Everyone can spot an unacceptable face of capitalism. But we’re not so good at recognising chief executives that do well by doing good. Here I argue that capitalism needs business leaders who can see the bigger picture.
There was a time when any activity detracted from financial success. Above all, investors weren’t interested in the nicest corporate citizen on some nebulous do-goodery metric. Not that it would have pleased the Milton Friedman. The late Nobel-winning economist argued in the 1970s that business leaders who talk about corporate social responsibility are:
preaching unadulterated socialism.
And generations of chief executives embraced his message. Essentially, it was that shareholders, as the owners of companies, had primacy. In other words, the only duty of chief executives was to provide them with profits:
free markets would look after everything else.
Well, the markets haven’t held up their end of the bargain. But the doctrine of shareholder supremacy which has reigned for half a century is now dead.
The shifting priorities of capitalism
Priorities are shifting, for two key reasons.
- Social media. This can inflict reputational damage on bosses hitherto able to control the message.
- Intergenerational inequality. Most companies now have a millennial and Gen Z workforce trying to get on the housing ladder. They don’t respond well to an employer obsessed only with financial targets.
For instance, take Rupert Hogg. He resigned as CEO of Hong Kong’s Cathay Pacific airline. And the reason: Chinese authorities ordered him to submit a list of employees who’d taken part in the Hong Kong protests. So, he sent a list which had only one name on it: his own.
Now, this is a welcome contrast to other Western business leaders. As they tend to all toe the Beijing line to preserve their flow of profits.
At a time of huge change (in Hong Kong and elsewhere) capitalism needs more chief executives like this. However, has the new mood spread to investors? Unfortunately, there’s not much sign of it yet. Businesses have the power to transform society. Yet too many think only of maximising returns at the expense of wider society. In other words, they still prefer profit over purpose.
No wonder capitalism is in crisis.