Please indulge me for a moment. Stop multi-tasking, take a deep breath and deep dive for a few minutes in search of your “why.” Remember when you first dared to start your entrepreneurial journey? Behind all your doubts, fears, and worries was probably a deep-seated purpose or core belief driving your actions, yes? Do you have it? Good. Now ask yourself, what is the purpose of “business” in general? Does the concept of “doing business” look the same now as it did 50 years ago? Is American Capitalism, as a system of trade and industry by owners for the purpose of profit, sustainable long term?
Ok, enough with all the questions. I ask these pointed questions to open your neural pathways to receive new information – a new perspective. This January, I was fortunate enough to participate in a month-long Startup Bootcamp focused on helping socially conscious entrepreneurs build sustainable businesses. Created and executed by the Torrey Project, a global non-profit dedicated to transforming business for good, I was connected with other socially conscious leaders and introduced to the concept of stakeholder capitalism.
So how are stakeholder capitalism and the ideology of purpose over profits changing the business landscape…let’s start with a simple explanation and definition…
What is Stakeholder Capitalism?
According to Stakeholder Theory, this form of capitalism is hyper-focused on the relationship between a business and ALL of its stakeholders. Stakeholder capitalism is about creating value for not only your shareholders but employees, suppliers, investors, communities – everyone who could potentially be impacted by your business. Now, I know some of what I just said seems like a total 180 from the traditional business enterprise and wall street model. Well…it is!
In 1984, R. Edward Freeman, said to be the Father and Founder of Stakeholder Capitalism started a conversation about bringing morality and personal values into the workplace and aligning them with business purpose. Even today, this is a highly controversial position, with disagreements on both sides of the argument. In my opinion, business is evolving to catch up with the global workforce trend of discovering a purpose behind profits. Although a healthy salary is important, I believe it’s only a small piece of a much larger pie that motivates employees and drives positive change in the global economy.
Values-Based Decision Making
Think about the impact your business has on ALL stakeholders, not just your shareholders or people profiting from your product or service. I have personally done a lot of soul searching surrounding this question for my business. Although I concluded that it’s impossible to make all my stakeholders happy all the time, I believe I can try every day to consider how my actions will affect everyone involved. That said, it only makes sense that who I am as a person, my beliefs and values should be the driving force behind how I do business.
In my experience, the younger generation of entrepreneurs and startup companies are exploring the idea of aligning their personal values and beliefs into company culture, mission, and vision. I am guessing you started your business with the intent of helping someone or doing something to help serve others in some way? Personal values and beliefs are a powerful motivator and can help you make tough business decisions. Why not make it easy on yourself and bring some of your personal values into decision making for your business? In a way, you can help make business better and transform the way business is done by acting in accordance with your higher morality and core beliefs.
The Benefit Corporation
Current research shows that going into business for the good and benefit of all stakeholders not just shareholders as a long-term approach, has a good probability of future success in the business world. The difference between a benefit corporation and a traditional corporation has to do with fiduciary responsibility. Instead of believing that the only fiduciary responsibility that a company has is to make money for its shareholders, a benefit corporation believes that it has a responsibility to take care of ALL its stakeholders. In my opinion, these companies hold the power to change the world and business for the better. Thinking long term, they look to act in a way that creates a balanced return for all stakeholders, including their local communities and the environment.
A few well-known benefit corporations such as Patagonia and New Belgium have taken it one step further and made a public declaration of their core values and beliefs by becoming Certified B Corporations through B Labs. Certified B Corps must go through a rigorous checks and balances process and make promises and agreements to do good for everyone they serve including employees, shareholders, investors, and the environment. The global discussion continues regarding the long term feasibility of benefit corporations, and if transforming business for the greater good can and will be adopted as the norm.
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