{"id":2358823,"date":"2025-01-02T01:00:00","date_gmt":"2025-01-02T06:00:00","guid":{"rendered":"https:\/\/monetizemail.com\/magatoon\/?p=2358823"},"modified":"2025-01-09T03:54:35","modified_gmt":"2025-01-09T08:54:35","slug":"co-opting-capitalism-from-value-creation-to-virtue-signaling","status":"publish","type":"post","link":"https:\/\/monetizemail.com\/magatoon\/2025\/01\/02\/co-opting-capitalism-from-value-creation-to-virtue-signaling\/","title":{"rendered":"Co-opting Capitalism: From Value Creation to Virtue Signaling"},"content":{"rendered":"<\/p>\n

When a business is conducted efficiently, effectively, and ethically, a business serves its own interests and also the society around it. Despite this comfortable collaboration, people outside those businesses continually debate about corporate America\u2019s role in serving society<\/a>. And while activities and initiatives related to Corporate Social Responsibility<\/a> (CSR) have been around for ages<\/a>, it wasn\u2019t until the 1990s that CSR became popularized as a subfield in business studies \u2014 thanks in part to Dr. Archie Carroll\u2019s 1991 publication<\/a>, \u201cThe Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders.\u201d\u00a0<\/p>\n

As an academic in the field of management studies, Carroll sought to understand how businesses balance the interests of a firm with those of the wider community. And, in 1979, he began working on a framework<\/a> to demonstrate a firm\u2019s broader responsibilities, which later developed into <\/a>the CSR Pyramid. Carroll\u2019s CSR Pyramid has been cited<\/a> as \u201cthe most well-known model of CSR\u201d and, in recognition of his research, Carroll received<\/a> the inaugural \u2018Lifetime Achievement Award in CSR\u2019 from the Institute of Management, Humboldt University, Berlin, Germany.\u00a0<\/p>\n

The CSR Pyramid features four levels: the base is a firm\u2019s economic responsibility and the next three levels consist of legal responsibilities, ethical expectations, and philanthropic activities. In Carroll\u2019s earlier work<\/a>, he referred to philanthropic activities as \u201cdiscretionary (or volitional) responsibilities.\u201d According to Carroll, such responsibilities \u201care those about which society has no clear-cut message for business\u2026 They are left to individual judgement and choice.\u201d It seems, however, that duties Carroll noted to be discretionary back then have since evolved into an all-encompassing marketing mindset<\/a> for businesses today. CSR kicked into high gear in the 2000s, developing metrics<\/a> for CSP (Corporate Social Performance) and frameworks<\/a> for monitoring ESG<\/a> (Environmental, Social, and Governance). With this evolution in mind, it is perhaps worth revisiting Caroll\u2019s CSR Pyramid to see how it has been turned upside down for modern day firms.\u00a0<\/a><\/p>\n

The CSR Pyramid<\/h3>\n

The CSR Pyramid was to serve as an intuitive model for categorizing business practices in relation to social responsibility. Economic responsibility is featured first for obvious reasons \u2014 to be a long-lasting business, a firm must be productive and profitable. Legal responsibilities fittingly come next since a firm must be law-abiding. The third and fourth levels, however, differ from the previous two since they are not necessarily required and are much less clearly defined. Ethical responsibilities are depicted as being expected while philanthropic activities are deemed to be desired; and actions pertaining to these upper levels may vary over time, dependent on the societal norms and the cultural context in which a firm operates.<\/p>\n

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Carroll\u2019s framework was published just as conscious consumerism<\/a> was trending upward and corporate America\u2019s interest in cause-related marketing and the promotion of social impact activities was truly taking off. This was fortunate timing<\/a> for political elites since, in 2000, the then United Nations Secretary-General Kofi Annan initiated the Global Compact<\/a> with the aim of \u201cuniting business for a better world.\u201d Capital markets were being called upon to support the UN\u2019s Millennium Development Goals<\/a>, later updated as the Sustainable Development Goals<\/a> (SDGs), and policymakers along with consumers<\/a> seemingly favored the idea of business taking up the charge.\u00a0<\/p>\n

