{"id":17314,"date":"2019-07-24T18:35:05","date_gmt":"2019-07-24T18:35:05","guid":{"rendered":"https:\/\/www.lifeandnews.com\/articles\/?p=17314"},"modified":"2019-07-25T16:55:18","modified_gmt":"2019-07-25T16:55:18","slug":"investors-consumers-and-workers-are-changing-capitalism-for-the-better-by-demanding-companies-behave-more-responsibly","status":"publish","type":"post","link":"https:\/\/www.lifeandnews.com\/articles\/investors-consumers-and-workers-are-changing-capitalism-for-the-better-by-demanding-companies-behave-more-responsibly\/","title":{"rendered":"Investors, consumers and workers are changing capitalism for the better by demanding companies behave more responsibly"},"content":{"rendered":"

Elizabeth Schmidt<\/a>, University of Massachusetts Amherst<\/a><\/em><\/p>\n

Capitalism\u2019s days may be numbered \u2013 at least judging by recent polls.<\/p>\n

A majority of millennials reject<\/a> the economic system, while 55% of women aged 18 to 54 say they prefer socialism<\/a>. More Democrats now have a positive view of socialism<\/a> than capitalism.<\/p>\n

One problem interpreting numbers like these is that there are many definitions of capitalism and socialism. More to the point, people seem to be thinking of a specific form of capitalism that deems the sole purpose of companies is to increase stock prices and enrich investors. Known as shareholder capitalism, it\u2019s been the guiding light of American business<\/a> for more than four decades.<\/p>\n

As a scholar of socially responsible companies<\/a>, however, I cannot help but notice a shift in corporate behavior in recent years<\/a>. A new kind of capitalism seems to be emerging, one in which companies value communities, the environment and workers just as much as profits.<\/p>\n

\"\"
Democrats increasingly view socialism in a more positive light.<\/span>
\nAP Photo\/J. Scott Applewhite<\/a><\/span><\/figcaption><\/figure>\n

The purpose of business<\/h2>\n

Nearly 50 years ago, the economist Milton Friedman<\/a> proclaimed that the sole purpose of a business is \u201cto use its resources and engage in activities designed to increase its profits.\u201d<\/p>\n

Within a decade, Friedman\u2019s claim became accepted wisdom<\/a> in corporate boardrooms. The era of \u201cshareholder primacy capitalism\u201d had begun.<\/p>\n

One result has been remarkable growth in the stock market<\/a>. But critics argue companies and the \u201cshareholder value theory\u201d are also complicit<\/a> in exacerbating many economic<\/a>, social<\/a> and environmental<\/a> problems, such as income inequality<\/a> and climate change<\/a>.<\/p>\n

\"\"<\/a>
Milton Friedman won prizes for his research on consumption analysis and monetary history.<\/span>
\nWikimedia Commons<\/a>, CC BY<\/a><\/span><\/figcaption><\/figure>\n

They also note that putting profits first actually harms shareholders<\/a> in the long run by encouraging managers to take actions that may eventually reduce earnings.<\/p>\n

The rebellion<\/h2>\n

Many consumers, workers and socially conscious investors have also noticed these shortcomings and increased pressure on corporations to change.<\/p>\n

For starters, more Americans no longer find it acceptable for companies to exclusively seek profits. A 2017 poll<\/a> found that 78% of U.S. consumers want businesses to pursue social justice issues, while 76% said they would refuse to buy a product if the business supported an issue contrary to their beliefs. Almost half the respondents said they had already boycotted a product for that reason.<\/p>\n

Workers increasingly expect their employers to share their values. A 2016 study<\/a> found that most Americans \u2013 particularly millennials \u2013 consider a company\u2019s social and environmental commitments when deciding where to work. Most would also be willing to take a pay cut in order to work for a \u201cresponsible\u201d company \u2013 and are demanding their current employers behave that way.<\/p>\n

For example, workers at online furniture company Wayfair recently walked out<\/a> when they learned it had sent beds to detention centers at the U.S.-Mexico border. More than 8,100 Amazon employees signed an open letter supporting a shareholder resolution<\/a> urging the retailer to do more to address climate change.<\/p>\n

Finally, investors are becoming more socially aware<\/a> and putting more of their money behind businesses that behave in sustainable and responsive ways. At the beginning of 2018, portfolio managers held US$11.6 trillion<\/a> in U.S. assets using environmental, social and governance criteria to guide their investments, up from $2.5 trillion in 2010<\/a>.<\/p>\n

Laurence Fink, founder and CEO of BlackRock, the world\u2019s largest asset manager<\/a>, summed up the growing sentiment<\/a> when he said, \u201cTo prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.\u201d<\/p>\n

