Business Leaders Can Help Save the Nation

August 25, 2020

p-kotler@kellogg.northwestern.edu

Business Leaders Can Help Save the Nation

Philip Kotler

All kinds of events can occur in a nation that upset a large majority of its citizens. A recent poll shows that 67% of the public wants stimulus funding for the U.S. Postal System, only 15% oppose added funding. Yet Donald Trump wants to reduce funding to the U.S. postal system. He admits that he doesn’t want people to use mail-in ballots for the 2020 Presidential election. He thinks that mail-in voting is plagued with fraudulent voting by American and foreign interests. He has never proven this.

If he has his way, many mail-in ballots will never be counted by November 2, 2020. Millions of citizens will have to stand sometimes up to 6 hours in a huge line to cast their single ballot. And this will happen during Covid-19 requiring people to wear masks and keep a social distance. One can only imagine how many people will not even turn up to vote let alone how many will get coronavirus by standing hours in line.

As a citizen, I can do nothing about Trump’s undemocratic grab for power and ignoring public opinion. Yes, I can write to my governor, my mayor, my representative, my two senators but they are all Trump supporters who are afraid to disagree with him. They can’t individually stop Trump from cutting U.S. postal funds and postal workers.

In former times, I would have pinned my hope on the AFL or CIO or both. We had organized labor unions acting as a countervailing force to big business interests. The labor unions represented the interests of John Doe, working class guys who needed a voice in the events that would affect them. Unions’ aimed to improve the lives of the working class. Today they can hardly be found.

There are many nonprofit cause groups and associations that exert some degree of local power and some have national followings. But they don’t collaborate enough to stop the President from exerting his own will.

Only one group is left that can put enough pressure on the President to keep the U.S. postal service operating efficiently to deliver voters’ ballots on time.

That group is our nation’s business leaders.

Why the Business Leaders?

We have a longstanding tendency to see all business leaders as having one and the same mind. First, that business leaders primarily think only of what is good for their business. Second, they prefer to stay out of politics. Third, they are against radical ideas. Fourth, they favor small government. Five, they are against regulations.

In 1953, Charles Wilson, President of General Motors, told a congressional committee that “what was good for our country was good for General Motors, and vice versa.” Often it is stated as “what’s good for General Motors is good for the country.” Today it captures Donald Trump’s core political philosophy. Any action hurting General Motors would hurt our country.

In recent times, we watched how the Koch brothers used their wealth to finance every cause that would help them increase their profits and hurt their enemies, the Democratic Party. The Koch’s didn’t avoid politics. They used politics to advance their business and ideological interests.

However, what I am increasingly seeing among business leaders is what David Brooks has called “radical conservatives.” These are prominent business leaders who care deeply about the nation and its health. They are not from the laissez faire school of Capitalism that assumes that by every business maximizing its own profits, the nation creates the most wealth and also solves the nation’s problems. Yes, laissez faire capitalism has produced great wealth growth but it does not relieve any national problem. It certainly doesn’t end poverty and hunger. If anything, old fashioned capitalism creates growing income and wealth inequality. The idea is dead that American capitalism serves the poor and the middle class as well as the rich.

Here are signs that more of our business leaders are concerned with the suicidal direction in which our economy and society are headed.

1. Larry Fink, CEO of Black Rock group, “Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance but also show how it makes a positive contribution to society.”

2. Stephen Hahn-Griffiths, Reputation Institute: “It’s not enough to just have a high-quality product and deliver results on Wall Street. Social activism, aligning with communities, what you do to make the world a better place — that’s the metric.”

3. Professor Klaus Schwab is founder and executive director of the World Economic Forum (WEF). It holds its annual meeting in Davos, Switzerland and attracts thousands of eminent business and government leaders and celebrities. WEF collects economic information during the year and traditionally represented a conservative economic position. Today WEF is pursuing a Great Reset, made urgent by Covid-19 and the precipitous economic downturn that might lead to the world’s greatest depression since the 1930s. Global government debt has reached its highest level in peacetime. Unemployment is skyrocketing. The International Monetary Fund expects the world economy to shrink by 3% this year. Many governments are weakening environmental protections that will lead to further social ills. Ad hoc fixes are not enough to fix the problems.

