The Case For Enlightened Enterprise and an End to the Shareholder v Stakeholder Nonsense
“There is a surprising ignorance today about how business was done only half a century ago, totally misleading statements routinely being offered to an unsuspecting public by academics and consultants who should know better.”
“If the whoring after false managerial gods is abandoned in favour of the pursuit of true ones, the uneven distribution of relative wealth in the United States [and elsewhere] in recent decades can be halted and perhaps even reversed. And “Insofar as wealth creation becomes once again the norm all elements in society will benefit, as they did before.”
Additionally, “no nation or society is condemned to poverty by its past.” “Humanity does not have to live perpetually in a two-speed world, in which over half the people are sunk in poverty.”
The three statements were included in the preface to The Puritan Gift: Reclaiming the American Dream Amidst Global Financial Chaos (2019). It argues, “in distancing itself from the core values of innovation and discipline – the gift of the early Puritan settlers which underlay its past commercial and economic success – America sacrificed its future prosperity and success.”
The book offered a strong and sound warning following the Global Banking Crisis. As we know, the warnings were ignored, and the lessons not learned. Now, more than a decade later, the situation is far worse. Many are living the American Nightmare, whilst confidence in “the system” means capitalism and democracy are in grave danger.
The problems extend well beyond America. The UK, from where the Puritans and Quakers that first settled in America originate, has also suffered in distancing itself from the same core values of innovation and discipline that were the characteristics of the first Industrial Revolution.
If we did not distance ourselves deliberately from these values, we certainly lost sight of them. We also lost sight of the fact that these two non-conformist religious groups included key figures in both the Enlightenment and the Industrial Revolution, and it was the Enlightenment from which the values originated.
As Joel Mokyr states in The Enlightened Economy: Britain and the Industrial Revolution 1700-1850, “The Enlightenment was an intellectual movement, a set of belief and values about both positive (what the world is) and normative matters (how the world ought to be).
It emerged in a European, not a British context, though Britain was very much part of it”.
He adds, “the impact of the enlightenment on the economy was slow and subtle”, but the influences “penetrated deeply and were impossible to undo.” They also found favourable conditions in Britain, relatively speaking, a much more tolerant society than that found in many other European countries at the time. And it became increasingly tolerant over time.
Despite the strong connection, “The literature on the Industrial Revolution to date has paid little heed to the Enlightenment”, argues Mokyr. He notes, “economic historians have shied away from drawing a connection between intellectual changes in the age of Enlightenment and the economics of the Industrial Revolution”.
He adds, “it is often believed the Enlightenment was primarily a French affair, whereas the Industrial Revolution was British”, ignoring the fact many of the most important Enlightenment ideas were Scottish, and the particular nature of the English Enlightenment, mixed with liberal Christianity which featured values, “perfectly consistent with the values of an industrial society.”
“This interaction produced a positive feedback loop that created the greatest sea-change in economic history.” And this should tell us, “economic change in all periods depends, more than most economists think, on what people believe.” A point recognised recently by the Nobel Prize-winning economist Robert Schiller in his book Narrative Economics.
THE ENLIGHTENED ENTERPRISE ACADEMY
Having studied the link between the Enlightenment, the First and Second Industrial Revolutions, and the related values, in detail I decided to create the Enlightened Enterprise Academy and write the Enlightened Enterprise Manifesto, with the aim of stimulating an Enlightened Enterprise Movement. We need a New Enlightenment era.
The Enlightened Enterprise Academy is already developing nicely. The Manifesto will be published in the next few months, and the movement will be born as 2021 progresses. It will be fully launched with a Festival of Enlightened Enterprise in the fourth quarter of the year.
In a series of articles, of which this is the first, I will offer more details about each of the initiatives and all the related activities. I will do so by relating each of them to the telling of the values of the 18th Century Enlightenment and the 19th and 20th Century Industrial Revolutions. In doing so, my aim is to highlight the importance of values in the creation of value, where value is defined in terms of contributions to sustainable widely shared prosperity, measured in terms of human flourishing and wellbeing.
This approach links directly to the notion of “purpose” that we hear so much about, and the purpose of those who led the earlier Enlightenment and were the leading figures of the Industrial Revolutions. The Puritans, Quakers, Calvinists, and other nonconformists shared some common values, but, I will focus mostly on the Quakers since so much has been written by them and about them. Their purpose was the establishment of heaven on earth. This is akin to my goals for the new Enlightenment and relates to what Aristotle called eudaimonia.
By telling my story about the New Enlightenment era I think we need, and by relating it to the previous Enlightenment, I will provide insights that illuminate how far we have distanced ourselves from the values that transformed the fortunes of the human race as never before.
