Capitalism Regains Consciousness

Consciousness:
1. a. alert and awake; not sleeping or comatose
  b. aware of one's surroundings, one's own thoughts and motivations, etc.
4. a. denoting or relating to a part of the human mind that is aware of a person's self, environment, and mental activity and that to a certain extent determines his choices of action
-- World English Dictionary

In the last several years, too many people have seemed unconscious -- or occasionally comatose -- to the economy-wrecking consequences of their actions. In life, individuals who don't realize how their behavior could hurt others are often dangerous. An entire marketplace contaminated with such self-centered and selfish obliviousness is infinitely more so. To prevent future economic catastrophes, and better address the damage remaining from the last one, it's high time that capitalism regained a little consciousness.

Comatose capitalism
Corporate managers' drive for short-term profit at all costs, with no regard for the needs of myriad stakeholders, has done considerable harm to the stock market, the economy, and the entire country. Corporate America's been only too happy to provide us with several recent examples:

  • Define fair: Instead of demonstrating humility and grace, BP's (NYSE: BP  ) Tony Hayward responded to his ouster as CEO with this comment: "Life isn't fair. Sometimes you step off the pavement and get hit by a bus." Or, sometimes your company ignores safety regulations, one of your rigs blows up, 11 people die, and you befoul the Gulf of Mexico to an unprecedented degree. Same difference.
  • Define s----y: Will Goldman Sachs (NYSE: GS  ) ever learn any lessons? A recent policy banning the use of naughty words in emails implies that Goldman still doesn't quite get what folks have been all worked up about. Hey, maybe the investments so colorfully described in the offending email really were s----y.

    It seems to me that somebody's totally missing the point! We're not upset about Goldman's language. We're upset with the behavior that prompted it. (At least such terminology gave us a little comic relief, not to mention something to rewind on the DVR during the congressional hearings. Some things, you just never expect to hear on C-SPAN.)
  • Define think: Congressional hearings on the Lehman Brothers debacle in late 2008 revealed Dick Fuld's response to the idea of conciliatory pay cuts in light of failure. "Don't worry," he said about the folks calling for pay cuts, "they are only people who think about their own pockets." Say, Dick, are you sure you weren't talking about yourself there?

Your wake-up call is here
Unlike the denizens of the preceding walk of shame, some folks in charge can do the right thing, regardless of their pockets, their short-term profits, or anything else. Look at companies like Whole Foods Market (Nasdaq: WFMI  ) , Costco (Nasdaq: COST  ) , and Starbucks (Nasdaq: SBUX  ) , all of which provide health-care benefits to workers in an industry that generally shirks that expense.

Conscious capitalism eschews the notion that "shareholder value" is the only thing that matters. Under this stakeholder-driven capitalism, employees, customers, and shareholders all matter.

My Foolish colleague Selena Maranjian recently quoted highly respected former General Electric (NYSE: GE  ) CEO Jack Welch's take on this concept:

On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy. Your main constituencies are your employees, your customers, and your products.

More and more companies increasingly comprehend that many different stakeholders all play crucial roles in a company's long-term success. Several businesses have even begun to pursue Benefit Corporation, or B Corporation, status, certifying that they "institutionalize stakeholder interests."

Don't hit the snooze button
A little more consciousness in our marketplace could help us tackle our society's serious trust deficit. And conscious capitalism has few advocates more ardent than Whole Foods' founder and co-CEO John Mackey.

Mackey even came to Fool HQ last year to share his philosophy, which could be a way to carve a positive future for capitalism. Last spring, he also spoke out about the need to create high-trust organizations.

Want to hear more about his ideas from the man himself, or ask him your own questions? Mackey is scheduled to participate in a chat right here on Fool.com on Tuesday, Aug. 10. Mark your calendars, and if you have queries for him, please share them in the comments box below.

I believe Mackey and his fellow corporate crusaders are right. We've all been asleep at the economic wheel for too long. A little more consciousness -- and conscientiousness -- would literally do our marketplace a world of good.

Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on corporate governance.

