Sunday, May 5, 2013

Conscious Capitalism: Corporations as Stewards of the World

Eyes (feat. Mindy Gledhill) by Kaskade on Grooveshark

I've always loved business.  There is something about capitalism that has always been magical to me:  the interchange of service and capital, the creativity and innovation, the huge advancements and benefits to society.  But the concept of "pure" capitalism has been smeared by venal politicians and executives resulting in a derogation into what's been aptly called "crony capitalism" (where politicians and executives engage in a parasitic alliance at the expense of consumers and which also creates a subversion of true free market principles).  I recently read "Conscious Capitalism: Liberating the Heroic Spirit of Business."  I wish this were mandatory reading at every business school and for all entrepreneurs.  The former may actually come true; Bill George - former CEO of Medtronic who oversaw Medtronic's rise in value from 1.6 billion to  60 billion under his tenure - wrote an extremely complimentary foreword to the book and he now teaches at Harvard Business School, teaching the same principles advocated in the book.

It is a fascinating and eloquent read on taking capitalism to its highest form and beyond which results in creating not only financial value but also positive changes to society, our ecosystem, other living creatures on this earth, this planet as a whole.  One of its authors is John Mackey (the other, Rajendra Sisodia), the charismatic co-founder of Whole Foods.  He makes a brilliant defense of capitalism (and terms it "conscious capitalism") and one of his theses (shared by Bill George) is that:  "well-run, values-centered businesses contribute to humankind in more tangible ways than any other organization in society," more so than sluggish government entities weighed down by bureaucracy and even non-profit organizations that are entirely dependent on donations.  He then describes the four tenets of a thriving successful business that creates wealth for every "stakeholder," including the community, the environment, the investors, employees:  1. higher purpose; 2. stakeholder integration; 3. conscious leadership; 4. conscious culture and management.  You can read about them more in the book but I wish every business person would do so.  You might not agree with everything he says, but it will change your former belief system on how to become profitable.  And the method doesn't encompass a mindset that's 100% altruistic, we can all make this world a better place while staying true to the tenet that businesses exist for profit.

I'm not going to summarize the book here, that would be doing the book a huge disservice not to mention it's a lot of work for me.  :-)

But here's something from the book that resonated with me:  a recent Gallup survey found that the quality of one's WORK is the primary determinator for happiness, not wealth per se, health or family...but work that is meaningful and done in the company we care about.  This tends to be true the more educated and affluent you are due to the unfortunate plateau effect of achievement.  This makes absolute sense to me although I would venture to add that sometimes having a blissful family life can negate the unhappiness caused by a person's job.  ...

**Edit:  in today's day and age, more people than ever have access to advanced education and opportunities.  They have moved beyond the paradigm of a job for a job's sake.  They have a calling.  And for these people, it is essential to their happiness-pie that they have meaningful work with people they care about.  No amount of family happiness can fill this void.  And that's wonderful because it's from the Steve Jobs and Richard Bronson's and John Mackey's of the world that society receives immense benefits.  Which is not to say that a happy family life is not a piece of the happiness-pie for them, but fulfilling their calling in life in terms of their work must be accomplished in order to be fully happy.**

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The book talks a lot about Whole Foods, of course, but also other companies who engage in conscious stewardship, a concept that includes maximizing long-term profit (as opposed to the harmful tactics engaged by senior management to optimize short-term profits in order to meet analysts expectations, for example, or to cash out their stock options) but which defines that as synonymous with creating value for all stakeholders.

One of them is the Tata Corporation.

The Tata Corporation is a global conglomerate based in India with annual revenues of over $85 billion and employs over 425,000 people worldwide; its holdings include power, telecommunications, beverages, hotels, cars, steel companies and every other imaginable commodity.  In addition to its immense financial success, it's ranked by the Reputation Institute as the 11th most Reputable Company in the world (amongst 600) and was awarded the Carnegie Medal of Philanthropy in 2007 amongst other numerous awards for the amazing things Tata has done for the worldwide community.  But its social consciousness is not implemented by a separate "Philanthropy" or "Social Responsibility" department operating under a begrudging budget.  It's a part of the company's DNA, it's a part of the company's overall philosophy and purpose.

