Wednesday, August 22, 2012

Moral capitalism?

One thing is for sure in life - everything is changing all the time, a constant state of flux. It is only humans that are fighting against the flow of nature, and think that current structures, ways of doing things, relationships, or throughts are immutable. Well, let's face it. They are not. It is natural that we are constatly challenging our believes, systems and tools to see if they are still working in our best interests: and if they are still supporting our values, if they are still helping us to create a sustainable life for ourselves, and for future generations.
Capitalism is one of those structures that has been around for a long time and has started to show some serious defects, mostly based on moral and ethical stances that have little to do with our established environment. It has everything to do with the fundations of modern civilisation, human dignity and the true essense of a human being: as an emotional, intelligent, holistic and concious participant on the planet Earth.
From those basic precepts a thesis of a "moral capitalism" has been derived. It is in its infancy, and I can only hope that it will hit a wave of a global discussion and open up a new dimension of social awarness. These are the initial thoughts, shared with us by Stephan B. Young, the global director of the CRT organization that has been the first to challenge the business community by addressing the core challanges of capitalism and searching for future solutions.
Short CV
Stephen B. Young is the Global Executive Director of the
Caux Round Table. Steve has published Moral Capitalism,
a well-received book written as a guide to use of the Caux
Round Table ethical and socially responsible Principles for
Business. In her 2008 book, The Difference Makers, Prof.
Sandra Waddock listed Young among the 23 persons who
created the corporate social responsibility movement.
Steve was educated at Harvard College and Harvard
Law School
. He served as an Assistant Dean at the
Harvard Law School and as the third dean of the Hamline
University School of Law. He has taught at the University
of Minnesota
and at the SASIN Graduate School of
Management in Bangkok
and spoken at many workshops
and conferences on corporate social responsibility and
business ethics.
Young has also taught at the University of Minnesota Law
School, Carlson School of Business, the College of Liberal
Arts, and Minnesota State University – Mankato. He has
written numerous opinion articles for the Pioneer Press,
the Minnesota Journal on Law and Politics, the Saint Paul
Legal Ledger and has been published in the Wall Street
Journal, the New York Times and the Washington Post.

V: From where did the concept of moral capitalism derive?
Steve:
At first the idea was only to provoke thought; It was considered an "oxymoron" concept, one that had no inherent sense. But it worked wonderfully to open people's minds to the possibility that capitalism does not have to be exclusively selfish and exploitative, yet, that a moral sense can play a role in capitalism, that business decision-makers can be responsible.

V: What is moral capitalism? What is the basic intention behind it?
Steve:
Moral capitalism is making business decisions for the long run, in order to enhance the value of that business. It is mindfulness of how to manage stakeholder relationships to build their asset value for the company.
The intention is two-fold: to respect the interests of stakeholders and, simultaneously, to build the asset value of a business around its capacity to improve our quality of life.

Photo: Stephan B. Young and Violeta Bulc
Source: Vibacom archive, Switzerland 2012
V: Which are the most challenging issues of capitalism, as we know it today?
Steve:
There are two negative features of today's market capitalism which are mutually supportive. One is calculating values based on short term cash profits only, and not on long term asset appreciation.  This approach misprices future risk and leads to financial irrationality and prevents companies from internalizing the full social and environmental costs flowing from their business model. Second, today's rationalization of capitalism uses a wrong understanding of human motivation. It assumes people have no sense of moral responsibility and only seek selfish monetary profit in life.  This assumption drives the modern financial and portfolio theory, and pricing of financial assets such as derivatives and it calls for companies to serve only the short term profit interests of owners.

Photo:  View from the conference center - Caux House, Switzerland
Source: Vibacom archive, Switzerland 2012

V: How is the Caux Round Table addressing these issues?
Steve:
We have created new management metrics and guidelines and have suggested new ways to value companies, including a new understanding of what people value in life.
V: The activities and concerns of the CRT group can be folowed through the e-publication Pegasus.
VISION:
Our VISION is for a free, fair and prosperous global society built on the twin pillars of moral capitalism and responsible government
MISSION:
Our MISSION is to put moral capitalism to work by ensuring business contributes to greater prosperity, sustainability and fairness
PURPOSE:
Our unifying PURPOSE is Moral Capitalism for a Better World
PRINCIPLES:
The Caux Round Table PRINCIPLES support our vision, mission and purpose:
  • Principles for Responsible Business
  • Principles for Governments
  • Principles for NGOs
  • Principles for Ownership of Wealth

V: What were the most important conclusions/lessons to come from the CRT meeting in Switzerland?
Steve:
That a variety of business professionals agree with the CRT approach. We are not isolated, marginal thinkers but at the cutting edge of sound strategic planning for the future of capitalism.
The Caux Round Table (CRT) recently concluded its 27th Global Dialogue in Caux, Switzerland, and has resolved upon four major reforms to restart sustainable global growth.  These four recommendations will permit capitalism to overcome its current crisis of mediocre, financial performance, combined with systemic, ongoing, ecological and demographic imbalances.
The CRT Global Dialogue resolved that, first, the U.N. General Assembly should adopt a charter of responsible practices for sovereign nations to maintain sound and sustainable financial intermediation at a reasonable cost to society.
Second, sound and sustainable financial intermediation requires changes in banking practices.  Compensation systems, except in small privately held firms, should be aligned with levels of moderate leverage, moderate risk and professional prudence. Trading and speculation, as a business model, should be separated from commercial banking and lending, as a business model, and should be supported by industry- financed reserve funds. “Too big to fail” financial institutions should be broken up under anti-monopoly laws.
Third, sound and sustainable financial intermediation requires non-negligent ratings of securities and their issuers, both private firms and governments.  Credit ratings are market information that is a public good.  Therefore, more competition in providing ratings is necessary and the issuer paid business model of providing ratings should be supplemented with non-profit or publicly funded alternatives.
Fourth, sound and sustainable financial intermediation requires an academic theory of individual and firm motivation that rejects the erroneous assumption that rational, self-interest, measured by extrinsic monetary rewards, will lead to perpetually accurate market pricing.  Business schools should teach an alternate theory of business behavior which is grounded in the norms of fiduciary stewardship.