Costco is a Motley Fool Inside Value selection. Costco, Starbucks, and Whole Foods Market are Motley Fool Stock Advisor recommendations. The Fool owns shares of Costco. Try any of our Foolish newsletters free for 30 days.

Alyce Lomax owns shares of Whole Foods Market and Starbucks. The Fool has a disclosure policy.


Read/Post Comments (15) | Recommend This Article (15)

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  • Report this Comment On August 06, 2010, at 6:03 PM, ranchrfl wrote:

    Well, given that the market has been, is now and likely always will be driven by greed and a herd-mentality it's nice to think that corporations will learn from these lessons and the herd won't run off a cliff every time someone on CNBC says BOO! But, don't bet on it.

  • Report this Comment On August 06, 2010, at 6:09 PM, ranchrfl wrote:

    Well, actually I did. I bet BP wouldn't bankrupt even though the CNBC talking heads said it was a good chance and I bet the herd would stop running and turn back so $30.90 proved to be a good reentry point for my Roth IRA.

    Until corporate leadership regains a little consciousness, I'll continue to bet it will continue to react and perform as it always has.

  • Report this Comment On August 06, 2010, at 9:46 PM, xetn wrote:

    I think the author should differentiate between what constitutes "capitalism" now with free-market capitalism. What we have now is corporatism distinguished by mostly large companies, many with legalized monopoly through political favoritism or by regulation which favors one company or sector at the expense of others. FTC determined competition by fiat. Companies bailout of failure, and legalized labor monopoly.

    Contrast that by a free-market system which recognizes and protects private property rights and the only regulation is based on free exchange where both parties believe they have derived more from the exchange than what was given up.

    In a free-market, there would be no fed (central bank) which controls the price (interest rate) of money, and has the power to create money. Only commodity money (the only constitutional money) based on gold or other metals, and absent legal tender laws.

    I could go on, but hopefully you get the point. Only freedom of exchange is ethical; there is no such thing as fair because it is subjective.

  • Report this Comment On August 07, 2010, at 8:34 AM, TopAustrianFool wrote:

    xetn,

    I agree with your statement.

    "What we have now is corporatism distinguished"

    Basically in a lot of markets, the important ones like healthcare, banking, utilities, agricluture ect., we have fascism which is socialism/communism by proxy.

    "there is no such thing as fair because it is subjective."

    Correct. The price for you depends on what the item means to you and your personal benefit. Not to some arbitrary govt beaurocrat.

  • Report this Comment On August 08, 2010, at 5:27 AM, Foosballking wrote:

    The author is a socialist fool. She doesn't understand what a free market is. Her resume would be an interesting read...

  • Report this Comment On August 08, 2010, at 9:36 AM, PEStudent wrote:

    xetn, I agree with you to some extent, but you demonstrate a big problem when you write, "...Contrast that by a free-market system which recognizes and protects private property rights and the only regulation is based on free exchange where both parties believe they have derived more from the exchange than what was given up."

    If the "only" regulation is based on free exchange, how are private property rights protected? You've just added another layer of laws. Then, when you hire a worker, his body is his private property, so any damage to it has to be protected as well, so you've just added worker comp.

    You say that in exchanges, both parties "both parties believe they have derived more from the exchange than what was given up", but does that mean I can sell a car whose motor I know will die in a couple days without telling the other party? He'll "believe he has derived more..." So now you have to regulate the degree of transparency in regulations - like the one the banks fought over disclosing selling derivatives they've privately taken positions against and which will reduce the value of what they're selling.

    So, unfortunately, a large number of regulations of many kinds are needed.

    I've seen Warren Buffett and George Soros speak and heard them both say roughly this: "100% Socialism has NEVER worked. 100% Capitalism has NEVER worked either. There has NEVER been a successful occurrence of a "free market" and it's unimaginable that it ever could.

  • Report this Comment On August 08, 2010, at 6:21 PM, TopAustrianFool wrote:

    "If the "only" regulation is based on free exchange, how are private property rights protected? "

    I'll give you my answer to that. Property right are protected by arbitration, by say, the court system. You enforce contracts and allow individuals to pay and charge what they are willing based on personal valuation.

