The claim that the welfare of the people in a business matters more than its profit is one that many find self-evidently decent and many others find naive. It is worth examining rather than cheering or dismissing, because it actually contains two very different assertions tangled together. One is empirical: that looking after people and making money tend to go together. The other is a moral priority: that when the two genuinely conflict, welfare should win. The evidence has a good deal to say about the first and, by its nature, nothing to settle the second. Keeping them apart is the only way to think clearly about a claim that generates far more heat than light.
The evidence that welfare and profit align
Start with the empirical part, because it is stronger than sceptics assume. The finance professor Alex Edmans spent years testing whether employee wellbeing actually helps or hurts company performance, using the published list of the best companies to work for as his measure. He found that the companies rated best to work for in the United States beat comparable firms in stock returns by around two to three per cent a year over a period of more than two decades, and that the market appeared to underappreciate the value of employee satisfaction rather than pricing it in.
The reading Edmans offers is that treating people well is often not a cost subtracted from profit but an investment that produces it, through lower turnover, greater effort, and a reputation that attracts talent and customers. There is an important qualification: the effect was clearest in flexible labour markets such as the United States and United Kingdom, and weaker where labour rules already compel firms to treat workers a certain way. But the broad finding undercuts the assumption that kindness and returns pull in opposite directions. For a great deal of the time, they pull the same way.
The classic counter-view
Against this sits one of the most influential arguments in modern business thinking, and any honest account has to give it its due. In 1970 the economist Milton Friedman published an essay in the New York Times titled The Social Responsibility of Business Is to Increase Its Profits. Its core claim, later dubbed the Friedman doctrine, was that a company’s executives are agents of its owners, the shareholders, and that their proper job is to maximise returns for those owners rather than to pursue broader social aims with money that is not theirs to give away.
In this view, worker welfare is not unimportant, but it is instrumental: worth pursuing insofar as it serves the returns, not as an end that outranks them. It is easy to caricature this as mere greed, and scholars note Friedman’s argument was more careful than the slogans suggest, resting on ideas about who has the right to spend a company’s money. But stripped down, it is the clearest statement of the opposing priority, that profit, not welfare, is the point of the enterprise, and it still shapes how much of the business world actually behaves.
The false dichotomy, and where it stops being false
Put the two together and the first thing to notice is that the welfare-versus-profit framing is, most of the time, a false choice. In ordinary conditions a well-treated workforce is a productive, loyal and creative one, and the interests of people and profit rise together. The businesses that insist on choosing between them are frequently making an error, not a hard trade-off.
The framing stops being false only in the cases where the two truly collide: the failing firm that must cut jobs to survive, the profitable decision that would harm the people who work there, the moment when doing right by staff would genuinely cost more than the business can bear. It is precisely here, and only here, that the claim welfare matters more than profit becomes a real and contested statement rather than a feel-good one. And here the evidence goes quiet, because this is no longer a question about what works but about what a business is for, which is a question of values on which reasonable people disagree.
The shift, and the scepticism
The wider argument has been moving, at least rhetorically. In 2019 the Business Roundtable, a group of chief executives of major American companies, issued a statement redefining the purpose of a corporation to serve not only shareholders but also employees, customers, suppliers and communities, a public break with the shareholder-first orthodoxy. Supporters greeted it as an overdue correction.
Sceptics were less impressed, arguing that a statement of intent changes little without changes to incentives, ownership and accountability, and that some signatories carried on much as before. Both readings deserve airtime. It is genuinely unclear whether stakeholder capitalism represents a real reordering of priorities or a reputational upgrade, and the honest position is to watch what firms do rather than what they declare.
Where it leaves us
For what it is worth, our own view, offered once and briefly, is that the strongest position is neither of the pure ones. The evidence suggests welfare and profit are usually complementary, so the smart and decent course is to treat people well because it tends to work and because it is right. But the bald claim that welfare always outranks profit sits awkwardly with a plain fact: a business that neglects profit does not survive, and a dead business protects no one’s welfare at all. In that sense profit is less the rival of welfare than its precondition, the thing that keeps the jobs and wages and pensions in existence.
So the claim is at its most persuasive when read modestly: that people are not merely a means to profit, that their welfare is a genuine end deserving real weight, and that the businesses which grasp this tend to do better, not worse. Read immodestly, as a promise to disregard profit whenever it conflicts with welfare, it describes an enterprise that will not last long enough to help anyone. The interesting truth is that, most of the time, the choice the slogan dramatises does not have to be made at all.