The Great Reset calls for businesses to change many of their past practices, including less frequent air travel and more workers working at home. Many companies are shifting from shareholder capitalism to stakeholder capitalism that they had previously barely considered. There is greater interest in steering the market toward more equitable outcome shares. Government needs to withdraw fossil-fuel subsidies, and to develop new rules to govern intellectual property, trade, and competition. Governments need to launch large-scale stimulus spending programs. Cities need to commit to “green” urban infrastructure and to environmental, social, and governance (ESG) metrics. Private enterprise and government must do more innovation to improve the common good through better vaccines and health related efforts. The will is forming to build a better society, with the help of more private-sector engagement and more effective government. Klaus Schwab describes the new vision in his book, Covid-19:he Great Reset (2020).

4. The Business Roundtable (BRT) is a non-profit association based in Washington, D.C., whose members are CEOs of major U.S. companies. BRT promotes public policy such as NAFTA and No Child Left Behind. BRT opposed Trump’s family separation policy. BRT In 2019, BRT redefined its definition of the purpose of a corporation, putting the interests of employees, customers, suppliers and communities on par with shareholders. BRT members include Jamie Dimon of Chase Morgan, Jeff Bezos of Amazon, Tim Cook of Apple, and Mary Barra of General Motors.

5. The American Sustainable Business Council includes business leaders who believe in a living wage, worker dignity, racial justice, well-run workplaces, the circular economy, better climate and energy, and improved infrastructure. The members believe that “jobs are created when consumers have money to spend and destroyed when they don’t. Businesses cannot succeed unless consumers have the ability to spend and confidence to spend it.”

6. Many leading companies have taken public stands on political issues where a clear majority of voters agree: Starbucks, Unilever, Levi Strauss, Nike, Body Shop, Patagonia, Ben and Jerry’s and many others.

7. Many business leaders and some billionaires want to pay higher income taxes. Bill Gates of Microsoft and Warren Buffett of Berkshire Hathaway have stated this. In addition, Gates and Buffett convinced 204 billionaires to sign the Giving Pledge to give away half of their money to good causes within the next ten years of signing up. The signatories have included Ted Turner, Marc Benioff, Mark Zuckerberg, Michael Bloomberg, Larry Ellison, David Rockefeller, and many others.

8. The Responsible Business Alliance (RBA) is the world’s largest industry coalition dedicated to corporate social responsibility in global supply chains. Most companies now acknowledge that they would be advantaged by showing that they care about some public issue, such as water scarcity, overtimbering, overfishing, climate change, racial injustice, income inequality, college student debt, or health care for all. Business must lead the new world order built on climate protection, sustainability, resilience, digital inclusion and equality. Member companies address responsibility in the management of factories, labor, and supply chains.

9. A movement called Conscious Capitalism, founded by John Mackey, former CEO of Whole Foods Market and Raj Sisodia, a marketing professor, has a growing membership of individuals and companies who believe that business and capitalism should work for all stakeholders, not just shareholders. Conscious Capitalism holds to four principles to guide a socially responsible and ethical business: 1. Higher purpose beyond money-making. 2. Creating value for all stakeholders. 3. Conscious leadership to focus on value creation. 4. Conscious culture that links stakeholders with each other and with the company’s mission, workers and processes.

10. Companies originally thought of corporate social responsibility (CSR) as a polite gesture. Yet in Corporate Social Responsibility (2005), Nancy Lee and I described the positive social responsibility activities of 45 leading companies, where each company cared deeply about some social issue. CSR has moved much further since then. Brand Activism is a company’s move to use its platform to influence reforms on social, economic and political issues.

What Can a Company Gain by Supporting Better Societal Conditions?

