Conscious Capitalism: The Moral Case

Updating workers’ rights 

By Dr. Larry Fedewa (May 25, 2019)

Until now, we have been exploring the case for Conscious Capitalism on the basis of economic necessity. It is clear that the strength (68%) of America’s economy is based on consumer demand. Most of the consumer purchases in America are bought by the families of the middle class, because there are more of them and because their needs tend to cover a wide spectrum of goods and services. It is therefore critical that a majority of Americans have enough money to buy an ever-increasing supply of consumer goods and services if our economic engine is to keep on growing.

But the fact is that more and more of the available capital is ending up in the hands of the very rich, leaving the vast majority of the population with less and less disposable income. However,  the consumer needs of the very rich are limited; most of their spending goes for investments and passive income. In order for our economic progress to continue to prosper, therefore, something must be done to distribute more of America’s wealth to a larger proportion of America’s population. The alternative is the eventual destruction of the capitalist system which has worked so well for us for the past two centuries.

There are only three alternative ways to redistribute America’s wealth: 1) do nothing and continue to rely on the “free market” to distribute our wealth equitably – which it never has in human history; 2) empower the Government to collect more of the money being earned by American businesses (through high taxes on the very rich) and then being responsible for dispensing those funds as it sees fit (usually through welfare programs), or 3)  reform of our capitalist system to provide for re-distribution of profits as an outcome of the normal way of doing business. While many Americans would prefer to achieve greater financial success through their own efforts rather than through a government hand-out, the mechanism by which that result can be implemented has remained elusive.

Fortunately, a new system of capitalism has been undergoing development for the past generation and has now matured into a new view of business and its role in social justice. The basis of this movement has been recognition of each worker as an individual human being, deserving of respect, loyalty, and appropriate rewards for his/her contribution to the enterprise. In the 1980’s, W. Edwards Deming introduced a democratization of the production process called Total Quality Management (TQM). This theory depended on recognition of the ideas and creativity of workers, initially on a production line, to improve the quality of the final product. As “product quality” became a major consideration in American business culture, it was frequently presented in the context of greater worker involvement. This movement spun off ever more sophisticated standards of product quality such as Six Sigma, ISO 9000, and Lean Manufacturing, among others. These “new” management theories for production also began to  be applied to services organizations. I was personally involved in introducing TQM (as amended) to the federal government during the late 1980’s and 1990’s.

This formal focus on the individual worker was picked up and expanded by a new movement called “Conscious Capitalism” in the new century. This management theory is profoundly democratic, in that every member of the enterprise is recognized as a contributor to the common effort and is responsible for participating in the culture and the activities associated with that particular organization. This includes open meetings on finances, policies and strategies. A bedrock belief of a Conscious Capitalist is that profit is not the purpose of the business, but a necessary pre-condition for the achievement of the true mission of the company. The mission, in turn, is viewed in the context of the company’s contribution to the larger society by counting as the company’s stakeholders not only the shareholders, but also the employees, the local community, their suppliers, customers, and the physical environment.

“Conscious companies” (as they call themselves) have been proven on average to be surprisingly successful in financial terms because of several factors. First, their marketing is supported by faithful, long-term customers and suppliers. Second, their personnel costs are demonstrably less because of lower executive compensation, lower turnover, “lean” middle management, and lower G&A overall, including less legal fees. Finally, these companies do not accept investors who are on a short fuse for ROI – in fact many of their shareholders are their own employees. (A very comprehensive source for becoming and maintaining a conscious company can be found in Conscious Capitalism Field Guide, by Raj Sisodia et al, Harvard Business Review Press, 2019)  The underlying factor in conscious companies is their insistence on a long-term rather than short-term  perspective which is then translated into policies and actions. Some of the more prominent conscious companies are Federal Express, Southwest Airlines, Whole Foods Markets, Starbucks and 1600 others with three million employees.

That is a very brief description of a non-governmental re-distribution of wealth. There is, however, an additional case for profit-sharing: the moral case. The moral basis of profit-sharing as the foundation of a new interpretation of “Workers’ Rights” is the paradigm of a product. A product is composed of many parts, and it is the result of many contributors, i.e. the concept, the design, the assembly of the materials, the fabrication of the parts, the assembly and testing of the prototype (and perhaps each copy), as well as the marketing, sales, warranty services, replacement parts, etc.

Our moral contention is: Compensation should be granted on the basis of how much each part contributed to the entire process. There are direct contribution costs, based on financial requirements of the people , materials  and equipment. Then there are “success” and “failure” compensations based on the presence or absence of profits – the measure of the success (or not) of the project. These compensations also should be shared according to the contributions made by the individuals involved.

The traditional basis for employee pay is hours worked. The new worker’s rights include a new basis: pay on the basis of employee’s contribution to the overall profit of the business. The detail of calculating exactly how to measure each person’s contribution to the company is truly a challenge. But the principle is simple, easy to understand – and the key to America’s future.

© Richfield Press 2019. All rights reserved.

 


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