V: What is the key message for the financial community?
Steve:
Revise your theories and methodologies of valuation of a firm to include stakeholder relationships as assets of the business.

V: What is the key message for corporate owners and managers?
Steve:
The same.

Source: Vibacom archive, Switzerland 2012
V: What is the key message for the citizens of Planet Earth?
Steve:
Do not look to today's politicians, academics, investors and manager for solving the current crisis of capitalism. Speak up and reward those who will dare to think original thoughts.

V: What is going to be the next CTR step?
Steve:
Launching a global journal of thought leadership to bring this new ideas to a wide audience of workers in financial, banking, politics, civil society and academics.

V: Thank you.

I hope that these brief  but concise answers are a good encouragement for you to formulate your own thoughts on the political system we live in and on changes that can lead to a more sustainable and moral society. Everyone counts. There is always a first step, a first thought and later, when there are thousands of them it will become clear to everyone. Let us be part of these first steps, thoughts, actions. Let us quietly but firmly change the direction that will lead to a thrivable planet, within us. within our community, organization, our worlds. I am doing it. It is hard but really rewarding. i hope you will be the next.


Violeta



Additional links and publications:

5 comments:

brief Al said...

I would love to believe that moral capitalism is possible but at the moment cannot for the life of me see how we can get there from here. Steve's comments to not count on our current politicians and other leaders to get us there is, in my opinion, both absolutely correct and a clear identifier of the principal obstacle to even moving in the direction of moral capitalism.
You seem to be counting on a groundswell of popular support toppling a structure that was created by and maintained by the wealthiest and most politically powerful (they are the same, aren't they) people around the globe.
It seems to me that if there is any hope for the concept of moral capitalism we need to find or create a successful, dynamic and impressive company that is functioning as a moral capitalistic entity and use that to persuade other companies to follow suit. Without a role model I believe the idea will remain an unattainable ideal.
Our political system in the United States is broken, perhaps beyond repair. The Supreme Court in its Citizen United decision turned the country over to the wealthy, whose objective - if evaluated from outside, disinterested perspective - seems to be to turn the United Stated into a low-wage, third-world plutocracy.
The political scene in Europe is no healthier with the same wealthy right-wing cohort lead by Ms. Merkel forcing policies on states that will drive many our or work and into poverty. These are not moral people with any interest whatsoever in creating moral institutions.
I have never in my life been so skeptical about society's future as I am now. The people in power show absolutely no concern for our planet or the other creatures (including the poor and disenfranchised) they share it with. Their desire to protect and expand their personal wealth seems to make them feel that it will protect them from the scourges their policies will bring about, because I can't believe that they do not understand the effect of the policies they are following.
Sorry to be such a skeptic. I'll follow this topic with great interest. I hope others leave their comments as well. I'd like to see a reason to change how I feel.

George said...

"in life - everything is changing all the time, a constant state of flux."

If it is so, then why should we think that capitalism is the last stage of evolution of human society and there cannot be nothing beyond it only repairing, improving it, fixing its excesses, making it more moral?

Yes, we can have morally enlightened capitalist individuals, and that is certainly better than not having them, but that doesn't change the basic equation: capitalism = theft.

brief Al said...

George, there is much in your sentiment with which I agree, however, I am much puzzled by your assertion that "capitalism equals theft." Where does that come from and what is your reasoning in support of such a judgment?

George said...

Al, thanks for probing into my provocative statement that rocks many boats. There are 17,000 webpages carrying the meme "capitalism is theft." One of the most concise description is from the Los Angeles Times:

"The reason capitalism is theft has to do with 'surplus value'--the difference between the selling price and the cost of equipment, materials, marketing and labor. All down the line, 'profit' is really the result of unpaid labor that creates additional goods without commensurate additional cost. The capitalist claims this profit by virtue of his capital alone, which in most cases is the result of economic, racial and social inheritance, not hard work." http://articles.latimes.com/1990-03-25/entertainment/ca-110_1_capitalism-theft-hard-work

Don't take me wrong, I don't think capitalism should be "abolished," and a bit more moral version of it is definitely better than the immoral. So I'm in full support of those who are working on that shift, while focusing on growing the capacity of the Commons to transcend the duopoly of Market and State. (The economics of the Commons was what Elinor Ostrom got Nobel Prize for in 2009.)

Does that make any sense to you at all?

P.Ryan said...

It is not until, as individuals, that we learn that the lust for "MORE", is the prime protagonist of global iniquity, and the mover for greed, will we ever learn "WHAT IS ENOUGH" and find contentment.