant paradigm in business continues to be one of profit prioritization.

## 4.5 Long-Term vs. Short-Term Maximization

A meticulous challenge to our thesis comes from the argument that apparent instances of companies not prioritizing profit (e.g., investing in employee welfare or environmental sustainability) are actually examples of long-term profit maximization strategies.

This perspective suggests that what may appear to be a departure from profit prioritization is often a more sophisticated approach to long-term value creation. For instance, a company investing heavily in research and development might see short-term profits decline, but this investment could lead to innovations that secure the company's profitability in the long run. Similarly, a company that pays above-market wages might see higher short-term costs but benefit from increased productivity and reduced turnover over time.

While this argument offers important insights into the complexity of business decision-making, it ultimately supports rather than challenges our thesis. If actions that seem to prioritize other factors over profit can be explained as strategies for long-term profit maximization, it reinforces the idea that profit remains the ultimate priority. The fact that companies justify these actions in terms of their long-term financial benefit further demonstrates the pervasive prioritization of profit.

This perspective also highlights the importance of considering the time horizon when discussing profit maximization. While short-term profit maximization might lead to different decisions than long-term profit maximization, both approaches still prioritize profit as the ultimate objective.
## 4.6 The Role of Personal Values and Leadership

The last argument against our thesis can be derived from the concept of personal values and leadership in the business environment. Others opine that the moral character of managers can cause choices that may not be profit motivated, not even in organizations that are ostensibly in business for a profit. Surely, there are cases of business managers who have acted based on their personal ethical values, sometimes even to the detriment of the company's immediate financial returns. For example, CVS Health's decision to eliminate the sale of tobacco products in 2014 by then-CEO Larry Merlo was estimated to reduce the company's annual revenue by $2 billion. However, such examples are far and few in between and can hardly be used as the norm. In publicly held companies, devices such as the shareholder action and the possibility of a hostile takeover exert tremendous pressure on the part of the company to make profit. Even if leaders act in accordance with personal beliefs, they are likely to rationalize these actions to shareholders in terms of future profits or exposure. However, the influence of individual leaders is normally short lived. When leadership regimes shift, organizations may return to a more direct focus on profits where the prior strategy was less profitable. Although these difficulties raise valuable points concerning corporate actions and responsibility, they are not capable of negating the argument of this paper. They instead tend to provide evidence of the ubiquity of profit orientation when seeking to maximize profits, even if organizations try to adopt multiple objectives. The stakeholder theory, CSR, and shared value approaches provide useful information on how organizations can generate value for more than one player. But in reality, these approaches are carried out in a manner that is supportive of the main objective of sustainable accumulation of profits. The B-Corp movement is still an emerging concept that offers a limited alternative to the current business environment populated by companies focused on generating the highest possible profit.

The distinction between short-term and long-term profit maximization is important but doesn't fundamentally challenge the idea that profit is prioritized. Instead, it suggests a more clear understanding of how profit prioritization manifests in business strategy. Finally, while individual leaders can certainly influence corporate behavior, the systemic pressures towards profit prioritization in our current economic system tend to prevail over time.

Understanding these challenges and counterarguments enriches our understanding of the complex relationship between profit maximization and prioritization. It highlights the need for continued dialogue and research on alternative business models and regulatory frameworks if we wish to see a fundamental shift in how businesses balance profit with other societal objectives.

## 5. Future Directions: Rethinking Profit Maximization

As we move further into the 21st century, the concept of profit maximization faces new challenges and potential evolutions. Several trends and ideas are emerging that could reshape how businesses approach profitability and its prioritization. One significant development is the growing emphasis on sustainability and long-term value creation. As environmental concerns become more pressing, businesses are increasingly being called upon to consider their ecological impact alongside their financial performance. This could lead to new models of profit
maximization that incorporate environmental sustainability as a core component rather than an externality.

Addressing the issues raised by profit maximization requires a multi-dimensional approach. In terms of corporate governance, one potential direction is the expansion of fiduciary duties beyond shareholders to include other stakeholders, as proposed by Stout (2012) in "The Shareholder Value Myth." This could involve legal reforms that explicitly require directors to consider the interests of employees, communities, and the environment alongside those of shareholders.

Education also plays a crucial role. Business schools could integrate critical perspectives on profit maximization into their curricula, drawing on alternative theories like stakeholder theory (Freeman, 1984) and the economics of mutuality (Mayer, 2018). This could help future business leaders develop a more subtle understanding of corporate purpose and performance. Education plays a crucial role in transforming business practices, with educators of future business leaders bearing the responsibility to critically engage with profit maximization theory. This engagement could involve several approaches: critically examining PM theory by incorporating more critical perspectives into curricula, drawing on works like Ghoshal (2005) on the negative impacts of certain management theories; integrating alternative theories such as stakeholder theory (Freeman, 1984), the economics of mutuality (Mayer, 2018), or the triple bottom line approach (Elkington, 1997); featuring case studies of companies that successfully balance profit with other objectives, like B-Corps or social enterprises; adopting an interdisciplinary approach that integrates business education with ethics and environmental studies; and engaging with practitioners to develop curricula reflecting real-world challenges. By implementing these educational strategies, future business leaders could be better equipped to critically evaluate profit maximization theory and explore alternative models of corporate success, potentially contributing to a gradual shift in business culture and practices towards more balanced and sustainable approaches.

