Category Archives: Conscious Capitalism

The Week in Ethics: Arbitrage, When There is Never Enough

How much is enough?

That was a central question John Bogle, founder of The Vanguard Group, posed several years ago about Wall Street. It is also an underlying question in Arbitrage, Nicholas Jarecki’s recently released film.

Richard Gere plays Richard Miller, a billionaire hedge fund manager whose greater cause is seeing himself as the orbit point of the universe. He is driven in equal measure by greed and power, wrapped in the self-conceived nobility of doing it all for his family.

When his very risky financial, business and personal decisions backfire in disastrous consequences that he continues to play out, his defiant responses lack remorse, self-reflection, or apology:

“What am I supposed to do?”….”Did you want me to let our investors go bankrupt?”….”I did what was necessary.”….”Everything I do is for us….”

In an interview, director Jarecki said he wanted Gere’s character to reflect an Aristotelian tragic hero: a good man who became corrupted, who read too many of his own press releases.

Wall Street doesn’t have the market corned on megalomania. We’ve witnessed it in politics and any profession when an individual believes he is entitled to write his or her own rules without accountability to consequences.

However public trust in banks and big business remains at an all-time low, not rebounding from the financial crisis. Gallup’s Confidence in Institutions poll this summer indicated that only 21 percent surveyed trust banks and big business a great deal/quite a lot, compared with 63 percent who said that about their trust in small businesses.

Movies like The Inside Job and Margin Call merely reflect what the public experienced, saw, heard or read about the financial meltdown that contributed to its losing trust.

The issue of how much is enough is directly tied to trust. It is a question we have yet to answer.

In Arbitrage, Miller’s wife asks the billionaire, “How much money do we need? Do you want to be the richest guy in the cemetery?” For  Miller, there is no limit to the amount needed because it is spent faster than it is made. The end justifies the means in the endless pursuit to obtain more.

Bogle wrote in his 2008 book Enough: The True Measures of Money, Business and Life that “Central to the effective functioning of early capitalism was the fundamental principle of trusting and being trusted.”

As an aside, Bogle might take heart from the Conscious Capitalism movement, which promotes profit and creating “multiple kinds of wealth and well being” that have a positive impact on society and inspire public trust.

Bogle’s book grew out of a 2007 commencement speech he delivered to Georgetown University MBA graduates. He asked them to consider “the role of ‘enough’ in business.” He admonished the graduates: “It is said on Wall Street, correctly, that ‘money has no conscience,’ but don’t allow that truism to let you ignore your own conscience nor to alter your own conduct and character.”

Arbitrage’s Miller can’t be trusted — seduced by his own sense of omnipotence, blind to his impact on others, he is driven by the belief there is never enough.

Gael O’Brien      September 21, 2012

The Week in Ethics

Gael O’Brien is also a columnist for Business Ethics Magazine. Her September  2012 column is on The Responsible Company.


The Week in Ethics: Benefit Corporations, A Path Away from Crises

How many crises would be averted – root causes eliminated or problems contained – if companies operated with a lens that included their impact on society as well as shareholder value?

Lessons learned from the crises of BP,  Toyota, Massey EnergyGoldman Sachs,  and the 2008 global economic meltdown — among many others — have demonstrated the human break down when companies focus on profits, losing sight of the impact of what they do (or fail to do) on people, communities, and society.

Slowly but perceptibly, other ways of doing business are posing alternatives to business as usual. Conscious Capitalism, shared value, social entrepreneurship, and the B Corporation or benefit corporation  are among the models.

In seven states (Vermont, Maryland, New Jersey, Virginia, Hawaii, New York, and California) over nearly two years, companies who have registered to become benefit corporations have broadened their lens beyond profit maximization. They can now structure their business to include social and environmental concerns  in their mission. The legal structure of benefit corporations provides a shield against shareholder lawsuits that say such activities dilute stock value. Several other states are considering legislation to adopt this corporate structure.

Patagonia  founder Yvon Chouinard was the first to register his company as a benefit corporation in California when its law went into effect January 2012. He indicated Patagonia was trying to build for the next 100 years: “Benefit corporation legislation creates the legal framework to enable mission-driven companies like Patagonia to stay mission-driven through succession, capital raises, and even changes in ownership,” he said, “by institutionalizing the values, culture, processes, and high standards put in place by founding entrepreneurs.”

Mission-driven companies like Patagonia are profitable and far less likely to show up on the damaged-reputation list of those felled by crises. For those filing as benefit corporations, the requirement that companies’ corporate purpose create a material positive impact on society and the environment further reduces the risk of crisis. It broadens the criteria that go into making good and sustainable business decisions.

An additional risk mitigation factor involves requiring benefit corporations to redefine fiduciary responsibility to consider the interests of workers, community and the environment. This will necessitate discussing in board and executive meetings the impact of proposed actions beyond the silo of a company’s own interest. Accountability and transparency are reinforced by benefit corporations being required to use an independent, third-party standard in reporting social and environmental performance.

Critics of benefit corporations argue this is just a legal fad. The argument goes that corporate directors already have the ability to justify actions like saving the whales or other causes they feel are in a company’s best interests. They point out that under current law, companies can demonstrate socially responsible behavior.

However, there is a difference between the option to demonstrate socially responsible behavior (perhaps under the auspices of a department like CSR) and having it permeate the DNA of your organization. By building it into your corporate purpose, your business strategy, the impact you want your company to have on society and the environment, it isn’t ancillary; it becomes how business is approached.

The benefit corporation is an example of a new way of doing business where the shareholder investor and the stakeholder of society both get what they need without either being jeopardized.

