Business, Legal & Accounting Glossary
In the free market economy, the profit motive is the ultimate purpose of a commercial enterprise, to earn a profit. The profit motive notion is closely related to the concept of self-interest. Adam Smith originally described the workings of the free market not in terms of a profit motive, but as a by-product of individual self-interest. Under this philosophy, the profit motive is axiomatic, in that the only way a company can further the self-interests of its shareholders is to earn a profit. The profit motive is merely a proxy for providing income to shareholders. As an extremely focused definition of business purpose, the profit motive engenders considerable criticism of capitalism generally and multinational corporations in particular. These critics point out the profit motive apparently allows no room for the interests of the customer, the employee, or society and the environment, unless those interests happen to align with what the profit motive dictates. Perhaps the profit motive is a bit like democracy: the worst corporate objective, except for all the others that have been tried.
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This glossary post was last updated: 6th February, 2020