Blog of Intellectual Capital

‘Conscious Capitalism’: A business primer for doing well — and doing good, too
By Lanny J. Davis –  Read more: http://thehill.com/opinion/columnists/lanny-davis/279707-conscious-capitalism-a-business-primer-for-doing-well-and-doing-good-too#ixzz2JPVnIcib

Once in a while, a book about business theory and philosophy transcends the usual audience that reads “how to” business books — with lessons to be learned by everyone, business people and consumers alike. Such a book is Conscious Capitalism, recently published by the Harvard Business Review Press.

The two co-authors are John Mackey, co-CEO and co-founder of Whole Foods Market, a Nasdaq-listed public company based in Austin, Texas, which has become one of the most successful and premier supermarket chains and brands in the world; and Dr. Rajendra (Raj) Sisodia, professor of marketing at Bentley University, who in 2006 wrote, along with two other management specialists, Firms of Endearment, identifying 35 such firms, including Whole Foods, that have been successful as businesses and followed progressive, socially responsible policies.

Conscious Capitalism describes four specific tenets to teach companies how to implement policies and practices of this approach to business leadership and success.

The visual graphic in an early chapter of the book depicts both the interrelatedness and interdependence of these four tenets, as well as their prioritization. The three white, smaller triangles around the outer three sides of the large triangle describe three of the tenets: “stakeholder integration” (on top) and “conscious leadership” and “conscious culture and management” as the bottom two.

In the center — obviously, the most important, because of its central location and because it is highlighted in shaded gray — is a triangle with the first tenet of the book: “higher purpose and core values.” As Mackey once stated in a 2005 debate with conservative economist Milton Friedman, who argued that a company’s purpose must be almost entirely to make a profit, not to do good deeds:

“Making profits is the means to the end of fulfilling Whole Foods’s core business mission. We want to improve the health and well-being of everyone on the planet through high-quality foods and better nutrition, and we can’t fulfill this mission unless we are highly profitable. Just as people cannot live without eating, so a business cannot live without profits. But most people don’t live to eat, and neither must businesses live just to make profits.”

Whole Foods’s remarkable record is a case in point. In late 2008 and early 2009, at the time when the Federal Trade Commission appeared to have successfully blocked Whole Foods’s already completed acquisition of Wild Oats Department Stores, the company’s share price on the Nasdaq exchange plunged from $40 per share to $10. Whole Foods fought back against the FTC’s legal action, and the result was a compromise settlement that allowed the company to move on. On Friday, Jan. 25, the stock closed at $95.65/share — an increase of more than 900 percent in just four years.

Aside from shareholders, Whole Foods and its management team are proud of the way they have treated all others whom they regard as stakeholders — suppliers, employees, citizens of communities where stores are located and philanthropic causes — consistent with the fourth tenet of conscious capitalism, “higher purpose and core values.” For example, Whole Foods gives a minimum of 5 percent and closer to 10 percent of its profits to nonprofit organizations each year; allows all employees — called “team members” — to participate and vote on important working condition and company policy issues; puts a ceiling on the maximum ratio between the highest-paid executive and lowest-paid team member; and provides all full-time team members with virtually all their premium costs for health insurance, and part-time workers some healthcare benefits as well.

As readers of this column know, while I am a liberal Democrat (clearly on the opposite end of the ideological spectrum from Mackey on some issues), I also search for “purple” areas where there are common values and subjects about which constructive, solutions-oriented conversation can occur between left and right. And I find many such places articulated in this book.

The fact is, Conscious Capitalism is an important book for exactly that reason. I believe it should be a must-read, with a message especially appropriate for these times of dysfunctional political polarization, with “red-state” Republicans over-simplistically depicted as conservative and pro-business and “blue-state” Democrats as liberal and anti-business.

This book teaches that there is nothing inconsistent between doing well and doing good. Indeed, both not only can co-exist, but each is dependent on the other. That is a crucial lesson with meaning both in the business community as well as the larger divisive political, cultural and social arena in which the country finds itself after the 2012 elections.

Davis, a Washington attorney and principal in the firm of Lanny J. Davis & Associates, specializing in legal crisis management and dispute resolution, served as President Clinton’s special counsel from 1996-98 and as a member of President Bush’s Privacy and Civil Liberties Oversight Board. He represented Whole Foods during its legal challenges with the Federal Trade Commission in 2008-09 and on various matters since then, but does not do so at this time.

Read Full Post »