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What’s Conscious Capitalism?

April 25, 2013

conscious_capitalism_the_end_of_business_as_usual

“Capitalism is great, but it assigns no value to your grandchildren.”

Jeremy Grantham, Co-founder, Grantham, Mayo van Otterloo

Conscious capitalism is in the wind. At my shiny new Whole Foods , CEO John Mackey’s book, Conscious Capitalism: Liberating the Heroic Spirit of Business is prominently featured in the front of the store.

In my inbox, I inspected the invitation to the launch of the Conscious Capitalism 2013 conference that was held in April in San Francisco.  In addition to talks by John Mackey, the agenda enticed me with workshops titled, Conscious Leadership is an Inside Job and  Consciousness and Complex Change.  I’m encouraged that this kind of conversation is happening on a larger scale.  But I’m concerned.  I don’t see anything on the agenda about climate change.   What about chronic long-term unemployment and income inequality? What’s that got to do with conscious capitalism?

In their book, Mackey and co-author Raj Sisodia profile the forward thinking practices of organizations like Trader Joes, The Container Store and Starbucks and predict that companies that focus solely on the bottom line, will be the end losers.

In her book review Christine Bader points to the indisputable points well-made in Mackey and Sisodia’s book:

  • Companies must take responsibility for their impacts on people and the planet
  • CEO’s that adopt systems thinking and take seriously the views of their staff and critics and catch problems before they escalate will do better in the long-run
  • Caring for workers, communities and the environment is not, as some argue, a distraction from fiduciary responsibility, but actually “the best way to optimize long-term profits and long-term shareholder value.”

But Christine also points out that an “over the top adulation of the private sector” pervades the book which falls short of any rigorous analysis.

Certainly Mackey has himself been the subject of media attention. He raised eyebrows with his views on the Affordable Care Act (Obamacare) which he characterized as “fascism,” and ideas about climate change which he described as “perfectly natural and not necessarily bad.”  While many of Mackey’s overall political views may be consistent with the average Fortune 300 CEO, his vision for the future of corporate behavior is not.

Mackey’s positive vision is predicated on corporate behavior and practices  that critics point out – to date – show little evidence of benevolence or even enlightened self-interest.  Mackey often points to his strong belief that “free enterprise capitalism is the most powerful system for social cooperation and human progress ever achieved, because it has lifted millions out of poverty, especially in the past 200 years.  He believes that business is “fundamentally good and ethical.”  Perhaps  Mackey’s belief in the inherent good of capitalism is rooted in his idea that “we human beings are wired to create value and trade with each other. This is in our very nature.”

Investment banker and “Merger” author Sanjay Sanghoee writes, “Capialism, contrary to what some people think is not the natural order of things, but simply a philosophy out of many other philosophies that we choose to apply to our nation; and as such, it is perfectly within our right to modify and augment it in ways that benefit it.”

“It matters how the money is made.”

Jim Collins, author Good to Great

Mackey and Sisodia’s treatise on the virtues and possibilities of western style capitalism raises important questions that deserve widespread discussion.  Far from being a product of the natural order of things, capitalism is an ideology that classically defined is an economic system based on the private ownership of the means of production with the goal of making a profit.

While even the most vociferous of Mackey’s critics has nothing against the concept of profit – volatile global economic markets, chronic structural changes affecting short and long-term employment and grim forecasts for the impact of climate change require serious analysis of the current trajectory most companies, especially multinationals, are on.

In his a Harvard Business Review article, Companies that Practice “Conscious Capitalism” Perform 10x Better, Tony Schwartz writes, “I don’t kid myself about the unenlightened and even cruel ways capitalism has been practiced by many companies: accumulating wealth for a few while paying most employees subsistence wages; fighting regulation while blithely degrading the environment; avoiding taxes and ignoring responsibilities for the communities in which they’re based. The truth is I meet few CEO’s or senior executives at large companies who seem to have much of a vision beyond the next quarter’s earnings, or a sense of responsibility and commitment to their employees, customers, suppliers and communities that equal their focus on their shareholders.”

In fact a powerful argument could be made that corporate trends of the last 20 years are evidence of the opposite of anything resembling conscious capitalism. The last vestiges of the concept of the commons are quickly disappearing.  Historically the commons have  been understood as the cultural and natural resources accessible to all members of a society – today this would include everything from the air we breathe  to the internet. While the commons contains public and private ownership, those rights are mutually negotiated to benefit the public or common good.

Increasingly those rights have been replaced by what author, Jonathan Rowe calls, “modernization” by which the value of a tree is the timber it yields.  Rowe believes that “the commons includes our entire life support system, both natural and social. The air and oceans, the web of species, wilderness and flowing water – all are parts of the commons. So are language and knowledge, sidewalks and public squares, the stories of childhood, the process of democracy. Some parts of the commons are gifts of nature, others the product of human endeavor.”