  • Report this Comment On August 08, 2010, at 6:24 PM, TopAustrianFool wrote:

    "You say that in exchanges, both parties "both parties believe they have derived more from the exchange than what was given up", but does that mean I can sell a car whose motor I know will die in a couple days without telling the other party? He'll "believe he has derived more..." So now you have to regulate the degree of transparency in regulations - like the one the banks fought over disclosing selling derivatives they've privately taken positions against and which will reduce the value of what they're selling."

    If you do that you will not be in business for long since your reputation will sufer and that is the Free-Market regulating itself. That will also teach the other party that they should have negotiated a warranty. But maybe that would increase the price of the car, so they are willing to take the risk by a cheaper price.

  • Report this Comment On August 08, 2010, at 6:28 PM, TopAustrianFool wrote:

    "100% Capitalism has NEVER worked either."

    There have never been 100% Capitalism, so Buffet maybe good at choosing businesses to invest in, but he does not know the first thing about economics. I hope you don't think he an economist just because he is a millionaire.

  • Report this Comment On August 08, 2010, at 8:32 PM, TripleEFocus1 wrote:

    Alyce, thanks for your insightful writing...just to say keep it up. May the day quickly arrive that we Fools make a Profit while caring for People and Planet-true wealth .

  • Report this Comment On August 09, 2010, at 3:00 PM, midnightmoney wrote:

    topsecret fool and xetn,

    That most subjective of realms--art--does it exist or not? More to the point, there are five of us in a bomb shelter and we have five chicken legs. None of us owns the bomb shelter, and there are no damn communists among us (we ran them with our super-duper anti-communist pitchforks from walmart, say). How do we equitably divvy up the digs? Or can fair not be determined in this case?

  • Report this Comment On August 09, 2010, at 3:04 PM, midnightmoney wrote:

    I'd also like to add that I too like your article, Alyce. Thanks.

  • Report this Comment On August 09, 2010, at 6:09 PM, TopAustrianFool wrote:

    midnightmoney,

    I find hard to believe that the communist didn't sent you to a work camp before you had any chance to run them out with pitch forks. See, they probably had so much regulations for you to buy guns that all you had was pitch forks. Too bad they did have guns since they had no problem showing need to carry.

    As for you bomb shelter question. I wouldn't know since we have no govt to tell us how to divvy up your silly chicken legs.

  • Report this Comment On August 09, 2010, at 6:17 PM, TopAustrianFool wrote:

    "Conscious capitalism eschews the notion that "shareholder value" is the only thing that matters."

    I own all the companies you mentioned. What in the world gave you the idea that what is good for capitalism, and share holders is not good for employees. The examples you show contradict your premise. What you call "conscious capitalism" is capitalism, plain and simple. Mistreating employees is not good for shareholders.

    Yet the "Corporate managers' drive for short-term profit at all costs, with no regard for the needs of myriad stakeholders" is the perfect example of regulation socialism. Banks behave poorly because they get bail outs and regulations that protect their monopolies. The same regulations in the new financial reform bill, will be used by these banks to continue their abuse. It will happen again.

  • Report this Comment On August 11, 2010, at 2:16 PM, wolfman225 wrote:

    <i><b>Define fair:</b> Instead of demonstrating humility and grace, BP's (NYSE: BP) Tony Hayward responded to his ouster as CEO with this comment: "Life isn't fair. Sometimes you step off the pavement and get hit by a bus." Or, sometimes <b>your company ignores safety regulations, one of your rigs blows up, 11 people die, and you befoul the Gulf of Mexico to an unprecedented degree. Same difference.</b></i>

    Didn't the Obama administration fully inspect the rig and approve it's operating/drilling plan? Didn't they also give BP's Deepwater Horizon platform an award for safety excellence and hold them up as a model of safe off-shore drilling practices shortly before the accident?

    I believe that BP may have taken a few shortcuts, but they are far from solely responsible for the disaster. I also believe that they have done the best they could in dealing with an unprecedented situation. Also, as it turns out, Tony Hayworth was right when he said that the environmental consequences would not be as severe as the main stream media and the administration were trumpeting.

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