The corporate response<\/h2>\n

Presumably realizing how important these constituencies are to their bottom lines, businesses are paying attention.<\/p>\n

Dick\u2019s Sporting Goods, Kroger, Walmart and L.L. Bean, for example, responded to growing concerns over mass shootings by restricting the sale of guns<\/a>. Proctor and Gamble, a major sponsor for U.S. Soccer, expressed support for the quest of the women\u2019s team<\/a> for equal pay and donated $500,000 to help narrow the pay gap with men.<\/p>\n

Airlines including American, United and Frontier refused to knowingly fly children<\/a> separated from their parents at the border following outrage over the Trump administration\u2019s policy. And even though Amazon shareholders rejected the worker-supported shareholder resolution described above, Amazon set stronger goals<\/a> for reducing its carbon footprint after the resolution was introduced.<\/p>\n

\"\"
Unilever found that its \u2018sustainable living\u2019 brands such as Ben & Jerry\u2019s are growing faster than its other products.<\/span>
\nAP Photo\/Wilson Ring<\/a><\/span><\/figcaption><\/figure>\n

These actions have sometimes hurt the bottom line. The decision to restrict gun sales cost Dick\u2019s Sporting Goods $150 million<\/a>. Delta lost a $50 million tax break<\/a> in Georgia after severing ties with the NRA.<\/p>\n

But these and other companies<\/a> didn\u2019t back down. The CEO of Dick\u2019s Sporting Goods explained<\/a> that when something is \u201cto the detriment of the public, you have to stand up.\u201d<\/p>\n

Companies are also setting tougher social and environmental goals for themselves and then reporting their successes and failures. Tesla, Unilever, Nike and Whole Foods are among nine companies with annual revenues of at least $1 billion that \u201chave sustainability or social good at their core<\/a>.\u201d<\/p>\n

In 2018, 86% of Standard & Poor\u2019s 500 companies<\/a> reported on their environmental, social and governance performance and achievements, up from less than 20% in 2011.<\/p>\n

And companies have found that putting more emphasis on social justice can pay off. Unilever, for example, said in 2017 that its \u201csustainable living\u201d brands<\/a>, such as Ben & Jerry\u2019s, Dove and Hellmann\u2019s, are growing much faster than its other brands. Companies with the best scores on their sustainability reports generally perform better financially<\/a> than those with lower scores.<\/p>\n

The end of shareholder capitalism?<\/h2>\n

Skeptics can be forgiven for believing these corporate \u201cchanges\u201d are not real or are simply public relations stunts designed to appeal to a new generation.<\/p>\n

Businesses can, of course, say they will be responsible citizens while doing the opposite. Few sustainability reports in the United States are externally audited<\/a>, and the companies are asking us to take them at their word.<\/p>\n

Even if they are well-meaning, intentions are not enough to create systemic change. A 2017 study showed that many companies with climate change goals actually scaled back their ambitions over time<\/a> as the reality clashed with their lofty goals.<\/p>\n

But businesses can\u2019t afford to ignore their customers\u2019 wishes. Nor can they ignore their workers in a tight labor market. And if they disregard socially responsible investors, they risk both losing out on important investments<\/a> and facing shareholder resolutions<\/a> that force change.<\/p>\n

The shareholder value doctrine is not dead, but we are beginning to see major cracks in its armor. And as long as investors, customers and employees continue to push for more responsible behavior, you should expect to see those cracks grow.\"The<\/p>\n

Elizabeth Schmidt<\/a>, Professor of Practice, Nonprofit Organizations; Social & Environmental Enterprises, University of Massachusetts Amherst<\/a><\/em><\/p>\n

This article is republished from The Conversation<\/a> under a Creative Commons license. Read the original article<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Elizabeth Schmidt, University of Massachusetts Amherst Capitalism\u2019s days may be numbered \u2013 at least judging by recent polls. A majority of millennials reject the economic system, while 55% of women aged 18 to 54 say they prefer socialism. More Democrats now have a positive view of socialism than capitalism. One problem interpreting numbers like these […]<\/p>\n","protected":false},"author":44,"featured_media":17309,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[5],"tags":[6383,508,832,511,930,3364,4099,172,224,358,196,4081,532,4084,13,1203,512,6708,1205],"_links":{"self":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/17314"}],"collection":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/users\/44"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/comments?post=17314"}],"version-history":[{"count":2,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/17314\/revisions"}],"predecessor-version":[{"id":17318,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/17314\/revisions\/17318"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/media\/17309"}],"wp:attachment":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/media?parent=17314"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/categories?post=17314"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/tags?post=17314"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}