The wealth of the commons continues to dwindle as these resources become less and less accessible to more and more people. Patent greed is the latest attempt to gobble up even human genetic materials. The United States Supreme Court is now reviewing the case of Myriad Genetics, a Utah biotechnology company that discovered and isolated two genes associated with breast and ovarian cancers. The company is seeking to patent the genes. Unlike the heroic Jonas Salk, the inventor of the polio vaccine who rejected proprietary interest in his discovery, Myriad argues they have done the work and therefore deserve the financial benefits.

In 1955, Dr. Salk commented that he would not seek a patent and famously added, “Could you patent the sun?” Apparently, many in today’s corporate environment would consider it their due.

The Brave New World of Capitalism

 Just as John Mackey is seeking to redefine the terms of capitalism, it seems that other corporate leaders are doing the same.  In the past two decades, many corporate leaders have broken new ground in expanding their organizational “interests.”  Who the interest serves is a question each of us must answer as we either acquiesce or seek to empower the ideals and practices of a more “compassionate,” responsible and responsive capitalist movement.

Many corporations are mounting determined and expensive efforts to dominate political debate and policy so they can dramatically limit regulation and taxation, in all forms. While these actions  may be cleverly branded as efforts to level the playing field, attract greater investment and employ more workers, the real intentions are transparent to even a casual observer.

Here’s a short list of some examples:

  • U.S. corporations are sitting on 1.7 trillion dollars in profits outside the country.   Major corporations like Eli Lilly, IBM, Johnson & Johnson, Coca-Cola, Hewlett-Packard, 3M and Cisco have formed a lobbying entity called LIFT (Let’s Invest for Tomorrow) which pushes for major tax reforms like the territorial tax system which would let them pay home country rates competitive with those paid by low tax rate shelters.
  • Despite 46 billion in cash, Cisco CEO John Chambers said he won’t invest in any U.S. companies or hire U.S. workers until the tax code is changed
  • In 2010 the U.S. Supreme Court ruled that the government cannot impose limits on corporate spending in U.S. elections which opened the floodgates of corporate spending to influence politicians and shape policy
  • Many of America’s fast-food chain CEO’s have cut or threatened to cut worker hours and raise  prices to offset the cost of the Affordable Care Act  (Obamacare) Although some of the initial reaction to increased costs has lessened due to a more careful fiscal analysis (and considerable media and public pressure)
  • CEO salaries continue to go through roof.  Wal-Mart CEO Mike Duke just got another enormous raise. Duke, who recently said that the company “pays competive wages” earns 1,034 times the average Wal-Mart worker, who at $22,400 are below the poverty line for a family of four.
  • While corporate profits have skyrocketed and productivity has steadily risen, workers wages have stagnated or declined to a record low as a share of U.S. gross domestic product. Until 1975, wages accounted for more than 50% of the GDP but in 2012 they fell to a record lows of 43.5%.

As an Apple executive said to the New York Times, “ We sell iPhones in over 100 countries, we don’t have an obligation to solve America’s problems.”  If corporations don’t believe they have any allegiance to any local, state or national communities, who does? Where does the burden lie? Surely, corporate leaders would not point to government as they increasingly are taking collective steps with memberships in organizations like ALEC to reduce government “interference” and “over reach.”

What is 21st century capitalism’s “social contract” with workers, communities and the environment? Is there one?  How wide and far does the contract, if it exists, go? What is the responsibility of a company to protect and respect the workers and environment within their global supply chain?  Do companies bear any responsibility for deadly conditions and fires that kill workers far away from their clothing racks in suburban U.S. cities?  As corporation vie for bigger cuts in local and state taxes forcing localities to increase school class size and layoff police and firefighters, who makes up the loss?

I don’t have answer to these complex questions, but I know we need to engage more people in the conversation. It’s a serious conversation that will affect the quality of life today and for our grandchildren.

Capitalism is not a state religion. It should not be equated with nationalism. It’s not unpatriotic to challenge, criticize or even denounce certain brands of capitalism being practiced now. We have to step away from the fear that we can’t “bite the hand that feeds us,” by asking tough questions and requiring accountability.

If we believe that “conscious capitalism” is possible and necessary to create a sustainable future, we’d better broaden and deepen the conversation post-haste.

Thanks for reading and taking the time to comment, subscribe, share, like and tweet this article. It’s appreciated.

Louise Altman, Partner, Intentional Communication Consultants

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Related articles: Nowhere to Run: The Growing Spotlight on Corporate Accountability; The Next America: How the 2012 Election Will Shape the Future of Work; What Rights Should All Workers Have?

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6 Comments leave one →
  1. April 26, 2013 9:19 am

    You raise some great questions, Louise. Especially the ones about the social contract, which far too often seems to go in only one direction. Of course, we could always simply embrace the old robber-baron model, and wait for the trickle down from charities they create to help undo the problems they created earlier. But we know how well trickle-down works.

