Article by Tim Kelley and Nathan Havey, Conscious Capitalism, Inc.
Image by George Kedenburg III on Unsplash
On this date last year, the Business Roundtable, a group of 180 CEO’s of America’s largest companies, made an announcement that would make Gordon Gekko roll over in his fictional grave. “Maximizing value for shareholders,” they said, “is no longer the sole purpose of business. The purpose of business is now to maximize value for all of a company’s stakeholders.”
While this might be a controversial statement at first blush, the controversy would be based on a view popularized by Milton Friedman and the Chicago School of Economics that maximizing shareholder value is the only purpose of business. In his incredible work over the past quarter century, business professor Ed Freeman has all but proven that in fact, the best way to maximize benefit for any stakeholder in a company, including shareholders, is by rejecting trade-off thinking and aligning the interests of all key stakeholders. In other words, focusing on the greatest win for all stakeholders is the best way to maximize value for shareholders. This concept was further supported mathematically by John Nash in his Nobel-winning game-theory proof, as popularized in the movie A Beautiful Mind.
Anyone who has read much in the field of Conscious Capitalism is familiar with this idea, but many may be unfamiliar with what this concept looks like when it is applied in the day-to-day operations of a company.
We offer the five-stage continuum below as a guideline for operationalizing this concept and helping facilitate self-reflection for leadership teams to direct the evolution of a company’s work in this area. As in any model, we have arbitrarily broken a continuum down into stages for clarity. Where is your company in this journey?