Capitalism is in crisis. The United States—and our democratic values, discourse, and institutions—is suffering from unprecedented levels of inequality. Today, the three richest Americans collectively own about as much wealth as the bottom half of the population combined. Worse, extreme levels of economic inequity are only one of the many forms of inequality that plague our nation: We also face rampant discrimination based on race, gender, sexual orientation, ethnicity, religion, and ability. Looming over all of this is the threat of a global environmental catastrophe, which will make every one of these disparities more extreme through droughts, food shortages, and refugee crises.
When I was a child, I had the distinct sense that America was rooting for my success. Despite living in a small rural town in East Texas—and despite the prejudices I faced growing up black and gay in the South—I experienced the benefits of individuals and institutions working in concert to cheer me on. Time and again, I felt the wind at my back. But as I reflect on our system today, I find myself wondering and worrying: Do today’s underprivileged children feel optimistic? How could they?
Clearly, we the people cannot wait for the next election to address the crisis of capitalism. And thankfully, we haven’t been waiting, because we know what’s possible when we reclaim the purpose of business and allow the benefits of capitalism to reach all corners of our country and beyond.
Today, a growing number of leaders in the business and social sectors are finding ways to make our capitalist system fairer. They recognize that if we create the context and conditions for an inclusive and just economy, the more we can use capitalism’s undeniable productive power to unlock better ideas and outcomes for humankind.
Early positive signs of that recognition came in late summer, when a group of 181 CEOs from the Business Roundtable announced that they had redefined the purpose of a corporation. These CEOs committed to “lead[ing] their companies for the benefit of all stakeholders—customers, employees, suppliers, communities, and shareholders.” The idea is simple: Everyone affected by the policies and practices of a firm should have a voice in shaping them.
This is the value reset that many of us have been clamoring for, a shift from late-20th-century capitalism run amok to a more equitable 21st-century capitalism.
Moving to stakeholder capitalism is not only a matter of doing the right thing, economists such as Harvard University’s Oliver Hart and the University of Chicago’s Luigi Zingales argue. In many cases, it’s also economically more efficient—which will in turn help everyone’s bottom line. It’s less expensive to not pollute the environment than it is to clean up pollution. It’s less costly to not sell addictive opioids than it is to provide mental and physical care for those who become addicted. By considering the perspectives of all the stakeholders involved, we can avoid cases like these where everyone involved ends up suffering.
The Business Roundtable’s statement is only meaningful if its signatories follow it up with real commitments and actions. Now that these businesses have declared their values, it’s time for them—and everyone else, from new business-school graduates to longtime CEOs, from advisory nonprofits to lobbies for corporate governance—to turn those values into action.
This starts by putting more and different stakeholders into positions of power. We can look to Germany, for example, where codetermination has been the law of the land since 1976: Large corporations there have to allow half of their supervisory boards of directors to be elected by workers. This rule hasn’t slowed the country’s economy. In fact, Germany’s annualized growth in real per capita gross domestic product has been faster than ours since then. Plus, they have less income inequality and higher life expectancies. It’s little wonder that here in the United States, workers have been pushing to increase the minimum wage (which a full two-thirds of Americans support raising to $15 an hour, according to the Pew Research Center) and demanding better working conditions.
American democratic capitalism once worked in a similar way. My own grandfather, with just a third-grade education, served as a porter in an oil company for nearly 40 years. Because the company managed a profit-sharing plan for every employee, my grandfather was able to retire with financial security.
The most recent numbers suggest, however, that a mere 16% of today’s Fortune 500 companies offer a traditional pension to new employees. Too many corporations are selling their workers short. While Americans are now working harder and more efficiently than ever, wage growth lags far behind that increase in productivity. Simply put, Americans are working more—and better—for less.
Together, we can—and must—reverse these trends. One of the companies highlighted in this issue, Patagonia, offers an example for how we might do so, with its exemplary family leave policy. For more than three decades, the company has provided high-quality, on-site childcare that allows parents to take lunches and breaks with their children. It offers 16 weeks of fully paid maternity leave (and 12 weeks of fully paid leave for fathers and adoptive mothers) and nanny services for when employees need to travel, among other policies. The results are quite clear: Over the past five years, 90% of women at Patagonia who took maternity leave returned to work. That retention rate is something every company should strive for.
To reach goals like these, companies need to start keeping track of them. After all, the best way to ensure that promises come paired with progress is to measure and monitor. Traditionally, though, measuring something like social impact has been a challenge. Thanks to a constellation of leading institutions, however, these measurements are now far more precise.
The Sustainability Accounting Standards Board, an independent council, has worked to standardize corporate reporting of material nonfinancial data in areas such as employment, environmental sustainability, and governance. IRIS (Impact Reporting and Investment Standards), an initiative of the Global Impact Investing Network, offers a catalog of accepted performance metrics that helps guide investors who want to consider the social and environmental impact of their holdings. And the Global Impact Investing Ratings System (GIIRS) rates companies and funds based on their environmental and social impact, in a manner similar to Standard & Poor’s credit-risk ratings. In short, companies can now measure social performance right alongside financial progress—and the next step is to streamline all of these different measurement systems so that we have clear, accountable, and universal metrics for assessing social value.
Of course, in a broader sense, we must replace the tyranny of quarterly financial reporting with a commitment to longer-term planning and sustainability. Larry Fink, chairman and CEO of BlackRock, the world’s largest asset manager, has written passionately about this issue, having declared that the companies in which BlackRock invests must publicly delineate their “strategic framework for long-term value creation.” As with the Business Roundtable, I hope that BlackRock’s strong words will be met with equally strong action.
Fink’s bold declaration is sound advice outside the world of finance too. Across both the public and private sectors, we need to start thinking more about long-term value. This means, for example, thinking about the future of workers in an era of automation; after all, America needs workers to have a sustainable future so they can buy the products that these companies are making, an idea pioneered by Henry Ford, whose family established the foundation that I am privileged to lead.
In that position, it has become increasingly clear to me that solving today’s challenges requires unprecedented collaboration between business and philanthropy, private and public sectors. For our part, the Ford Foundation is working to reimagine the philanthropic model—to shift our work, and our sector’s work, further along the spectrum of generosity to justice. The idea is to address directly more of the root causes of injustice, rather than just addressing the symptoms of those problems with charity. The deeper we have dug into this work, the more we have discovered how interconnected business and philanthropy truly are, which is why it’s so important that we work together to produce a more inclusive capitalism.
Capitalism only works if it works for everyone, which makes it our obligation to push it to be better. This special issue is chock-full of other ideas, with leaders, thinkers, and workers from around the country arguing for new ways of reimagining our economic system.
The imperative of the 21st century is to build a new economy that recognizes the role of business and corporations in creating value in ways that better benefit society. We owe it to the next generation—to ensure that they have just as many reasons to be optimistic about their future as I did.