Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia ISBN: 978-1-922069-89-4 Should Corporations Continue to Pursue Profitability or Does Sustainability Matter? Eunsup Daniel Shim Abstract As evidenced by the recurring economic and financial crises and market failures, the society calls for a new paradigm, reexamination of capitalism, the market economy and corporate governance. It has long been argued that the major objective of the corporation is to maximize shareholders’ wealth. The idea of shareholder wealth maximization demands short-term profit maximization. In order to maximize profit, corporations tend to take a short-term planning horizon and focus on the short-term results. These short-term opportunistic behaviors results in unethical behaviors, illegal actions and numerous corporate failures including Enron, Arthur Anderson, and Global Crossing. In this paper, I argue that corporations narrowly focused on short-term profits, can make business decisions that could be detrimental to long-run sustainability. To increase shortterm profits, for example, firms might not be making adequate investments in Research and Development and might be producing potentially harmful products, and might be ignoring environmental, external costs. Recent management theories emphasize sustainability over short-run profitability and agues for the stakeholder’s perspective over the shareholder’s maximization theory. The stakeholder perspective argues that the corporation exists not only for the benefit of shareholders but also for that of other stakeholders including employees, suppliers, customers, and to some extent, for the benefits of society. The stakeholder perspective promotes ethical business decisionmaking and focuses on long-run sustainability by emphasizing a stable customer base, employee well-being, a better corporate image, and corporate social responsibility. Ethical decision-making includes a fair and equitable distribution of corporate profits, empowering business decisions and stabilizing employment. In a new and contemporary economy, the stakeholder perspective provides a better view of managing corporations by promoting long run focused, ethical decision-making and by paying attention to “common good”. This will ultimately help in improving profitability and long-run sustainability. ___________________ Dr. Eunsup Daniel Shim, Cahir and Professor of Accounting, Department of Accounting and Information Systems, John F. Welch College of Business, Sacred Heart University, 5151 Park Avenue, Fairfield, CT 06824, USA, Email: shime@sacredheart.edu, Phone: 203-371-7873 (o), 203-450-2300 (c)