A good first step for the movement’s advocates would be to make clearer
distinctions between “shoulds,” “cans,” and “wills;” otherwise they risk continually
engaging in the fallacy of composition: to wit, “because many virtuous companies
are profitable, all are, or can be.” Yes, every company that can adopt the
tenets of Conscious Capitalism should do so but, realistically, not all companies
or industries can. In particular, many small businesses lack sufficient funds to
behave generously to their employees and other stakeholders even if they would
like to, and many profitable businesses can’t because of the nature of their businesses
or the technologies they employ. In this context, it is important to note
that the firms associated with the Conscious Capitalism movement are far from
a random sample of American businesses: In fact, a great many sell relatively
expensive products to relatively affluent, socially- or health-conscious consumers.
It is hard to imagine how a coal company could embrace the principles and
practices of environmental sustainability.
Moreover, since “sustainability” is central to the concept of Conscious
Capitalism, it is important not to overlook two inherent threats to Conscious
Capitalism, namely, the Body Shop Syndrome (when enlightened entrepreneurs
seek to retire from the virtuous businesses they have founded) and the Ben and
Jerry Effect (when shareholders demand that founders sell their company to a
larger firm at a substantial premium). In both instances, virtuous entrepreneurs
end up selling their companies to large corporations who promise to remain true
to the founder’s values—but then seldom make good on that promise.
Real efforts are needed to discover how virtuous companies can be made
to last beyond the careers of their founders. For example, should Conscious
Capitalist entrepreneurs commit themselves to selling out only to their employees
and not to large, publicly traded businesses? Given the single-minded pursuit
of short-term profits that characterizes American stock exchanges, should
Conscious Capitalists be focusing on alternatives to equity financing? Moreover,
what happens when a CEO with strong Conscious Capitalist values leaves the
firm, as has recently happened to Jeffery Hollender, an influential advocate of
corporate virtue whom the board of directors recently removed from the management
of Seventh Generation.32 Will Whole Food’s corporate mission survive
the retirement of Mackey? What will happen to Stonyfield Farms after the
departure of Gary Hirshberg?
Conscious Capitalists might also benefit from acknowledging that a great
many business people don’t care about anything more than enhancing the bottom
line. Why should we expect the many people who enter business only to
become more financially successful to change their values now and become
Conscious Capitalists? Perhaps they should, and some will; but many won’t,
or can’t.
On our part, we will continue to applaud virtuous business practices
wherever we see them and to encourage our MBA students to behave ethically
and responsibly. Nonetheless, we must warn the most enthusiastic of our fellow
travelers that they may be over-promising what business can realistically deliver
by promoting a false sense of complacency about the capacity of business to
solve the world’s problems. This will in turn divert public and business attention
from the many instances in which government support or regulation is essential
in order to enable firms to behave responsibly without disadvantaging their
shareholders.