At its cultural core, America is pragmatic. The first settlers came for opportunity. Those that followed pushed west, grabbing as much as possible. So you might say we are pragmatic about opportunity. A cultural mindset that drives every business culture as well.
How can we grow? How much market share can we steal? What strategic alliance should we create? Where can we carve out more margin? Will we meet our numbers?
Corporate America is a slave to more.
But more is a race without a finish line. It is the carrot strapped to your head — no matter the effort, you never get closer.
More is a tyrant that’s killing us.
And since Milton Friedman is dead, we should bury Shareholder Capitalism with him.
Tightly defined and singleminded, Friedman Economics was a compelling rallying cry for business in 1970. It depicted a focused, ruthless definition of success that electrified the hearts of investors who didn’t care a whit for ethics or anything that didn’t rhyme with “profit.”
Which I can understand. Who doesn’t like to see their investments grow?
But this rapacious approach to business has taken its toll on the American worker by defining success in numbers, which are abstract unless you happen to be an investor. As a result, employees toil under the pervasive sense that you’re working for someone else.
There’s a term for this type of work: indentured servitude.
Salseforce CEO Marc Benioff pulls no punches on the subject:
“I’ll never forget reading Friedman’s essay when I was in business school in the 1980s. It influenced — I’d say brainwashed — a generation of C.E.O.s who believed that the only business of business is business. The headline said it all. Our sole responsibility to society? Make money. The communities beyond the corporate campus? Not our problem.
“I didn’t agree with Friedman then, and the decades since have only exposed his myopia. Just look where the obsession with maximizing profits for shareholders has brought us: terrible economic, racial and health inequalities; the catastrophe of climate change. It’s no wonder that so many young people now believe that capitalism can’t deliver the equal, inclusive, sustainable future they want.”
The paradigm is already shifting. (In case you haven’t noticed.)
According to The Atlantic, in May of 2021, more than 700,000 workers in “professional and business services” (aka “white collar”) left their job — the highest monthly number ever.
Forbes echoes that “people’s attitudes toward work have also changed. After a year spent unemployed or working from home, many have recalibrated the expectations they have of employers and the priorities they have for themselves.”
The pandemic has given the American workforce a window for self-examination. It’s forced us to reformulate a work-life balance by taking away the office. And employers are freaking out, demanding employees return to the office. But the push back at Apple only demonstrates how out of touch CEOs like Tim Cook are.
Like it or not, we’ve become socially distanced from work.
Appearing on NPR’s Marketplace, Keith Ferrazzi says “Decisions are being made to force individuals to march back into the workplace on the basis of poor assumptions — the assumption that we can’t be innovative in a remote and hybrid world. And the reality is we can actually do it better if we use the tools well.”
But before we veer off on the pros and cons of commuting or working remotely, we should discuss whether or not our work actually has meaning.
Work must have meaning.
“Jobs aren’t big enough for people,” says a project manager named Amanda in Studs Terkel’s book Working — a fictional biography of work in post WWII America. It’s also poetic that Terkel published his work in 1974, just a few years after Friedman’s NY Times Op-Ed. The book — and subsequent play — is a first-person essay on how work either lends meaning to life or numbs you with menial labor that fails to feed your soul.
Stephen Covey, in his book The 8th Habit, describes a poll of 23,000 employees drawn from a number of companies and industries. He reports the poll’s dismal findings:
• Only 37 percent said they have a clear understanding of what their organization is trying to achieve and why.
• Only one in five was enthusiastic about their organization’s goals.
• Only one in five had a clear idea how their tasks aligned with their organization’s goals.
• Only 15 percent felt that their organization fully enables them to execute key goals.
• Only 20 percent fully trusted the organization they work for.
Covey then superimposed a very human metaphor over the statistics: “If a soccer team had these same scores, only 4 of the 11 players on the field would know which goal is theirs. Only 2 of the 11 would care. Only 2 of the 11 would know what position they play and know exactly what they are supposed to do. And all but 2 players would, in some way, be competing against their own team members rather than the opponent.”
This is what corporate America looks like: work without meaning.
And the old guard is confusing the resistance of younger professionals to join the swamp as a lack of work ethic. In case you haven’t listened to Simon Sinekin the last five years, Millennials look at Boomers and are saying “No thanks.”
Who can blame them?
Shareholder Capitalism’s roadkill of income inequality, job obsolescence and environmental disaster make a persuasive case to explore a Stakeholder approach to Capitalism.
Redefining Capitalism
In 2014, Eric Beinhocker and Nick Hanauer offered a compelling vision of Stakeholder Capitalism in a McKinsey Quarterly Report titled “Redefining Capitalism”:
“If prosperity is created by solving human problems, a key question for society is what kind of economic system will solve the most problems for the most people most quickly. This is the genius of capitalism: it is an unmatched evolutionary system for finding solutions.”
Corporate America has the structure, finances and the ingenuity to solve our biggest challenges. This is the real power of Capitalism. It fosters innovation. It is what business is best at. Gather your workforce around solving a big problem and you have work that has meaning.
A job big enough for an employee to fill.
Capitalism needs to level up.
