A “living profit”? Some hints from Guinness.


guinness glass filled with beer

Photo by Engin Akyurt on Pexels.com

A pint of the black stuff (Guinness) would be most enjoyable now, ten weeks into “lockdown”.  Of course, this is not a lament to me wanting a pint, but there is link to Guinness.

For quite a few years now, media and commentators have highlighted the large profits and low taxes of many companies. Take amazon.com Inc, whose Q1 sales in 2020 reached $75 billion (see here for more), or think of Apple, Facebook or many other companies. Before I say anything further, I am not a total socialist, nor am I a total capitalist – there is a happy medium in there somewhere.  You may know from reading previous posts that I do some historic research on the Guinness company. Dennison and MacDonagh (1998) in their book Guinness 1886-1939: from Incorporation to the Second World War provide some very useful insights into the general management of the company, and I will draw on one of these now.

Sometimes I ask myself why do some companies need to make so much profit? On the  other hand, in a democratic/capitalist society, they are free to do so. Now, with a serious pandemic gripping the entire world, some of our underlying models are at least being questioned. So my question is could companies be happy with a “living profit”. I first noticed the term in relation to Guinness dealings with Irish malt suppliers around the turn of the 20th century. The company wished to encourage the production of Irish malt, but were not willing to buy at the lowest market price. Instead the company noted a “living profit” should be attainable. What exactly this means is not specified, but the general principle if clear. Today, most (not all) companies seem to want lowest cost everything and highest profits – presumably to keep shareholders/investors at bay. Would it not be a great improvement for us all if more and more firms took the approach of the “living profit” espoused by Guinness over a century ago? I am sure economists and others could give me many reasons why not.  But, perhaps it is worth having the conversation as the business world comes back a new normal in the coming months.

 

 

 

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About martinjquinn

I am an accounting academic, accountant and author based near Dublin, Ireland.

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