Can capitalism be saved to better the world?
Capitalism is at a crossroads, with a growing perception that business is failing its obligations to society
Excessive executive pay, abuse of zero-hour contracts, tax evasion, outsourcing to the lowest bidder, mistreatment of staff and mis-selling all cast a negative light on capitalism. Maximising profit in the short term appears to be the only objective.
Against this backdrop, the UK is seeing its national health system and social services stretched to the limit; there is inadequate housing supply, major challenges in the educational system and the erosion of financial support for the disadvantaged. National borrowing is at a record level and although employment is at an all-time high, more and more are self-employed, surviving on low incomes and only just about managing. Certainly, inequality is unacceptably high: households in the bottom 10% of the population have on average a net income of £9,277 while the top 10% have over nine times that at £83,897.
In such a dysfunctional system where some are enjoying exorbitant wealth as millions of others struggle to access social care, sufficient benefits and decent housing, it is no surprise that many people are becoming disillusioned.
But can capitalism somehow be changed to provide a solution to these problems?
I suggest several practical ways on how business, and those of us working within it, can make this change towards improving society and the common good.
Our individual contribution
As individuals, we have a responsibility to play our part and make a positive contribution — by being respectful, responsible, tolerant, compassionate and loving in our actions and decisions. Importantly, we need to carry these responsibilities through into the workplace and ensure that our decisions there too have a positive impact on society and the environment.
Businesses becoming triple-purposed
Private sector businesses in the UK employ around 26 million people out of a working population of 31.5 million, so they will be vital contributors.
My contention is that having a single purpose of making a profit is not sufficient; businesses should instead look at being triple-purposed, namely to:
- make a positive social impact;
- protect the environment; and
- make an ethical profit.
The idea is based on the concept of the “triple bottom line” accounting framework where performance is evaluated against broader social and environmental factors as well as financial.
But why should businesses care about social impact, the environment or being ethical? It is because they do not and cannot, operate in a vacuum. Where would a company be without the services provided by civil society and government? There would be no educated, socially stable and enthusiastic employees. There would be no infrastructure (hospitals, welfare, transport system, power, law and order), without which they would be unable to do business. And as users of these services and privileges, they have a corresponding duty to contribute. Hence why, for example, companies pay tax — or should do!
But beyond that, we can strengthen legislation to ensure businesses take more responsibility by making it a legal obligation to consider society and the environment in all its decision-making.
Furthermore, these triple purposes should be incorporated into a company’s Articles of Association and mission statement as a constant reminder. Non-financial reporting including within management, measurement and reporting systems need to be introduced to provide the structures and processes to help embed strong societal values and environmental efficiency into the company’s culture. Results and progress against targets must be included in the Annual Report on corporate governance and communicated regularly to all stakeholders including staff, customers, shareholders and the supply chain.
Creation of an internal ethics council
In discharging its societal responsibilities, companies should empower their staff to play their part in the workplace.
Companies could for example (as some already do), appoint an ethics or purpose officer who would champion ethical values within the organisation and help embed good culture into the DNA of the business.
Another suggestion is the formation of an ethics council or similar, comprised of workers from various parts of the organisation. The council should seed good corporate culture by bringing a continued focus on ethical issues and using communications to highlight what is important to all staff and other stakeholders on a regular basis via meetings, newsletters and social media. This council would assess major decisions that impact society and the environment and convey these cultural values via the ethics officer directly to the CEO and the board. Another function of this council might be to approve all the incentive schemes introduced by the company — much of the unethical behaviour in business can be caused by inappropriate incentives. Through this procedure, the views of the workforce on ethical issues would strongly influence the business’s ethics strategy.
Investing in the workforce, embedding ethical values
Staff who are happy in their jobs, well-trained, feel part of a team, proud in their work, safe, have equal opportunities, made to feel valued, have a fair work-life balance and justly paid are likely to be more loyal, motivated, hard-working and conscientious. Companies with this kind of workforce will be more successful. Employers who value a happy workforce, and encourage independent judgment, creativity and decision-making will attract more talented people and retain them.
Just as companies that invest in new product development and R&D will design better products, remain competitive and ultimately achieve more sales, investing in training, collaborative working and innovation can improve a company’s ability to adapt to new market conditions and be more sustainable.
Then in terms of limiting the risk of brand damage, where ethical values are embedded into the DNA of the business, the chances of a reputational crisis is much reduced where there is better, more consistent and ethical decision-making at every level.
And where strong ethical values translate to conscientious meeting of legal obligations like payment of a fair rate of tax, this will in turn lead to greater public revenue for health, schools, infrastructure and so on.
A new approach to capitalism is needed, where a greater emphasis is placed on the ethical perspectives of business conduct.
We need to create work environments where people are happy in what they are doing, feel valued, purposeful and motivated; where they feel they can make a contribution, not only to the profitability of the business but also to making the world better for current and future generations. I think many people would love to work in such a place.
The way forward lies with this new form of social capitalism — capitalism with a social conscience — where a company and most importantly, its employees, accept their individual and collective responsibilities towards society and the common good.
We need CEOs who understand that businesses have a strong, moral obligation to be strong corporate citizens; we need ethics champions within businesses to better the world for the future.
Are you such a champion?