Review: Conscious companies can revive capitalism

March 1, 2013

By Daniel Indiviglio
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Free markets often get the blame for such troubling outcomes as inequality, corporate scandals and economic crises. In “Conscious Capitalism,” Whole Foods co-founder and co-CEO John Mackey and business professor Raj Sisodia argue that economic liberty needs a reboot.

The authors say that the trouble with capitalism isn’t that firms have too free a rein; it’s that economists have told them to focus on the wrong thing and that government gets in the way. They suggest that companies should focus on purpose rather than profits. And they blame crony capitalism for poisoning an otherwise excellent economic system.

They’re not wrong. Corporations are too close to lawmakers, and the result is overcomplicated tax systems which don’t serve the public good. Governments end up over-regulating in the name of safety, only making it safer for big companies to trample small ones that can’t cope with higher compliance costs.

While stomping out cronyism is a fairly easy sell, Mackey and Sisodia have more work to do to persuade readers that most businesses should turn their strategies upside-down. The heart of their reform plan for capitalism is captured by a paraphrase of Richard Leider, an executive coach and author. He asks what the most important day of one’s life is, other than birth. “It is the day you realize why you were born.”

Similarly, say Mackey and Sisodia, the most important thing a company can do is understand and pursue its higher purpose. They cite Walt Disney Co, which asks employees to use their imaginations to bring happiness to millions. For Southwest Airlines, it’s to give people the freedom to fly.

If a company aims chiefly at its purpose, profits will follow, they say. While that sounds plausible, it’s pretty vague. And Wall Street analysts are unlikely to smile when higher purposes lead to lower profits for a quarter, or perhaps a decade. Investors might want to see more emphasis on the bottom line before they part with their funds. But then again, the conscious company of Mackey and Sisodia is not merely run to enrich shareholders. Instead, it must integrate the interests of all stakeholders.

That means paying your workers well and your executives relatively modestly. No gouging of suppliers to cut costs. Such corporations must be a positive force in their community. The authors would even have firms befriend their foes: “A more constructive way to think about competitors is as allies in striving for mutual excellence.”

The image of corporate leaders sitting around a campfire, joining hands and singing Kumbaya, may warm the soul. But bitter experience, not to mention thousands of runs of the “prisoner’s dilemma” game, teaches that cooperation is not guaranteed, even if it’s in everyone’s best interests. Unless people begin to exhibit and deserve greater trust and reliance, many conscious companies will end up beaten unconscious.

That may be where conscious leaders come in. The authors portray them not as the smartest and most cunning, but excelling in emotional, spiritual and systems intelligence. They say the best leaders are empathetic, not ruthless. They probably meditate. And they must successfully manage relations between all stakeholders as one.

With such leaders in place, cooperation could lead to kinder competition. And maybe they could even convince investors that their purpose matters more than analysts’ financial models. The conscious economy that Mackey and Sisodia imagine sounds perfect. But people aren’t. Until humans evolve into a race of hyper-moral, fully-actualized beings, their capitalist ideal may be too lofty an ambition.

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