Guest Post by Linda E. Dunbar
Global Public Affairs Executive: PR Strategist, Spokesperson, Employee Communications Leader Adept at Engaging Key Stakeholders.
7 Reasons Why America is Rethinking Capitalism Now
There is a move afoot to change capitalism as we know it. A radical overthrow by futuristic anarchist forces? Hardly. Actually, the US business community is bravely harking back to its pre-Milton Friedman roots.
In September 1970, the 5”0’, Brooklyn-born Friedman, a well-known American economist who would earn a Nobel prize in economics six years later, published an opinion piece in The New York Times.
The title — “The Social Responsibility of Business is to Increase Profits” — summed up his thesis succinctly. In his piece, he accused US business of “preaching pure and unadulterated socialism” in attempting to address social issues of the day.
Friedman’s dismissive view: “The business men believe that they are defending free enterprise when they declaim that business is not concerned ‘merely’ with profit but also with promoting desirable ‘social’ ends; that business has a ‘social conscious’ and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers.”
To set the scene, when Friedman wrote his piece, life was very different from today although there remains no shortage of societal issues for the US business community to address.
In 1970, a woman needed a man, any man, even her 17-year-old son, to sign a business loan, get a mortgage or a credit card regardless of her income. Her income would then be discounted by the lender by as much as 50 percent when deciding how much credit to extend. In those days…
Equal access to credit for all, at least on paper, would not come to be in the US until the Congress passed the Equal Credit Opportunity Act of 1974.
Just the year before, in 1969 Rep. Charlotte Reid (R-Ill.) became the first woman to wear trousers in the U.S. Congress and Barbra Streisand became the first woman to attend the Oscars in pants.
Also, in 1969 the Stonewall Inn riots in Greenwich Village launched the gay pride movement.
The unpopular Vietnam War would rage on another five years until the fall of Saigon in 1975.
Despite the passage of the historic Civil Rights Act of 1964, discrimination against minorities continued to be rampant. In Loving vs. the State of Virginia, the U.S. Supreme Court case that overturned “miscegenation” laws in the US, was decided in favor of the plaintiffs a mere three years after in the year 1967.
The first Earth Day was proclaimed in April 1970.
The animal rights movement had not yet gotten momentum. In fact, People for the Ethical Treatment of Animals (PETA) was not founded until 1980.
Following Friedman’s pronouncement, Corporate America and its corporate governance practices made shareholder value the end-all-and-be-all of corporate thinking.
Even if that approach clearly didn’t make any sense. Anyone in business today knows intuitively no customers no business no employees no business. But along with that pronouncement came the opportunity for many major U.S. companies to take a pass on societal issues, even issues that might have been caused by business practices (extractive industries and their activities affecting the environment come to mind).
Thankfully, we have come full circle and Corporate America — in fact the global corporate business community — is coming together to rethink capitalism and its societal impact. Recent comments by asset management giants and others have been well-received as we look toward creating change.
What does rethinking capitalism mean? And why now?
Better Capitalism. Tempered Capitalism. The New Capitalism. Conscious Capitalism.
Whatever it is called, helping to transform the short-term, insular thinking currently stifling the potential of American business and its ability to effectively connect with stakeholders is an important element of the movement.
Understanding that although businesses have an important fiduciary responsibility to shareholders, the enterprises exist for reasons other than to solely enrich shareholders (and business leaders who understand that perform better than those who don’t).
And the core: understanding your reason for existing, your purpose, what business you are really in is critical for long term success. As in do what you love and the money will follow.
“Purpose” turns out to be an effective organizing principle for many businesses. This thought process is catching on.
Here are my seven reasons why I think the time is ripe to rethink capitalism and mesh social impact and success.
1. Social media – Businesses just can’t ignore customers and employees any more. Before social media an unhappy consumer complained to roughly 17 other people. Now unhappy customers have a direct impact on reputation in a way they just could not before social media and a poor reputation eventually leads to lost revenue.
2. The Age of Authenticity — People in the US are tired of literal and figurative airbrushing. People want companies to do what they say they will. And they want them to strike the right note. If your advertising firm has advised you to be edgy, you have no margin for error. See number 1.
3. Millennials – There are over 79 million Millennials and the numbers of men and women Gen Z are close behind. They expect a different relationship between society and business — and they are not taking no for an answer. The idea that life is too short to be someone you are not or spending time in a way that you do not want to is part of their DNA. Gay, transgender, what have you, Millennials and Gen Z are not batting an eyelash. Equality, diversity, and inclusion are table stakes. They expect diversity, inclusion, equality where they shop, eat, work. If not, they will go somewhere else. Period.
4. Additional demographic shifts – The minority is becoming the majority and in 2019, the majority of U.S. children will be minorities. As demographics shift no business can be successful by leaving people out, be they customers or employee or potential customer or employees. This loops back to numbers 1, 2, and 3.
5. Climate change and the detrimental impact of humans on the planet is real – some problems we — business, government, NGOs, activists, the general public — have no choice but to tackle together. Like having air to breathe and water to drink.
6. The #Me too, #Times up Movement – Dignity, respect, and equality in the workplace, everywhere actually, are a given. And these movements have ramifications beyond sexual harassment. According to CNN, #MeToo and #TimesUp have pushed 48% of companies to review pay policies. Gender pay equity has been an issue since possibly the beginning of time and now we are seeing movement on this issue.
7. The data – The data says inclusive, diverse companies perform better.
How much better will companies perform when their purpose is at the core of what they do, long-term strategy is understood and embraced by everyone from the board on down, and stakeholders are effectively engaged? That remains to be seen but the prognosis is good!
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