The Shift to Shared Value<\/h3>\n

The notion that business could play a greater part in social matters was well-received. Harvard Business Professor Michael Porter coined the term \u2018shared value<\/a>\u2019 to represent how businesses can meet social needs and economic needs simultaneously. This concept was quickly embraced by industry leaders eager for a higher calling and, at the start of 2011, Porter and Mark Kramer published<\/a> \u201cCreating Shared Value: How to Reinvent Capitalism \u2014 and Unleash a Wave of Innovation and Growth.\u201d\u00a0<\/p>\n

A bandwagon effect<\/a> ensued with calls to reform business and, later in 2011, the debut of Richard Branson\u2019s book Screw Business as Usual<\/em><\/a>. Branson asserted that \u201cit\u2019s time to turn capitalism upside down and switch from profit focus, to caring for people and the planet.\u201d Clearly Branson had latched on to the Triple Bottom Line (TBL)<\/a> concept developed by John Elkington in the 1990s, which claimed that business success metrics should incorporate how a firm positively contributes to social well-being and environmental health. The \u2018business for good\u2019 mantra was also adopted by John Mackey who co-authored, in 2009, Be the Solution: How Entrepreneurs and Conscious Capitalists Can Solve All the World\u2019s Problems<\/em><\/a>. Then, in 2013, with Raj Sisodia, Mackey published Conscious Capitalism<\/em><\/a>, featuring four key tenets businesses should strive for: a higher purpose, stakeholder integration, conscious leadership, and conscious culture and management. Clearly, shareholder primacy<\/a> was out and a stakeholder mindset was in.\u00a0<\/p>\n

The concept of \u2018conscious capitalism<\/a>\u2019 was first promoted by John Renesch<\/a> back in the 1990s, and Patricia Aburdene predicted it would become a mainstream matter in Megatrends 2010: The Rise of Conscious Capitalism<\/em><\/a> \u2014 and Aburdene was right. Conscious capitalism turned into a full-fledged movement when the nonprofit Conscious Capitalism Inc.<\/a> (CCI) was formed with a \u201cmission to reshape the purpose, practice, and perception of capitalism.\u201d And CCI was far from being alone<\/a> in such pursuits. Social entrepreneurship<\/a> programs sprung up at elite universities across the US, shaping the worldview<\/a> of business students, while ethical certification systems<\/a> and the creation of Benefit Corporations<\/a> flipped Carroll\u2019s CSR Pyramid on its head.\u00a0<\/p>\n

Running a business was no longer seen as an economic matter and social purpose advocates sought to supplant<\/a> profit making as a firm\u2019s core objective. Simon Sinek<\/a>, famed guru and inspirational speaker for business leaders, has claimed that \u201cThe responsibility of business is to use its will and resources to advance a cause greater than itself.\u201d And it is quite telling that this quote is prominently featured on the website for AACSB<\/a>, a primary accrediting body for university business programs.\u00a0<\/p>\n

Supplanting Profit with a Higher Purpose<\/h3>\n

Many organizations and industry executives have, for decades, propagated the notion that a \u2018new form of capitalism\u2019 is needed. Recent examples include, Marc Benioff of Salesforce published Trailblazer: The Power of Business as the Greatest Platform for Change<\/em><\/a> (2019). Mark Bertolini, Chairman and CEO of Aetna, wrote Mission-Driven Leadership: My Journey as a Radical Capitalist<\/em><\/a> (2019). Paul Polman, Unilever\u2019s CEO, co-authored Net Positive: How Courageous Companies Thrive by Giving More Than They Take<\/em><\/a> (2022). Darren Walker, President of the Ford Foundation, recently released From Generosity to Justice: A New Gospel of Wealth<\/em><\/a> (2023). And this is only a small sample of the influential texts<\/a> out there<\/a>.\u00a0<\/p>\n

