Business in the Green: Value Stakeholders, Not Just Shareholders
Aug 03, 2011 01:17PM
● By Mitch Fine
Corporations are the dominant institution of our time. They have evolved to pervade all aspects of our lives. But a basic philosophical distinction that should govern corporations has been overlooked. And that distinction is this: making money is not a purpose. It is an outcome.
Most corporations will ultimately fail, because they confuse this outcome with their purpose. Others invent a purpose that is not authentic and does not inspire stakeholders to adapt and innovate in order to deal with our most pressing global issues. A small but growing number of corporations do get it right. By focusing on a purpose that is not about making money, these organizations not only make a significant difference in issues of sustainability, but are often more profitable than their contemporaries.
John Mackey, the founder of Whole Foods Market, has spoken eloquently of this paradox by comparing a corporation whose purpose is to “make money” with a person whose purpose is to “be happy.” Mackey explains that the pursuit of happiness as a purpose for one’s life generally creates the opposite outcome. For most people, happiness is the outcome of a life that is based on meaningful relationships with others, or a powerful sense of vision and purpose that results in the pursuit of meaningful goals and action.
Whole Foods Market is a company that gets this distinction right. In 1985, Whole Foods Market created its “Declaration of Interdependence,” which emphasizes a stakeholder philosophy. Walter Robb, Whole Foods co-president, details the company’s core values: “The deepest core of Whole Foods is this mission: Customers first, then team members, balanced with what’s good for other stakeholders, such as shareholders, vendors, the community and the environment. If I put our mission in simple terms, it would be number one, to change the way the world eats, and number two, to create a workplace based on love and respect. We believe business should meet the needs of all the stakeholders, as opposed to operating it purely for the shareholders.”
Mackey describes how the stakeholder philosophy integrates with capitalism: “We’ve always been unique, in that we have a stakeholder philosophy. The beauty of capitalism is that it is a harmony of interests. All stakeholders are important. Owners and workers, suppliers and partners, business and the community cooperate together to provide value for the customer.”
When the company was founded, its purpose was not to make money, but rather to focus on serving the needs of its customers in a unique and meaningful way, while consistently treating employees better than any of the competition and serving the needs of the community and the environment. In sticking with this purpose, Whole Foods has provided shareholders with best-in-class performance. Indeed, there is no other company in the sector, and very few in the world, that have provided an investment return of 2,500 percent over the past two decades.
Whole Foods Market is not a perfect company, and they are not the epitome of Progressive Capitalism. But at a core level, the company has gotten its priorities right and the results are clear. If we are to solve the problems we are faced with and create a world where we live in harmony with nature and with each other, corporations are going to have to “get it” about their purpose.
Mitch Fine is a financial advisor in North Texas and specializes in sustainable investing.