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A View for the Future: Emerging Economic Leaders Expand Goals to Include People and Planet
In the United Kingdom, an entrepreneur named Luke Johnson is seen as a business guru — having a high-profile column in the country’s best selling weekly newspaper, The Sunday Times. Earlier this year, his main business interest, Patisserie Valerie — of which he was executive chairman — went spectacularly and publicly bust. Many think that this should disqualify him as a business guru, but I disagree. These things happen in business and generally have a localized effect, although those involved often feel it most. He will now have more experience to share! But what perhaps should disqualify him is if he misunderstands what the purpose of business actually is. This does matter, a lot — to everything that lives on our planet, and to those who come after us.
Johnson’s argument that “business is a legal entity established to generate profits” (The Sunday Times Business, June 30, 2019) is only correct if your understanding starts in the 1970s. A deeper understanding is that business is a legal entity established to organize capital. Modern business can trace its roots to the establishment of joint stock companies in London and Amsterdam to fund risky tall ship voyages to the East Indies and Spice Islands and the like — or, later, to build railroads in the United States. They were established because single investors could not afford the risk associated with these ventures.
Initially, society required that corporation charters had to state a public purpose, in recognition of the profound power created when capital is organized.
But by the 1980s this profit-maximizing ideology of Milton Friedman’s Chicago School had successfully co-opted global capitalism. Johnson would have been taught this when he trained as a stockbroker in London at that time. Over the last 50 years, the idea that business is a legal entity whose purpose is exclusively to generate profits for shareholders has become an intellectual monopoly in business and finance.
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So whilst Johnson is right to bemoan the lack of ideological diversity in education of business, he is flat wrong when he states that this is because of left-wing ideology. In fact, business schools around the world have been co-opted by the Chicago School ideology, just as most people in business and finance have.
But it is only an idea. There are others. Increasingly, business schools around the world are exploring them. This is where the greatest energy is amongst the next generation of business leaders. There are now myriad examples of companies around the world successfully pursuing the idea that business has a purpose beyond just profit.
In fact, the profit-maximizing conception of business is increasingly discredited. It is an idea that is driving our planet and society to the edge of destruction. Is lobbying by fossil fuel companies against actions to combat a climate emergency “an irreplaceable force for good”? Or by tech companies creating an emerging mental crisis emergency by their profit-inspired tactics to retain our eyeballs, so as to gather more data and increase advertising revenues? Or pharmaceutical companies that have precipitated an opioid crisis in the U.S. — fast coming to the UK?
The problem with the profit-maximizing idea is that it relies on policymakers to protect society and the planet through regulation. But big business has shown itself to be so adept at maximizing profits that it, rationally, dominates this process — whether through off-shoring to avoid regulation and tax or through infiltrating the lobby to ensure that policies support profit maximization.
Profit-maximizers and I might agree that business is the most powerful force invented by mankind. But, contrary to what they think, we do have a choice as to what we instruct these capital-organizing legal entities to do in, and to, the world. The Future of the Corporation is not about profit maximizing, and it includes the leaders of many of Britain’s biggest companies who clearly see the need for a better idea.
It is now obvious to anyone capable of looking at the data that we have a duty to install a new operating system for business, to replace “profit maximizing.” To date, the most credible alternative being successfully operated by business around the world replaces it with the purpose of creating value for everyone — people, planet and profit. To protect the social and environmental systems in which business is embedded, rather than strip them bare like a plague of locusts — be that the mental health of our children or the future ability of our planet to sustain human life.
Unlike Patisserie Valerie, the toxic ideology of profit-maximizing matters very much indeed. A deeper understanding and reflection is required, for the sake of everything that currently has life—and might have life in the future.
B the Change gathers and shares the voices from within the movement of people using business as a force for good and the community of Certified B Corporations. The opinions expressed do not necessarily reflect those of the nonprofit B Lab.
To Rediscover the Purpose of Business, Look to Its Origins was originally published in B the Change on Medium, where people are continuing the conversation by highlighting and responding to this story.