An impressive number of corporate elites have banded together in The Coalition for Inclusive Capitalism<\/a> (CIC). This organization is co-chaired by Marc Benioff, Lynn Forester de Rothschild, and other noteworthy high networth names<\/a>. According to its website, the CIC was inspired<\/a> \u201cby Pope Francis\u2019 public appeal to business leaders to respond concretely to issues of our day.\u201d\u00a0<\/p>\n

According to the CIC\u2019s website, Council Members \u201cencompass heads of businesses, foundations, and nonprofits from every sector and region of the world.\u201d Its Steering Committee<\/a> alone represents $10.5 trillion in assets under management, $2.1 trillion in market capitalization, and over 201 million workers worldwide.\u00a0<\/p>\n

CIC Council Members \u201cmake actionable commitments aligned with the World Economic Forum International Business Council\u2019s Pillars for sustainable value creation<\/a> \u2014 People, Planet, Principles of Governance, and Prosperity\u201d and work to \u201cadvance the United Nations Sustainable Development Goals<\/a>.\u201d Evidently, if Carroll were to craft his CSR Pyramid demonstrating business practices today for industry elites, he would need to feature social responsibility at the base and economic responsibility in a smaller, later stage. Such a firm may not remain \u201cin business\u201d very long.\u00a0<\/p>\n

Subjective Measures Can Lead to Coercive Pressures<\/strong><\/p>\n

By stripping business of its true purpose and identity (product or service providers that seek out opportunities for value creation and wealth generation), corporate executives stake their claim as social guardians<\/a> instead. And while I can only speak on behalf of my own preferences, I\u2019d rather have a business act in accordance with my needs and wants as a consumer or investor, instead of masquerading as a savior for society\u2019s ills.\u00a0<\/p>\n

These industry leaders (who, let\u2019s not forget, have profited greatly from good old-fashioned capitalism) imposing their need for a higher calling on the rest of the business community is a cause for concern. Certification systems<\/a> and rating agencies incentivize the interests of regulatory bodies which is why the creation of new standards and subjective metrics by the likes of CCI and CIC serve the aspirations of those already at the top rather than empower entrepreneurs who are working their way up from the bottom.<\/p>\n

Businesses work best when voluntary actions are based on individual preferences and interests, not the skewed social views of an elite class. More to the point, the value of a business is neither fixed nor tangible, but an emergent process of investment and exchange. A business is only as strong as its customer base, only as secure as the property rights it holds, and only as successful as the employees and leaders that power its decisions. As such, the societal role of a business as a business<\/em> is one that should be revered and rejoiced, not disregarded and debased. Indeed, the beauty of a business is that it is made up of a network of people who create, coordinate, and collaborate the means for exchange, without necessarily sharing social values \u2014 which is why capitalism doesn\u2019t need to be changed.<\/p>\n

The post Co-opting Capitalism: From Value Creation to Virtue Signaling<\/a> was first published by the American Institute for Economic Research (AIER)<\/a>, and is republished here with permission. Please support their efforts.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

When a business is conducted efficiently, effectively, and ethically, a business serves its own interests and also the society around it. Despite this comfortable collaboration, people outside those businesses continually debate about corporate America\u2019s role in serving society. And while activities and initiatives related to Corporate Social Responsibility (CSR) have been around for ages, it …<\/p>\n","protected":false},"author":137,"featured_media":2358825,"comment_status":"close","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[59],"tags":[],"class_list":["post-2358823","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics"],"_links":{"self":[{"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/posts\/2358823","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/users\/137"}],"replies":[{"embeddable":true,"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/comments?post=2358823"}],"version-history":[{"count":2,"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/posts\/2358823\/revisions"}],"predecessor-version":[{"id":2358826,"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/posts\/2358823\/revisions\/2358826"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/media\/2358825"}],"wp:attachment":[{"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/media?parent=2358823"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/categories?post=2358823"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/tags?post=2358823"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}