Companies are increasingly aware of how their business results are affected by societal factors. Consider the following:

1. Covid-19 has created huge losses for U.S. businesses, consumers and governments. Consumer expenditures fell in March 2020 by 7.5%. U.S. unemployment is now at 14.7 percent, the worst since the Great Depression. The total number of U.S. Covid infections as of August 15, 2020 is 5,285,546 cases. Total deaths are 167,546. There is widespread agreement that President Trump didn’t understand coronavirus and didn’t ask for mask wearing and social distancing. In fact, he discouraged mask wearing. He advocated non-scientific remedies. He didn’t invest in tracking infections and tracing Covid spreaders. While European countries took the right steps and flattened the pandemic, the U.S. stood out as maybe the world’s worst performer in managing the pandemic. Business leaders should have pressed Trump to act quickly and firmly. They failed to do this and now their businesses are suffering from huge losses.

2. Most U.S. citizens favor building a more sustainable environment. A 2019 Pew Research Center survey found that 74% of U.S. adults said “the country should do whatever it takes to protect the environment,” compared with 23% who said “the county has gone too far in its efforts to protect the environment.” Citizens want less fossil fuel and coal and want more energy developed from solar, wind and other energy sources. Yet Trump is protecting the coal and oil industry and dismantling the power of the Environmental Protection Agency (EPA). As air, sea and earth become more polluted, this will raise the cost of crops and cause more people to need medical care. As these costs rise, business will have to pay more to their workers. Increased pollution will cause the earth to get hotter and this will lead to more Arctic icecaps collapsing, resulting in rising water and more coastal city flooding. All this will deeply hit business profits. Clearly businesses need to press for more support of positive climate improvement.

3. Businesses are affected by society’s level of property protection. Business leaders have witnessed the terrible damage to their property during the June 2020 protest movements in different cities. A point was reached when Trump sent uninvited federal agents to quell the protest movement and its danger to city federal buildings. As recently as August 2020, a criminal group broke windows and stole property in the classiest part of downtown Chicago. Businesses clearly have a keen interest in maintaining social order through strong policing. But business leaders need to recognizing the underlying factors leading to social protests, namely poverty, hunger, income inequality and racial injustice. Business leaders will achieve much better business results in a social order marked with full employment, good worker incomes and social justice.

4. Businesses are more successful when they create excellent value for their customers and excellent working conditions for their employees. If a gap develops between a business’s values and its customers’ and employees values, the business will fail. A high percentage of American employees see themselves as doing drudge work and lack motivation to work hard or innovate. Yet when you see a company that is dynamically involved with its customers and employees, where their values are much aligned, you see a winning company. Companies need to stand for a set of values that appeal to their customers and employees.

Conclusion

Everything points to the arrival of a new corporate consciousness to generate value for all stakeholders, not just the shareholders. Companies have seen hard evidence that companies producing a high level of customer satisfaction earn substantially more profit than companies with a low level of customer satisfaction.

It is very important that stakeholder-oriented companies use metrics that will exhibit that their company is sharing gains with all the stakeholders. It is very easy for Roundtable members to be swayed by their board’s shareholders to go light on the other stakeholders, especially in difficult times. Some journalists have observed slippage occurring in particular Roundtable member companies.

The movie Meet John Doe (1941) portrayed the U.S. in a terrible slump during the Great Depression. John Doe, a working class guy, saw the world falling apart and a newspaper reported that John Doe planned to commit suicide. People were so upset that they formed John Doe Clubs to bring people together and help their neighbors. John Doe Clubs grew rapidly and were found in every community. Every John Doe Club carried messages of love thy neighbor. Clearly a nation of John Doe Clubs is better than a nation with a lot of its citizens disaffected or citizens and having little or no income, no help from others. Happier, more connected and motivated citizens are better for society and better for business.

I like David Brooks column (“This is Where I Stand,” New York Times, August 13, 2020) on “radical conservatives.” As a conservative, Brooks used to object to radicals on the left who wanted to make large scale changes in society. Later Brooks began to recognize that radicals light up real problems that should be addressed, but not by the radicals. The radicals expect too much change that is rarely satisfying. The French revolutionaries in 1789 want to eliminate the monarchy and ended up decapitating not only the rulers but the French society. Brooks said that radical conservatives are those who can take action on the issue and implement change slowly but thoughtfully.

In my mind, the business community is that precise group of radical conservatives who have the power to make the world a better place.

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