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In the 1987 Oliver Stone drama Wall Street, the immortal business tycoon Gordon Gekko proclaimed “Greed is Good”, and despite the seismic market collapse later that year, a generation of budding business people took this maxim to heart. It seems we are met daily with the embodiment of greed as Martin Shkreli increases the price of anti-parasitic drug, Daraprim, by 5000% or Bernie Madoff swindles $65 billion from investors through an elaborate Ponzi scheme. Trying to find misbehaving businesses is about as hard as trying to find a frat boy who likes beer. Is this really what Adam Smith had in mind when he unleashed capitalism on the world centuries ago?
Some businesses have outright rejected this notion that the corporation should maximize shareholder value at all cost because doing so means a whole lot of people, vital to that business, ultimately get squashed. They also leave behind the notion that a business should be little more than a driver for profits without any larger point or purpose. In a lot of ways, Conscious Capitalism is a fresh way of thinking about business.
Conscious Capitalism is built on four pillars:
Should businesses exist for the sole purpose of raking in mountains of cash? Profit will always be the driving force behind any business because without it that business would cease to exist. Profit should not encapsulate what that business is. Conscious Capitalists would say a business should always have a higher purpose beyond the final tallies on a balance sheet.
Stuffing wads of cash in the pockets of shareholders is certainly nice for shareholders. I mean who doesn’t want to complete their Italian sports car collection? Yet a business isn’t going to get very far if it ignores the other key contributors to its success. In addition to its investors, Conscious Capitalism looks to maximize value for the entire ecosystem a business inhabits (employees, customers, suppliers, society and the environment). If every stakeholder buys in to the organization’s success each step along the way, that success is much more likely to be realized.
A business begins and ends with its culture. Regardless of its innovation and talent, if employees view the business culture as toxic, it will slowly drain the effectiveness of its work force and could ultimately lead to the failure of the business. A business must build trust between its team and stakeholders to establish that core cultural foundation. In addition to trust, a healthy culture must also push transparency, accountability, integrity, fairness, loyalty and personal growth. The more a business strives to grow in each of these areas, the stronger their corporate culture will become.
The leadership ultimately determines if Conscious Capitalism will nurture and grow within the organization. Conscious leaders operate with a “we” mindset that strives to draw out the best from those around them. Under their charge, strong leaders implement the keys to fostering a strong culture, center the business around stakeholder enrichment and place the business on a path to realize its higher purpose. Without strong leaders willing to construct and cultivate this unique business environment, Conscious Capitalism can’t succeed.
This idealized corporate vision can achieve superior results. Some of the most profitable companies in the world have adopted Conscious Capitalism like Whole Foods, Costco, Google, Amazon and Starbucks.
While the driving principles are the same, each company implements Conscious Capitalism to fit their own unique corporate vision. For instance, Costco starts its cashiers out at $13 an hour, offers healthcare benefits to most employees and are known for their charitable giving in the communities they inhabit. They turnover only 6% of their work force each year, saving the company substantial hiring and training costs.
Starbucks donates 100% of its unused food to local food banks. They were an early proponent of environmental concerns, switching over to recyclable cups in 2006 and offering used coffee grinds as free compost to anyone who wanted them. Like Costco, Starbucks offers its part-time workers health care and spends more every year on health benefits than it does on coffee. Let that percolate for a minute.
It can’t be said that Conscious Capitalism automatically breeds market winning performance just like it can’t be said that soul-sucking companies can’t be wildly successful. Just like every retailer, Nordstrom and The Container Store are getting their collective lunch eaten by Amazon (another Conscious Capitalist). Tobacco companies, perhaps the perfect unconscious capitalists, are racking up millions of customer deaths each year yet their stocks have produced some of the best returns of all time.
While Conscious Capitalism isn’t necessarily a magic bullet for business success, it does offer a way for business leaders to make the world a better place without sacrificing the bottom line. In a time when the ruthlessness of capitalism is being questioned at every turn, it is refreshing to see businesses finding ways to be part of the solution rather than part of the problem.
If you’d like to find out more about Conscious Capitalism, please check out the book Conscious Capitalism: Liberating the Historic Spirit of Business written by Whole Foods co-CEO John Mackey.