    Agree about the critical need for deepening the conversation now. As with anything related to business, I think for a large segment of the corporate sector, they have to see that there is something in it for them beyond the good feelings. So the real art is communicating in a way that grabs their multi-tasked, multi-focused attention for longer than 5 minutes, and speaks their language, while still invoking the very real larger social concerns.

    • April 26, 2013 9:30 am

      Hi Ronnie
      All great points.

      Demonstrating that there is something in it for them (besides their jobs and profits) is getting to a be a more challenging question. The reality is that the course we are on is not sustainable. Another headline grabber in today’s Business Insider shows the fast growing deepening of income inequality. The majority of economists will tell us that is simply unsustainable, not to mention the hardship and pain it is causing others. People “live” the social contract in one form or another, every day. Climate change has no favorites and even though those with the greatest means may be able to blunt the blow personally, they must live in the wider world.

      These aren’t easy or popular questions. Mackey’s book is optimistic (some would say unrealistic) but even he is not addressing this fundamental questions that will eclipse any feel good idea.

      Thanks for the thoughtful comment!
      Louise

      • April 26, 2013 10:09 am

        “Demonstrating that there is something in it for them (besides their jobs and profits) is getting to a be a more challenging question.” Such an important point you make. If I may tell a story on that point…

        I once worked for a large environmental organization, for a visionary MacArthur Fellow boss who helped revolutionize energy standards in this country and around the world. Years later, when I was working for a corporation, I called him to discuss the thoughtless waste I saw all around me (and I am sure replicated all over) when it comes to things like using unnecessary electricity, throwing away recyclables, etc. I suggested some sort of wide-scale campaign to try to change hearts and minds, show corporate citizenship (possibly increasing their stock’s attractiveness), and also save them very real dollars in the process.

        His response, after many years of doing nothing but thinking about such things, was that this just wasn’t the most effective way to make change happen, especially with corporations. After years of tilting at some of the very same windmills that I suggested we try, he told me that he had found that the keys to wide-scale change come from new and better technology, mandated standards, and products that in and of themselves, in their very design and concept, bring people along for the change ride.

        That’s not the whole conversation, but I hope it conveys some of his thoughts. Not that I am saying his thoughts are the only thoughts. It’s just another story pointing to how challenging this large-scale change is.

        All that said, I believe keeping the conversation going is essential. Thank you for your wonderful articles and the work you do!

      • April 26, 2013 10:22 am

        Ronnie~

        A very positive and effective example that need to be replicated thousands of times daily to accelerate the pace of change. But I do agree with your MacArthur fellow manager. One key point I try to make in this article is that we are reaching a critical point in core areas of our social existence – the very fundamentals of our social sustainability. Some, I think, rightly call this a “tiping point.” Certainly reputable scientists around the world believe we have even passed that point in terms of stemming “acceptable” increases in rising temperatures. We can either act as if this is not happening or engage in a much wider discussion of real solutions. Many of those solutions have to do with the ways in which companies make their profits. This is a fact. We can draw a straight line between the profits from carbon emissions and the global rise in temperatures.

        As with all “hard” conversations, this one isn’t easy – and it is just going to get harder.

        Thanks for being part of it.

        Louise

  2. May 9, 2013 7:12 am

    Louise,

    Thanks for your thoughtful recap of the conversation around conscious capitalism. Where I think we have been led astray is the definition of capitalism. It means a free market with low barriers to entry and lots of transparency. (This is how Adam Smith discussed it). What we have today is a definition that says capitalism is whatever is good for the corporate interests. Particularly those that will bribe a legislator with a sizable political donation. (Yes I used that word on purpose).

    Saying that the purpose of a corporation is to make a profit is like saying the purpose of my life is to eat. Both are necessary but if I lived to eat i would soon cease to live.

    Thanks

    • May 9, 2013 8:05 am

      Hi John,
      Thanks for sharing your thoughts. Yes, I agree our collective idea about capitalism needs to be redefined – especially in light of the brand of the past 20 years (although some would argue that it’s been going on in one form or another for the last one hundred). I don’t think most people today believe that capitalist practices are transparent. Having a Linkedin page and a Twitter account doesn’t make you any more transparent, though companies are clearly aware that their “brand” is immediately vulnerable to public attention. For example, the latest being the horrific garment factory fires in Bangladesh.
      I think we tiptoe around truths because as I said in the article we’re afraid to bite the hand that feeds us and also because at least in the U.S., capitalism is often oddly equated with patriotism. But we are on a long road here. We can pretend that predatory lobbying practices aren’t political bribes but as appetites for control become so rapacious that they finally reach a tipping point they will no longer do their work in the shadows.
      I do believe that corporations (which are after all, entities created and sanctioned by the state) can be accountable to private and public needs and fair practices and still make a profit. The problem is we aren’t having enough of a public conversation about it.
      I appreciate your adding to this one,
      Louise

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