Across America and around the world, we are facing tumultuous times. Trust is in short supply. Too many people feel like the current system of free market capitalism simply isn’t working for them, their communities, and the planet.
And who can blame them? Over the past 35 years, the economic value of America’s top 1% in income grew 175%, while the bottom 90% of Americans lost 3% in value. Yet at the same time, we are also sensing the presence of a major opportunity, a once-in-a-generation opportunity to create a new, upgraded version of the capitalist system that better reflects who we are and what we want to become.
This is not about politics. In fact, we must put politics aside for a moment. If you ask people (as we have done) what they think about business and the purpose of corporations, the vast majority of us are in full agreement. We want a private sector that builds prosperity for all.
At JUST Capital, our polling research has solicited the views of some 95,000 Americans over the past five years, on a fully representative basis, from all across the country. We have hosted focus groups and online discussions, performed in-depth interviews, and conducted qualitative and quantitative surveys on how people want companies to serve their respective stakeholders and what success really looks like.
A highlight of this year’s survey work was that almost 95% of respondents agree with the statement: “Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity.” In other words, we are united in the belief that the best route to long-term, widespread prosperity is through a more just form of capitalism. We have found comparable levels of support for similar sentiments each and every year since we began polling in 2015.
That’s the good news. The better news is that America’s CEOs agree. In August, 181 CEOs signed the Business Roundtable’s new Statement on the Purpose of a Corporation, which commits to precisely this ideal. The purpose of a company, according to this country’s business leaders, is to create value for all of a company’s stakeholders. This means not just shareholders but their workers, their customers, the communities where they operate (which in our model incorporates suppliers), not to mention the planet itself.
So now we are all on the same page, how do we get there from here? Clearly, a major trust gap still exists. What this year’s survey work also revealed is that only 45% of respondents feel that companies are actually living up to this promise. And 60% felt that companies still prioritized the needs of their shareholders above all else.
Contrast that with what the American public has identified as the most important stakeholder for corporate America: employees. Across many demographics—liberal, conservative, high-income, low-income, men, women, millennials, and boomers—Americans want corporations to stop prioritizing shareholder interests and start putting improved worker pay and treatment at the heart of just business practices.
Four of the top five issues people want corporate America to commit to include: paying a fair wage; paying a living wage; providing good benefits and work-life balance; and providing a diverse workplace with equal opportunity and pay equity.
Closing this gap between aspiration and performance, between words and deeds, is what needs to come next. That starts with measurement and data. By tracking corporations’ progress openly and unbiasedly, engaging with them to promote inclusive and profitable growth, and creating tools and products that enable market participants to invest in, work for, buy from, and otherwise support the most just companies, we can bring this vision closer to reality.
It is clear that more and more people are seeking information in order to align their purchasing habits with their core values. A study from Cone/Porter Novelli reports that 79% of Americans would be more loyal to a purpose-driven company and that 66% would switch from a product they typically buy to a new product from a purpose-driven company. An earlier Cone survey stated that a significant 9-in-10 millennials would switch to brands associated with a cause. Our own survey work similarly suggests that 78% of respondents had taken action to support just companies.
Investors are also hungry for better data. They know that companies that look after their stakeholders also generate better returns. Shareholder activism on social and environmental issues is on the rise, growing from 33% of total resolutions from 2006 to 2010 to 45% from 2011 to 2016 and standing at just over 50% in 2017. Some $30 trillion around the world is now managed with some form of sustainable, ESG, or social criteria, and that number is growing at a 16% CAGR. Investors are also throwing their weight behind efforts to break the myopic horizon of the quarterly earnings cycle and focus more on long-term value creation and risk evaluation.
Slowly but surely, across the marketplace, more and more people want information they can trust to help them understand which companies are creating value for their stakeholders, and which are not, in order to make more informed choices about how they invest their time, their money, and their talents.
Capitalism has always evolved to reflect the values of the society it serves. Embracing a stakeholder-based approach will help us shape capitalism so that it better meets the needs of society today. If we are successful, we can not only breathe life back into the American Dream, we can create a marketplace that addresses our systemic social and environmental challenges at scale and displays a higher intelligence about what creates value—indeed, what value even means.
Martin Whittaker is CEO of JUST Capital.