The demands of the 21st Century are rapidly transforming the notion that corporate purpose is solely to maximize shareholder value. While there is still a large camp that still believes this – there is another group that is gaining traction that this is too limited a view. In fact, maximizing shareholder value as the principle purpose of the corporation has not borne out with regards to the research on corporate performance. Three recent studies that point to the shift include: Aspen Institute; Deloitte Consulting; and, Ernst and Young. Furthermore, Havas Media’s research suggests “Meaningful brands [committed to social well being] out performed the stock market by 120% in 2013… with a majority of people not caring if over 73% of brands ceased to exist” (Havas Media). Additionally, Havas Media’s research claims that a mere 20% of brands are seen as having a meaningful and positive impact on people’s lives! These facts represent a powerful disconnect between the feedback from customers and their behavior and the management of brands.
If we don’t like the way a corporation is performing, why do we buy their goods? We have a choice, we vote with our dollars. In the end, how we allocate our money may be a far more rapid and effective feedback system than electoral politics.
While Baby-Boomers and Gen X and Y may have forgotten this, it is pretty safe to say that their children and grandchildren have not. In the epoch of Millenials and social media, the social contract – composed of environmental, social, and economic benefit – has come of age. The “born social” brands, those that did not exist prior to the 21st Century, are proving that success is not about massive marketing budgets buying eyeballs and customers, but about attracting people (like bees to a hive) to participate in a virtuous circle of interdependence.
Example: bees travel from flower to flower, collecting pollen, then return to the hive where it is transformed into honey. While bees are on their journey, they are also pollinating flowers, facilitating the process of fruiting. This is a virtuous circle of interdependence – nothing is wasted.
We are moving from mechanistic, transactional models to biological/natural law models; there are very different design rules in this new paradigm. I’d suggest that we have crossed a threshold whereby sustainability, corporate responsibility, and strategy are inseparable. While early adoption placed sustainability and CSR into stand-alone departments, the wiser choice is that it belongs as part of the genetic DNA of a corporation – and that is called purpose. After all, sustainability is no more than an emergent perspective on accounting that captures ALL the vital statistics and metrics describing how a corporation works. And, corporate responsibility is no more than the logical extension of corporate personhood (we cannot have it both ways). If individuals have social obligation, then the collective assembly of persons into a corporate identity would naturally have social obligation.
People who do not honor their social obligations are referred to as socio-paths; a collection of people who do not honor their social obligations represents a tyranny. Fortunately with regards to business, we do not have to be tyrannized; we simply have to stop buying and supporting (or working at) organizations that refuse their social obligation. This is something that Millenials intuitively know, perhaps a death knell for consumerism (who’s etymological roots come from the word – to waste).
Whether we are individuals or corporations, our purpose is the North Star that helps us to steer amongst a universe of infinite possibilities given our genius (who’s etymological roots come from the word – the spirit given to us at birth). The time horizon to guide purpose is a lifetime, not quarterly. Basing purpose solely on maximizing value to shareholders – who represent short-term value, rather than our grandchildren and great grandchildren – who inherit our good (or not) efforts at the end of life, makes no sense.
A sound strategy for meeting the 21st Century includes attention to all the elements in the field – profitability, shareholder value, employee attraction and retention, operations, social benefit, environmental impact, and economic value to society as a whole (as represented by customer selection). Each one must be sustainable and responsible to insure that an endeavor survives. This is conscious capitalism.
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