We also are skeptical of the commitment of Conscious Capitalism firms to
treat all their stakeholders equally and fairly. This goal is laudable, but often difficult
to realize in practice. Without doubt, there are some—even many—business
decisions that benefit multiple stakeholders, and Conscious Capitalists make
an important contribution by developing and implementing those. Nonetheless,
it strains credulity to believe that all business decisions fall into this category. At
publicly traded corporations, in particular, meeting investor expectations is critical,
and mangers have no choice but to put the interests of shareholders first.
While Conscious Capitalists are correct in claiming that meeting the interests of
other stakeholders is ideally the best strategy for creating profits for owners, it is
also the case that the interests of stakeholders can and often do diverge.
For example, when a company lowers its costs by outsourcing production
to developing countries, what is good for its customers is not necessarily beneficial
for its employees, and when sales decline, firms often have no alternative
but to lay-off employees to the benefit of shareholders. In the final analysis, the
ability of Conscious Capitalist firms to treat all stakeholders equally and fairly
is predicated on their ability to maintain a relatively high level of profitability.
However, in a highly competitive global economy, firms managed according to
the tenets of Conscious Capitalism, like all other firms, suffer periodic financial
reverses. Unfortunately, the principles of Conscious Capitalism provides no guide
to help managers recognize, let alone manage, the kinds of painful trade-offs
all firms must periodically be prepared to make in order to survive. Moreover,
absent that guidance, it is realistic to assume that when making such necessary
trade-offs, the interests of investors are likely to be paramount, especially if the
firm is publically traded.