Here's an example of how that ethos manifested itself.  In November 2008, its luxury hotel, the Taj Mahal Palace & Tower Hotel in Mumbai, was attacked by terrorists killing 164 people and wounding at least 308 others.

Photo of the hotel today.  
Here is what Tata did, on it own initiative, without any prompting by the victims' families or the community or the government, without question, without hesitation, without engaging in a cost-benefit analysis:

In November 2008, the Tata Group’s iconic Taj Mahal Palace & Tower Hotel in Mumbai was the epicenter of a horrendous terrorist attack that killed 164 people and wounded at least 308 in the southern part of the city.  Eleven hotel team members were killed, most while helping approximately 1,500 guests escape from harm. For the entire duration of the attack, not a single team member abandoned his or her post. Many repeatedly guided guests to safety before they themselves were shot by the terrorists. Some even stood in front of guests to take bullets. 
The dedication of its team members is exemplified most powerfully by the hotel’s general manager, Karambir Singh Kang, who lived with his family in an apartment in the hotel. In the midst of the terror and panic, Kang calmly supervised the evacuation of hundreds of trapped guests. Ratan Tata, chairman of the Tata Group, later told CNN, “The general manager lost his wife and two sons in one of the fires in the building. I went up to him today and I told him how sorry I was, and he said, ‘Sir, we are going to beat this. We are going to build the Taj back into what it was. We’re standing with you. We will not let this event take us down.’”  Indeed, in an act of defiance, the hotel reopened for business a mere twenty-one days after the attack, even though two-thirds of it was very badly damaged. Though it took two more years for the rest of the hotel to be repaired and reopened, not a single team member was laid off during that time. 
Ratan Tata and other senior company leaders attended all eleven funerals and visited the families of all eighty team members who were killed or injured. Within twenty days, Tata established a new trust to provide assistance to all those who were injured and to the families of those killed. Tata set up a psychiatric center in collaboration with the Tata Institute of Social Sciences to counsel those needing help, as well as outreach centers to provide food, water, sanitation, first aid, and counseling for team members and others in their South Mumbai neighborhood. The company assigned a mentor for every affected team member to serve as a single point of contact to ensure that the person received any help needed. For team members living alone in the city, their family members were flown in from outside Mumbai and accommodated in the Tata-owned Hotel President for up to three weeks. Tata provided compensation to the families of every deceased member, ranging from $ 80,000 to $ 187,000. In addition, Tata did the following: 
-  Guaranteed that deceased team members’ residences would be provided to the family, through the lifetime of the next of kin.  
- Waived all loans and advances, regardless of amount.   
- Committed to paying the team member’s last full salary for life. 
- Took complete responsibility for the education of children and dependents through college— anywhere in the world. 
- Provided full health-care coverage for all dependents for the rest of their lives. 
- Provided a counselor for life for each person. Tata even extended relief and assistance to the families of those who were killed in the vicinity of the hotel and at the railway station a few miles away. For Tata, these people were their neighbors, and the company felt a responsibility to help them. Railway employees, police staff, street vendors, and pedestrians who had nothing to do with the company were offered assistance of 10,000 Indian rupees (about $ 200) per month for six months. Street vendors who lost their carts were given new ones. A four-year-old granddaughter of a street vendor had been shot with four bullets during the attack. She was removed from the government hospital and taken to Bombay Hospital. The Tata family spent several hundred thousand rupees on her treatment. Even the employees of competing hotels were looked after. 
Mackey, John; Sisodia, Rajendra (2012-12-25). Conscious Capitalism: Liberating the Heroic Spirit of Business (Kindle Locations 2114-2139). Harvard Business Review Press. Kindle Edition. 

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When I read about this, a normally non-movable me got tears in my eyes.  Corporations have the power to do so much good in this world and it starts with conscious leadership.  I love reading stories like this because it gives me hope amongst endless stories of corporate corruption and political cronyism and selfish, exploitative people.  It's entirely possible to make this world a better place and be extremely profitable, in fact, these are synergetic energies, not mutually exclusive.  Here's to changing the old and limited narrative of capitalism!

“Businesses need to be driven by a purpose higher than maximizing profit, and they must ensure optimal benefits to all stakeholders. Only if that happens can capitalism deliver to all humanity the full societal benefits it is capable of.” —Ratan N. Tata, Chairman, Tata Sons

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