In Milton Friedman’s book, Capitalism and Freedom, he theorizes that “in a free society, there is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” And for decades, business leaders and CEOs took that theory and ran wild with it. “Companies should think of their shareholders” they would sing. They seemingly forgot about their stakeholders – the men and women that put their lives work into helping that same company grow. Today’s leaders want to change this method of increasing profit for shareholder’s sake. The Business Roundtable is bringing about a new hope, as 181 of the world’s CEOs are pledging to focus on an economy that serves all Americans.
Shareholders vs. Stakeholders: Then and Now
When Friedman first began publicly announcing his ideas, we had a very different idea of social responsibility. The concepts of “shareholder supremacy”, “maximizing shareholder value”, and “having a fiduciary obligation to shareholders” have all given businesses a scapegoat. But new generations are forcing companies to rethink their methods of turning a profit. Businesses are finally starting to be held accountable for their actions. No longer can corporations get away with atrocious acts such as cutting down rainforests, increasing pollution and carbon emissions, infringing upon national parks and other natural lands, and decreasing employee pay, safety, mental health, and general wellbeing without risking a social backlash.
Unfortunately, we aren’t fully there yet. Companies are still committing terrible acts towards both our planet and our fellow brethren. As Simon Sinek once said in an interview: “It didn’t happen overnight; it took 20 to 30 years over the course of the ’80s and ’90s for it to become fully baked into the system. And it’s going to take us another 20 to 30 years to fully bake it out.” Which is why it’s crucial now more than ever we continue to push corporations and big business into thinking about the big picture.
A New Direction, A New Hope
“The American dream is alive but fraying. Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term. These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.”
Jamie Dimon, Chairman, and CEO of JPMorgan Chase & Co.
Chairman of Business Roundtable
Since 1997, each version of the issued Principles of Corporate Governance has endorsed Friedman’s thought concept of shareholder primacy. This means that corporations should exist solely to serve and benefits shareholders. On August 20th, however, a staggering 181 CEO’s decided that time is up, and change is necessary. These CEO’s have committed to lead their companies for the benefit of all stakeholders (not shareholders). Stakeholders are the customers, employees, suppliers, communities, and yes, shareholders, who support said company.
New Hope in the Conscious Capitalism Movement
Conscious Capitalism is a way of thinking about capitalism and business that better reflects where we are in the human journey. It considers the current state of the world and the potential businesses have to make a positive impact. Conscious businesses are often made up of conscious leaders. They are driven to serve the people who interact with the business and the planet we all share. The goal of conscious businesses is to help evolve the world. They envision a future where everyone flourishes through leading lives of passion, purpose, love, and creativity. They long for a world connected through freedom, compassion, harmony, and prosperity.
Conscious leaders understand that although businesses have lost their way, the concept of business is foundationally good. Business is good because it creates value. It promotes ethics through voluntary exchange. It helps people find passion and purpose. And it can even change a person’s life by creating stability.
What A Corporation Should Be: A Statement from the Business Roundtable
“Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity. We believe the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment and economic opportunity for all. Businesses play a vital role in the economy by creating jobs, fostering innovation and providing essential goods and services. Businesses make and sell consumer products; manufacture equipment and vehicles; support the national defense; grow and produce food; provide health care; generate and deliver energy; and offer financial, communications and other services that underpin economic growth.”
These 181 CEO’s are pledging to:
- Deliver value to our customers. They will further the tradition of American companies leading the way in meeting or exceeding customer expectations.
- Invest in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. They want to foster diversity and inclusion, dignity and respect.
- Deal fairly and ethically with our suppliers. They are dedicated to serving as good partners to the other companies, large and small, that help us meet their missions.
- Support the communities in which they work. They respect the people in their respective communities and protect the environment by embracing sustainable practices across our businesses.
- Generate long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. They are committed to transparency and effective engagement with shareholders
How You, as a Local Business Leader, Can Instill & Perpetuate This New Hope
If you’re inspired by the new direction that conscious capitalism is bringing to our economy, there are a number of things you can do to instill new hope as a local business leader in your own backyard!
- Remember your employees are humans with their own lives. Their goals aren’t solely to increase your profit, but rather to take care of their families and loved ones and provide them with security. You should be doing the same for them.
- Engage in your employees’ personal goals and projects. And help them reach those goals if you can. Do you have an incentive in place to help those wanting to go back to school? What about paying for certain certification programs? Do you flexible working hours or remote/office flexibility for those with young kids or who have passion projects outside of the company?
- Volunteer for an issue or with an organization that you and your business stand behind. Do your best to make this a consistent part of your business. Volunteer quarterly or even better, once a month. Remember, giving back to your community benefits EVERYONE. And if volunteering isn’t feasible, donate what you can.
- Join in on the conversation. Unfortunately, that may mean alienating some of your customer bases. Don’t fret, as you probably don’t want to do business with those that don’t agree with the issues or causes you want to stand behind. And more likely than not, you’re going to gain new customers solely because they believe what you believe and want to support companies standing up for important issues! Use your platforms when you can – elevator pitches, blogs, social media posts, etc.
New Hope with onCOREventures
Frederick started this company because he has honed-in the skills that allow him to help support and grow local businesses. He has always advocated doing good things for good people that need help. We want to be the neighbor Mr. Rogers taught us to be and help support and grow our local Pittsburgh economy so that everyone can feel safe, secure, and like they are living a fulfilling life. This business was created for honest business owners wanting to operate in harmony with their core values. If you’re trying to create positive change in the world while also attracting customers who share your values, our “strategy first” methodology may be exactly the new hope you need!