The existing business paradigm isn’t working, said Chouinard in January after he registered Patagonia as a benefit corporation. “This is the future.”

In the aftermath’s of 2011’s Occupy protests, benefit corporations invite the possibility that comes with thinking differently.

Gael O’Brien         January 31, 2012

The Week in Ethics

Gael O’Brien is also a columnist for Business Ethics Magazine; her January 2012 column was “After Paterno, Penn State’s Struggle to Rebuild Trust.”

The Week in Ethics: TOMS, Starting Something that Matters

When Social Responsibility is really a part of the character of the company — rather than one of the many things a company does that stakeholders expect — it becomes an organic part of the story of who the company is, what it stands for.

Social Responsibility is second nature to companies that are aligned with the principles of Conscious Capitalism. For the Container Store, Stonyfield and TOMS, among many others, having a successful business is linked with a mission to impact society in a positive way.  For these companies social responsibility is in their identity and business strategy.

A recent book, Start Something That Matters, by Blake Mycoskie, tells the story of TOMS, but the larger point is what happens to leadership when the mission is allowed to transcend the leader.

TOMS name evolved from the idea of Shoes for a Better Tomorrow and Tomorrow’s Shoes. For every pair sold, TOMS donates a new pair to poor children. Since its founding five years ago, TOMS has donated one million pairs of shoes to needy children.

While TOMS story is significant, Mycoskie’s focus invites readers to find and develop their own story. He relies on   entrepreneurial advice  to start small, taking one step at a time. His table of contents includes wisdom like: “face your fears,” “be resourceful without resources,” “keep it simple,” “build trust,” “giving is good business” and “the final step.”

“When you have a memorable story about who you are and what your mission is,” he points out, “your success no longer depends on how experienced you are or how many degrees you have or who you know. A good story transcends boundaries, breaks barriers, and opens doors.” He adds that this is not only a key to starting a business, but also “to clarifying your own personal identity and choices.”

In the world of social media in which we live,  a story evokes emotion and forges a connection, he says; people who buy TOMS “talk about the support of our mission rather than simply telling people they bought a nice shoe from some random shoe company.”

Mycoskie’s views on leadership changed. He said he had wanted to become a rock-star business leader, a CEO cult figure of his generation, when he started out in business more than ten years ago in his early twenties. However, the more he learned, the more he aspired to servant leadership. He wanted to create a culture where everyone in the organization feels attached to TOMS, can be a spokesman when appropriate, and is helped to help others perform to their fullest abilities.

At a time when trust is very low – in business and politics – with ongoing examples of leaders not owning mistakes, Mycoskie believes in admitting and correcting them. While there is tolerance for making mistakes, trust is such an important value at TOMS that there is  zero tolerance for breaking trust internally.

TOMS and other conscious capitalism companies help drive awareness that trust is gained through a focus on respecting  customers and employees with both products and work environments that value the person.

Mycoskie says he has shifted the goal for his business. While relieving children’s suffering by giving shoes to those without them is still a powerful driver, engaging more people in identifying and creating solutions to the world’s problems is his goal.

It is a goal that encourages and influences people to start something that matters.

A timeless message for any of us at any age but one that in 2011 seems especially important; it opens up further possibility for what social responsibility can mean in an ever uncertain world.

Gael O’Brien    September 29, 2011

The Week in Ethics

Gael O’Brien is also a columnist for Business Ethics Magazine

The Ethics of Loyalty: Lessons From Conscious Capitalism

A mother, who had a few young children with her, was trying unsuccessfully to placate a crying child at the register of a Trader Joe’s food store while a clerk tallied her purchases. When she reached for her wallet to pay, it wasn’t in her purse. The clerk – or more correctly “crew member” as the company calls its employees – immediately told her he would pay for the groceries and she could pay him back.

He didn’t know her. His offer wasn’t part of Trader Joe’s policy or practice; he just quietly did it, he said later, because he felt it was the right thing to do in that circumstance. The mother returned with her wallet to pay him back, and is quick to pass the word now that Trader Joe’s is a wonderful store.

The story illustrates that if a company, like Trader Joe’s, puts a high priority on creating outstanding customer experience, with the expectation that crew members will “look through customer’s eyes;” and at the same time, the company also gives crew members a voice, listens to their opinions and looks out for their advancement, that company can reap the benefits of both engaged people who work for them and loyal people who buy from them.  This is a pretty good definition of win-win.

Trader Joe’s, a specialty grocery, sells preservative-free, organic and regular foods it buys in bulk so it can offer lower prices. By the end of 2010 it will have almost 340 stores in 27 states, according to Doug Rauch, its former president. As Trader Joe’s is privately held, Rauch said he wouldn’t give details about the chain’s profitability except to say it is very successful, enjoys double-digit growth, and is more profitable than Whole Foods. Rauch calls Trader Joe’s a “purpose-driven business”

Rauch’s remarks came recently at a conference on conscious capitalism. Companies that practice conscious capitalism aspire to more than just turning profits; Trader Joe’s, Whole Foods, the Container Store and Stonyfield Farms are examples of successful companies that have a higher purpose. Their definition of stakeholder reaches beyond those who benefit directly from the company, to larger social and environmental purposes affecting society.

Profit is essential. But we’ve seen what has happened when good intentions aren’t acted on and profit is the driver that overrides safety issues, customer interests, and the welfare and ecological environment of a region. Crisis ensues. Toyota, Goldman Sachs, and BP have become capitalism’s fallen angels. Going forward, putting ethical behavior at the center of how they do business might be something to consider when – as we’ve seen all too often lately – all else fails.

Gael O’Brien   July 4, 2010

The Week in Ethics