Moreover, regulatory approaches could include stronger enforcement of antitrust laws to prevent the concentration of market power that often facilitates aggressive profit maximization, as argued by Khan (2018) in "The Separation of Platforms and Commerce." Additionally, policymakers could explore new corporate forms that better balance profit with social and environmental objectives, building on the B-Corp model but with stronger legal frameworks. Lastly, there's a need for further research into alternative measures of corporate performance that go beyond financial metrics. The work of Eccles and Krzus (2010) on integrated reporting provides a starting point, but more work is needed to develop robust, widely accepted measures that capture a company's full impact on society and the environment.

The rise of stakeholder capitalism, as advocated by groups like the Business Roundtable, suggests a potential shift away from pure shareholder primacy. While our analysis suggests that profit prioritization remains dominant, these movements could lead to more exact approaches to profit maximization that give greater weight to other stakeholder interests. Technological advancements, particularly in artificial intelligence and data analytics, are also likely to influence how businesses approach profit maximization. These tools could enable more sophisticated, real-time optimization of business operations, potentially allowing for more dynamic balancing of
multiple objectives. There's also growing interest in alternative business models, such as social enterprises and benefit corporations, which explicitly seek to balance profit with social impact. While these remain a small part of the overall economy, their growth could challenge traditional notions of profit maximization.

Finally, the increasing prominence of ESG (Environmental, Social, and Governance) criteria in investment decisions may push companies towards a more holistic view of performance that goes beyond pure financial metrics. As these trends develop, the concept of profit maximization is likely to evolve. Future research will need to explore how these changes affect the relationship between profit maximization and prioritization, and whether new paradigms emerge that allow for a genuine balance between financial and non-financial objectives.

## 6. Conclusion

This paper has posited that profit maximisation presupposes profit prioritisation, a connection which is both logically a priori and evidenced in business practice. By reviewing the theoretical background, supporting research and possible implications for this perspective, we have developed a solid argument for the integration of these two concepts. The rationale for the profit maximization as a theory based on the classical and neoclassical principle explain that the process of profit maximization requires the consideration of profit over all other factors. It is not just a casual relation but is part and parcel of the concept of the optimum profit. The mathematical formulation of the profit maximization also supports this argument by indicating that true maximization entails giving the highest weight to profit in any objective function with multiple objectives. The theoretical argument we have made has received substantial support from the analysis of case studies and examples from the industry. Some of the most successful companies in terms of the highest possible profit, including Amazon and Walmart, have always shown the highest possible level of focus on the financial aspect of the business. This prioritization is evident in many areas of business activity, including labor relations and supply chain, pricing and revenue models, and approaches to regulation and taxation. If even the companies that try to have other goals alongside profit, like Patagonia or The Body Shop, we can observe that the market forces drive the company towards profit maximization. The problems which these firms encounter in competing with more narrowly geared for profit companies explain the pragmatic realities of profit emphasis for the purpose of maximization within the existing market structures.

While we have considered several challenges to our thesis, including stakeholder theory, corporate social responsibility, and the B-Corp movement, these alternative perspectives ultimately do not refute our central argument. Instead, they often serve to highlight the pervasive nature of profit prioritization in the pursuit of profit maximization, even when companies attempt to balance multiple objectives. The implications of this inseparability are far-reaching and significant. For corporate governance, it suggests that boards and executives should be more transparent about the trade-offs inherent in pursuing profit maximization. It challenges the notion that companies can easily balance profit-seeking with other objectives without ultimately prioritizing financial outcomes.
From a policy and regulatory perspective, recognizing this inseparability is crucial. It suggests that expecting corporations to self-regulate or voluntarily prioritize non-financial considerations may be unrealistic without changing the fundamental profit-maximizing structure of these entities. This understanding could inform more effective regulatory approaches that acknowledge and address the inherent profit prioritization in business operations. In the realm of business ethics, this insight necessitates a more direct engagement with the moral challenges posed by profit maximization. Rather than assuming these can be easily balanced with other objectives, ethicists and business leaders need to grapple with the inherent tensions and trade-offs involved in prioritizing profit. For stakeholders - including employees, customers, and communities - this understanding can help shape more realistic expectations about corporate behavior. It underscores the importance of robust regulatory frameworks and alternative business models in addressing societal needs that may not align with profit maximization.

Looking forward, this analysis opens up several avenues for future research. Quantitative studies could further explore the relationship between profit maximization strategies and various stakeholder outcomes. Comparative analyses of profit-maximizing firms versus those with alternative objectives (e.g., B-Corps) could provide valuable insights into the practical implications of different business models. Additionally, research into potential structural or regulatory changes that could allow for a more genuine balance between profit and other societal objectives would be valuable.

In conclusion, while businesses may pursue various objectives and consider multiple stakeholders, the pursuit of profit maximization inherently requires the prioritization of profit. Recognizing this reality is crucial for fostering honest dialogue about the role of business in society and for developing effective strategies to address the challenges posed by this prioritization. As we continue to grapple with pressing global issues such as inequality and climate change, understanding the true nature of profit maximization becomes ever more critical in shaping a sustainable and equitable economic future.

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