The Effect of Social Missions On Tech Innovation

The New York Times is running a piece on how some emerging companies in the tech industry are focusing on social missions rather than profits despite having successful business methods. The startups are modeling themselves after organizations like Mozilla and TechSoup, who have both grown to significantly affect their respective markets. The article also discusses some of the non-profit support groups, such as the EFF, who contribute specific services to the field. Quoting: "'There is a lot of discussion taking place right now about a whole new organization form around social enterprise,' said James Fruchterman, president of Benetech, a social enterprise incubator based in Palo Alto. 'Many of these efforts can make money; they will just never make enough to provide venture capital rates of return.' The new stream of technology-centric and successful nonprofits, however, appears to be driven in part by a set of microelectronics technology trends that have sent shock waves through many industries, from publishing to music and movies. 'Computer technology and the Internet are lowering the cost of doing business,' said John Lilly, the chief executive of Mozilla."

Comments

Re:Finally...

[vertinox]

It always seemed a major problem that companies must be devoted to profit... and that leads to issues

I remember a press release somewhere about a non-profit pharmaceutical company created specially because of the issues you refer to. Ah here it is... http://www.oneworldhealth.org/

Anyways, some type of issues that the world deals with doesn't fit well with the corporate business model. Just because a profit cannot be made, doesn't mean it shouldn't be done.

Re:Finally...

[swillden]

So its actually bad for a company to focus on profits. ...and it can be illegal for them NOT to focus on profits, if they're publically trading.

Not necessarily. Corporations must focus on providing value to shareholders. For most (i.e. almost all) companies, that means profit, though any and all legal means. But it really depends on what the articles of incorporation say.

Whenever you create a corporation, you file a legal document called the articles of incorporation that set up all of the rules about how your company works and what its goals are. The boilerplate articles that most companies use say that the company's goal is, basically, profit. When shareholders buy into such a profit-seeking company, they have a legally-enforceable expectation that the board and officers will focus their efforts on making money.

Some companies, however, write different articles. There are a number of companies in the last few years who have written environmental responsibility into their articles, and prioritized it above profit. So for those companies, shareholders expect profit to take a back seat to environmental concerns. The officers of such a company would be breaking the law if they were to, say, use cheap, non-sustainable technology to build their products in order to increase profits.

The problem, if there is one, isn't that corporate executives MUST seek profits, it's that shareholders prefer to buy into corporations that are structured to seek profits.