Why should capitalism be “conscious”? Premium

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Business continues to suffer from a bad reputation. A 2011 report from Gallop indicates that just 19% of Americans trust big business, representing only a slight rebound from 2009’s historic low of 16%. What has undermined business in developed markets? How can companies regain their legitimacy? The answer could be Conscious Capitalism.

1. Share a higher purpose: When companies fail to define their higher purpose clearly and consistently, stakeholder engagement and loyalty are compromised. On the other hand, stakeholders who believe they’re contributing to a company’s higher purpose will gain meaning and fulfillment in their work. Ironically, the secondary impact of prioritizing purpose over profit is enhanced financial performance, with conscious companies outperforming at a ten-to-one ratio the market averages for their industries.

2. Commit to all stakeholders: “Each stakeholder is both a means and an end, an instrument of value creation as well as its beneficiary,” write John Mackey and Raj Sisodia. Conscious companies don’t try to distribute profits more fairly between stakeholders: they strive to create more value for all.

3. Align leadership, management, and culture: The global objective of management in a conscious business is to “create, sustain, and strengthen the conditions” for high team member engagement levels, and it is thus characterized primarily by decentralization and empowerment. The objective is to promote a culture in which stakeholders behave responsibly towards each other and are loyal to the company.

Before Conscious Capitalism, there was the Tata way of doing business!
What does the practice of Conscious Capitalism look like? Response with R Gopalakrishnan, director of Tata Sons, the holding company based in India with revenues over $100 billion, who says one of the key reasons for Tata’s success is their sense of higher purpose in giving back to the community what they earn from it.

Read our dossier
Why should capitalism be “conscious”?

Based on Conscious Capitalism: Liberating the Heroic Spirit of Business by John Mackey and Raj Sisodia (Harvard Business Review, January 2013), “The Thought Leader Interview: William J. O’Rourke,” by Ann Graham (Strategy + Business, November 2012) and the interview with R Gopalakrishnan, director, Tata Sons, February 2013.
Business Digest nº 234, march 2013

Watch the video
Whole Foods CEO’s Capitalist Revival

How does conscious capitalism apply to business leaders in an array of industries, including less obvious cases such as the cigarettes and arms industries? Steve Forbes, editorin-chief of Forbes magazine interviews John Mackey, co-founder of Whole Foods Market, discussing the dangers facing business today and how business needs to change.