Earlier this week, the Wall Street Journal ran an interesting op-ed titled The West’s Bruised Confidence in Capitalism. In the op-ed the author summarized the findings of the recently published Corporate Perception Indicator survey, which found that 36% of those surveyed reported that they viewed corporations as a source of “hope,” while 37% viewed corporations as a source of “fear.” Broken down by generation, 44% of respondents over the age of 65 view corporations as a source of “hope,” compared to 36% of millennials (defined as those aged 18-34 – darn it, I just missed the cut off!) who view corporations as a source of “fear” rather than “hope.” The survey was not limited to the U.S. and one of the more interesting findings was that 61% of all respondents wanted to hear more about the ways in which corporations help to address broader social issues. The op-ed concluded by offering this thought: “For business leaders, six years after the financial crisis and amid continuing economic uncertainty, the challenge is to show how they use their positions of power to contribute to the common good. The public world-wide wants corporations to promote shared values around growth and opportunity, even as they build shareholder value. Their long-term success depends on it.”
In two previous posts (available here and here) I have discussed potential models for businesses to leverage their “positions of power to contribute to the common good.” As I have discussed, one of the most compelling business frameworks is “Corporate Impact Venturing,” which was developed by Dr. Maximilian Martin and is part of the Impact Economy portfolio. The basic idea is to “achieve actual financial returns, greater effectiveness, and more leverage potential for both business and society by updating patterns of value creation in new and existing multi-trillion dollar markets.” Ultimately, this means applying the promise of impact investing to business innovation. Examples of emerging patterns of value creation in a new market would include the 540 billion dollar LOHAS market (Lifestyles of Health and Sustainability), while an example in an existing market would be the modernization of the welfare state.
For executives and corporations interested in meeting the challenge of using their “positions of power to contribute to the common good,” compelling business frameworks are obviously a must. However, because corporations operate as part of a larger ecosystem, other conditions need to exist if widespread success is to be achieved. In my mind, such conditions for success include, but are not limited to:
- Having shareholders who share this vision of marrying corporate potential with the common good. This can be achieved to some extent by cultivating shareholders who have the capacity for, and are interested in, stewardship – a process I refer to as Shareholder Cultivation.
- Having a regulatory environment that helps move the needle – in particular, one thing to consider is whether moving to something like an integrated reporting model of disclosure would be preferable to the SEC’s current financial disclosure model.
- Reframing the debate on the nature of corporations and corporate governance. For example, the concept of corporate governance in the West is captured by the OECD principles of corporate governance, which in many ways cast corporations as being separate and apart from society. This of course is in contrast to, let’s say, the King’s Code, which views corporations as being part of society.
So are corporations sources of “hope” and “good” or are they “bad” and worthy of “fear”? While the perception among a majority of survey respondents (some 51%) reflect the latter, I’d like to think that the reality is closer to the former. Corporations can and often do contribute to the common good. They are centers of enormous potential for value creation, but many are still laboring under an outdated model and operating norm.