As implied by its name, Stakeholder Capitalism acknowledges that corporations answer to more than shareholders. Businesses are responsible to everyone their enterprise touches: the shareholders, the employees, the spouses and families of employees, the communities in which the companies reside, the strategic partners and supply chain, as well as the communities in which those partners reside.
This is more than adding Purpose to Profit with some social cause initiative. This is an existential shift how a business thinks about itself.
But such change does not come lightly. The status quo has such gravity and human nature is so entrenched, it usually means pain will be the catalyst for change. And Covid 19 certainly provided that pain.
In March 2020, Vijay Vaitheeswaran, Business Editor for The Economist, saw the Coronavirus as forcing US corporations to reexamine their price-driven supply chain and, in doing so, establish a more moral chain that has transparency and accountability all the way though. His insight flows out of a larger published work called Need, Speed and Greed: How the New Rules of Innovation Can Transform Businesses, Propel Nations to Greatness, and Tame the World’s Most Wicked Problems.
Long story made short, every business needs to elevate their definition of success from the bottom line to something that doesn’t lose its value in a fiscal quarter.
Profit is good. Of course. Only a naive fool would say otherwise.
But profit is not the purpose of business. It is the fruit of a successful business.
When profit becomes your business mission at the expense of everything else, it serves itself instead of advancing something greater.
Profit becomes an idol.
Which is why any business needs to have meaning beyond what it means to shareholders.
Capitalizing on the Creative Power of Capitalism
In a world of pundits, serial entrepreneurs and futurists, few people see over the horizon of change better than Tim O’Reilly. For nearly a decade, he’s drawn a distinction between “wealth extraction” and “wealth generation.”
That single word extraction indicts Shareholder Capitalism as the rapacious thing it is. Profit-driven companies use strip mining, fracking, slave labor and drift net fishing to extract value at a lowest cost. They use the power of automation to reduce workforce instead of elevating tasks. They see employees as human capital that they treat like all the other resources they extract then discard, because, in a global economy with its increasingly commoditized and competitive marketplace where companies must lower costs to carve out a margin, payroll is the primary way to trim cost.
Empirical proof that profit is not synonymous with prosperity.
But when a business sees its purpose as generating wealth, a more holistic and healthy culture is birthed. In addition to the shareholder, there is the prosperity of employees, customers, partners, community and the environment.
Wealth is generated to be shared. Not horded.
We’re talking about a virtuous circle of generate… share… prosper… generate more… repeat.
In 2019, a consortium of 227 CEOs called The Business Roundtable — a virtual who’s who of chief executives — drafted the “Purpose of a Corporation” in which they declare businesses share “a fundamental commitment to all stakeholders.”
Nice words. But will it ever amount to more than that?
In Forbes, a cynical Steve Denning writes:
“The attraction of stakeholder capitalism as a public stance is that it doesn’t commit big business to do anything in particular. Firms can go on privately shoveling money to their shareholders and executives, while maintaining a public front of exquisite social sensitivity and exemplary altruism.”
Yet, I remain optimistic because companies like Johnson & Johnson define success through a Stakeholder lens:
“We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services….We are responsible to our employees, the men and women who work with us throughout the world….We are responsible to the communities in which we live and work and to the world community as well….Our final responsibility is to our stockholders….When we operate according to these principles, the stockholders should realize a fair return.”
This is probably the clearest articulation of Stakeholder Capitalism I’ve ever heard. (Which surprises me since I actually produced a heartfelt documentary campaign for their baby products and never came across the statement.)
Yet, despite the J&Js and Business Rountables, far too many legacy corporations remain entrenched in driving profits while disingenuously imitating newer players who espouse high ideals but are as consumed with data as the legacies are with money.
Shareholder Capitalism wrapped in Woke Capitalism.
More Than Woke Capitalism
I blame much of these corporate half-measures on the uninspired name “Stakeholder Capitalism.”
No offense to Pete Drucker (who purportedly coined the term), but it’s a starched shirt of a name that feels dry and corporate. It fails to light a fire the way Friedman’s ruthless distillation did. And, because it lacks such a sharp edge, it’s vague. So no one knows what it actually means.
From a marketing perspective, that’s brand suicide.
Stakeholder Capitalism needs a rebrand.
In his criticism of corporate greed and the politicization of the economy, Scott Galloway has coined the term “Crony Capitalism.” Colloquial and brutally simple, it’s a perfect example of a “sticky” name. Unfortunately it labels the problem instead of the solution.
So is there a better name for Stakeholder Capitalism — one that possesses the same raw elegance of Galloway’s vernacular?
Here are five thought starters:
1. Sustainable Capitalism
This coopts environmental language to convey a healthier ecosystem.
2. Shared Capitalism
By truncating “Shareholder” we become inclusive. But maybe too socialist.
3. Conscious Capitalism
This captures the spirit but might be too soft to attract Friedman adherents.
4. New Capitalism
“New” works for selling products. Why not capitalism?
5. Creative Capitalism
Might as well lead with Capitalism’s strongest attribute.
The point of this exercise is not to embarrass myself, but to publicly ponder whether 21st Century business needs a 21st Century name to rally around.
Originally Published on Medium:
https://medium.com/bemeaningful/stakeholder-capitalism-needs-a-better-name-fa25efa49182
