Letter From the Editor

Not-so-strict constructionism.

For most of my two dozen years as a journalist, I’ve been the business equivalent of a strict constructionist. That is, I believed that the sole role and responsibility of a company was to maximize profit and shareholder value.


There’s a lot that’s compelling about that idea. Corporations in pursuit of profit have brought the world everything from lifesaving technologies to Looney Tunes. In seeking efficiency, they have made more and better products and services available to more people in more places than at any other time in history. The employment that successful, profit-maximizing companies provide, and the trade they generate, have raised standards of living all over the globe. At the same time, they have enriched their owners–the shareholders–letting them send millions of kids to college, say, and funding millions of comfortable retirements.

And there’s something vaguely disturbing about corporate charity. By what right does a CEO divert corporate resources to a pet philanthropic project so he can sit on a do-gooder board and be lionized at a dinner? Better, the strict constructionist argument goes, to return the money to shareholders and let them choose the charities they wish to support.

But I’ve come to the conclusion that the demands strict constructionism makes of the corporation are necessary but insufficient. Companies have gotten vastly larger, as have their footprints–on the environment, on health care, on society, and even on geopolitics. And the world has gotten smaller; we have come to understand that our resources are finite and that our activities have lasting, often damaging impact.

Does that mean we need even more regulation, and maybe even that we need to throttle back on economic growth? Hardly. There’s another way of looking at the rising power of corporations in a shrinking world. It’s that business can be a profound force for positive change, especially in an era when so much of government seems impotent, overwhelmed, or flummoxed. Think, for example, of the nimble and effective response of the likes of Wal-Mart and Home Depot to Hurricane Katrina last year. As FEMA foundered, those retailers had their stores open within days, getting food and supplies to the desperate–and generating sales and profits for shareholders.

That’s also the lesson to be learned from this year’s Fast Company/Monitor Group Social Capitalist Award winners. These are typically small organizations with limited resources. But they’re increasingly teaming up with business in a model that links social change with economic value. The CEO of the Wild Oats grocery chain, for example, had an epiphany while standing in a Mexican coffee field. He converted his stores to sell fair-trade coffee, producing more than $1.5 million in additional revenue for growers and their families. Meanwhile, the chain’s sales of coffee went up 20%, prompting him to introduce fair-trade tea, sugar, and fruit.

In other words, if you can apply the relentless logic of profit to the woes of the world, the result is hope on steroids. I’m a believer.