Objective Is to Make Profits

The scan: The Week v8 no20.pdf (PDF, Marxists Internet Archive, opens at this page)

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In a statement on the realistic objectives of any company in business, the head of a large chemical concern - Mr A.J.A.Argenti - said that the realistic objective of any company was to make profits. He debunked the suggestions made by some econ-~ omists that companies existed to generate a benefit or that they were there to expand exports or to lead the industry in technology or only to produce worthwhile goods. "There should be one survival and only one objective. All others such as wish for survival, are logically false or turn out to be means or constraints but not ends,” he asserted. Turning to targets, Mr Argenti said "The target for a public company is about ten percent interest to shareholders, This usually takes the form of a three per cent net dividend yield plus a rise in the dividend of about seven per cent, To achieve this pattern of divided payments a company will have to earn seven per cent more profits every year if its dividend cover is to remain constant, " This gives a clear unéquivocal profit target to aim for. If the company's profit after tax was £100,000 last year, then it should be aiming at £107,000 this year, £114,000 next year and so on until in 1977 the profits should have risen to £200,000." In emphasising the importance of objectives and targets, he went on to say that often these were set with scant regard for logic or realism, Companies struggled on when they should be wound up; subsidiaries were written off because their return on capital employed - "a wholly spurious measure" - was considered too low; or they struggled on to increase their size of the market when what they should be doing was to diversify into a wholly different market, "I believe that determining the objective for a company is not just an academic exercise. It really does matter." He added. Editorial note: this remarkably frank statement about the aims of capitalist enterprises was made in a speech to the joint Financial Times and University of Bradord Commerce Department conference on long-term business planning which is being held in Harrogate this week,