How is the goal of profit maximization affected by ethical considerations?

Answer 1

As a goal "profit maximization" alone is too simple to be meaningful.

All goals are filtered by our values. If someone is driven by greed alone then ethics may not be considered. However, that person will still need to consider timescale. If you take the short-term view a manager may put off maintenance on a machine so that it can continue to produce but not have the expense of the maintenance. Thereby increasing profit in that accounting period. But what if doing so causes irreparable damage to the machine that means it will eventually have to be replaced several years earlier than necessary. In the long-term the company's profit is reduced even though it was maximized in the short-term.

So even someone who does not value ethical behavior should modify their idea of what the "maximum" acceptable profit is in the short-term giving due consideration to the long-term.

When someone's values mean that they bring ethical behavior into the equation you need to plan for the cost of behaving differently. This means that the maximum profit achievable from acting ethically will often in the short-term be lower than from acting unethically. However, in the long-term the profits may be higher.

Look at the way banks have behaved in the recent past. The search for maximum profits lead them to act unethically in lending to people who were never going to able to service the debt. A culture of high bonuses fueled this behavior and people never thought that the growth would end.

Shame on the bankers, regulators and politicians who believed that profit maximization, without any other considerations, was a good thing.