To give one example, on March 15th we will host the first of a series of four conferences. The title is Beyond the False Dichotomy: Ending the Shareholder v Stakeholder Nonsense. It refers to the debate that has been running for half a century and is still a very live issue. If I relate this one issue to the values of the Quakers as the leading industrialists and capitalists of the Industrial Revolution in the UK and in America, it will be immediately obvious they would have considered the contest between shareholder and stakeholder capitalism nonsense.
The shareholder primacy argument is referred to as the Friedman Doctrine after the Economist Milton Friedman, said to have been the father of the concept (incorrectly I believe). It argues the only concern of business should be the maximisation of returns to shareholders. It is reflected in the practice of management focused on maximising profits and the firms share price - today or in the short-term rather than in the long run.
It leads to an obsession with performance, efficiency, and cost control, often at the expense of the necessary investments in the health of the business which will determine its future value creation potential in the longer-term. This outcome is pervasive and well documented. Boards of Directors and senior executives, including Finance Directors, acknowledge it and have frequently acknowledged they are often to blame for it.
It means the investments in research and development, in innovation, and in talent development are not made, so profits can instead be allocated to shareholders as dividend payments, stock buybacks, or other means.
It means many workers have not benefitted from the success of the businesses they work for, whilst shareholders have benefitted massively. this happens whilst, workers are often in insecure employment, earning low wages, and the taxpayer is meeting the cost of in-work benefits from governments so they can afford to live. They are unable to afford healthcare, afford homes of their own, find decent rented accommodation at affordable prices, and live in overcrowded homes. Public amenities have been cut back massively under Government-led austerity programs in many countries.
Compare these behaviours of the Quaker Industrialists who built Model Villages with housing, schools, hospitals, libraries, and public baths (investments in social capital as we would now call them). They also paid above average wages and offered better working conditions than many employers (Shared Value as we would now call that). They were also campaigners for workers’ rights, equality for women, the right to vote, the ending of slavery and other socially progressive measures (there most be some fashionable management name for that too, but I can't recall what it is).
Their beliefs gave them the pursuit of heaven on earth as a purpose, their behaviour demonstrated that they made this the purpose of their enlightened enterprises. Businesses today might do well to learn from this. And Enlightened Enterprises certainly will.
This example shows the Quaker Industrialists were more enlightened thinkers than many business leaders today, in my opinion. They knew the value of a great reputation to their long-term business success, and that real success was never going to be achieved in debating shareholder v stakeholder primacy whilst playing stakeholder groups off against each other. I am certain they would have seen it as a false dichotomy and a nonsense debate. They would also deplore excessive profiteering, the abuse of employees and the focus on rent-seeking and value extraction rather than value creation.
THE CONFERENCE
Find out more about the BEYOND THE FALSE DICHOTOMY: ENDING THE SHAREHOLDER v STAKEHOLDER NONSENSE – A CONFERENCE ON MARCH 15TH and see who is on the fantastic speaker list.
Tickets are just ￡10 and will entitle you to a free eBook version of the Enlightened Enterprise Manifesto when it is published. You will also get access to the longer versions of the articles in this series of articles, rather than the abbreviated public versions. TICKETS
Visit the Enlightened Enterprise Academy and join our mailing list.
FORUMS
You may also like to join the LinkedIn Groups related to our Forums:
INQUIRIES
Read more about the three major Inquiries we are planning to launch:
BOARD & EXECUTIVE BRIEFING PROGRAMS
The growing number of Board and Executive Briefing Programs for open enrollment and as private in-company offerings will begin with CULTIVATING ORGANISATIONAL HEALTH for which we are hosting a FREE ONLINE INTRODUCTION on March 10th. TICKETS
This will precede the first OPEN ENROLLMENT EXECUTIVE BRIEFING PROGRAM on the same theme. It is also being offered as a private executive education program see below
EXECUTIVE EDUCATION PROGRAMS
CULTIVATING HEALTHY ORGANISATIONS is also the theme of the first Executive Education Program we are offering as a PRIVATE PROGRAM FOR LARGER ORGANISATIONS AND BUSINESSES: BROCHURE
other Executive Education Courses being developed include LEADING WITH DIGNITY, designed in partnership with Dr Donna Hicks, author of a book by the same name, and a professor at Harvard University.
We are also working on the Yin & Yang of Reputation Management a radical new approach to reputation management, the wisdom of CREATING STAKEHOLDER COUNCILS, the need for CRITICAL SYSTEMS THINKING and the management of complexity and PHILOSOPHY IN MANAGEMENT. SUBSCRIBE FOR UPDATES