The Business Roundtable recently decided to widen its lens. That’s good news. But does it have the infrastructure, or mechanism, to pull it off?
Today is Labor Day, a day off, but a good day to rethink business. That’s what The Business Roundtable is doing. Last month, 181 of its 188 CEO members endorsed a new statement of purpose. Decisions would no longer be based on the narrow lens of whether they yield higher profits for shareholders. They would widen the lens, taking into account “all stakeholders”—that is, employees, customers and society writ large.
That’s encouraging. For decades, business leaders have been narrowly focused on maximizing value for shareholders. Milton Friedman’s decades-old maxim has ruled the day, shaping how companies imagine the scope of what business ought to be about.
There is skepticism, however. The Council of Institutional Investors suspects The Roundtable lacks the infrastructure to widen the lens. Ken Bertsch, Council leader, says, “There’s no mechanism of accountability.”
I hope he’s wrong. The Roundtable will need a strong mechanism to upend our two reigning models of capitalism: crony and collusive. Crony capitalism is when those on top take care of each other at shareholder expense (google: “golden parachutes”). Collusive capitalism is where corporations create a competitive advantage through the cooperation of regulators or politicians (google: “earmarks”). The Business Roundtable is riddled with corporations operating by one or both of these types of capitalism.
The Roundtable will need a strong mechanism to challenge financialization. This term describes the shift in the economy from production to finance. The revenue and profits of the financial sector have become an increasingly large segment of the worldwide economy (33 percent of employed seniors in the 2015 Harvard University class went into finance or consulting). The benefit is millions of people have easier access to credit while risk has been spread through derivative instruments. But the lens is too narrow.
Financialization tends to commoditize the goals of work and to emphasize wealth maximization, reducing the meaning of work to nothing but price. Shareholder return has become virtually the sole metric by which business leaders determine their performance and their worth. Economic prosperity for a few comes at the expense of social wellbeing, what the Bible calls shalom, or the good of all.
Globalization accelerates this gap between the haves and have-nots. The term refers to the efficiencies and extraordinary technological innovations wrought by social technologies. But these efficiencies drive wage disparity and economic dislocation.
This contributes to worker dissatisfaction. According to a 2017 Gallup study on the American workplace, two-thirds of workers are disengaged at work, or worse. Of the country’s approximately 100 million full-time employees, 51 percent feel no real connection to their jobs, and thus they tend to do the bare minimum. Another 16 percent are “actively disengaged.” They resent their boss, jobs, and tend to gripe to co-workers and drag down office morale.
There is a solution. As Chip Heath and Dan Heath note in Decisive, organizational leaders tend to narrow-frame decisions. Better decision-making requires stepping back, asking, “How can I widen my options?” Simple. Widen your lens.
That’s not so simple. It requires outsiders. But not just any outsiders. There are four characteristics of effective outsiders. And there are four characteristics of effective insiders—organizational leaders who are most open to widening the lens. Working collaboratively, any organization can widen its lens and do business better.
If you want to see how this works, come to our workshop in Chattanooga in October. A group of innovators will discover our behavioral DNA. They’ll discover how to widen the lens. They’ll see how this infrastructure yields virtuous capitalism.
What they won’t discover—at least in this first workshop—is how this infrastructure reflects the gospel. Trust me, I’m not ashamed of the gospel. I’m astute. In our post-Christian world, we have to first reframe the gospel in images and language accessible to all to get a foot in the door. I’ve found that if we help, many times people will ask where this infrastructure comes from. It’s a more natural way to share the faith.
Because this infrastructure depicts the gospel—good news for all—it’s effective for all businesses, not just America’s 3,600 public corporations. These companies account for less than one-third of the nation’s private-sector workforce and a tiny proportion of its 5.6 million employer firms. This is the infrastructure for every organization seeking to widen the lens and make the world a better place. If you want to discover this infrastructure, contact Clapham Institute. We’ll do a workshop in your town.
Many blessings to you Mike as you promote virtuous capitalism!
Thank you, Dave. We are going to need grace upon grace, blessing upon blessing.