Reforming Capitalism

A few things came together today that made me hopeful about our economic system. Thing number one: Some Globe and Mail columnist (I don’t remember who) mentioned that the lawyers who had been paid by Conrad Black’s corportations had also been found guilty and will be sentenced for not taking a stand against his misdeeds several years ago. It seems that this verdict is making a lot of people nervous about their own complicity with illegal activities. When underlings are held accountable for not speaking up against a criminal plot, then all kinds of people are going to become more scrupulous about ethical issues than before. (Which is, you must agree, a good thing.)

Thing number two: I received another e-mail promoting the practice of social entrepreneurship. I’ve never quite understood that term, which can refer either to the innovation of a useful money-making business or to the creation of a civil society organization that does good for some groups in society. Jeffrey Skoll promotes social entrepreneurship, and he’s a self-made capitalist who does as much for humankind as anyone I know. By definition, then, social entrepreneurship is a good thing.

Thing number three: Stratfor’s new “public policy report” deals with the future of corporate social responsibility (CSR), which I already knew to be a good thing. (Well, at least I personally think it is, though I have friends who believe that by definition, whatever a corporation does is a bad thing.) I googled “corporate social responsibility” to make sure I got more than one perspective on its future.

The Nestlé boycott was an early impetus for the corporate social responsibility movement, which is now going gangbusters. Next, as I recall, there were new ethical demands coming from investors, notably when a campaign arose for divestment of holdings in South Africa. Next, annual meetings of corporations became lively as shareholders started standing up an demanding various reforms. Another good thing.

The Stratfor report made me think back a few years to a Group of 78 meeting where there was a presentation by a woman representing the United Nations Global Compact, which had been created by Kofi Annan (see photo). He must have been pretty keen on the project because she said that he even located it in his office. (I hope she meant his outer office.) He particularly encouraged an emphasis on increasing the transparency of corporations’ activities — which seems to me a good place to start.

I googled the UN Global Compact to see how it’s going nowadays, and I found that it had just been holding a summit in Geneva from July 5 to 7, chaired by the new Secretary General, Ban Ki Moon. This was “history’s largest and most significant event on the topic of leadership and corporate responsibility.” It featured business leaders, government ministers, and heads of civil society and was devoted to “building the markets of tomorrow.” Here’s a blurb from one of their reports:

“Launched by 2000, the UN Global Compact brings business together with UN agencies, labor, civil society and governments to advance ten universal principles in the areas of human rights, labor, environment and anti-corruption. Through the power of collective action, the Global Compact seeks to mainstream these ten principles in business activities around the world and to catalyze actions in support of broader UN goals. With over 3,100 participating companies and hundreds of other stakeholders from more than 100 countries, it is the world’s largest voluntary corporate citizenship initiative.”

Some 63 percent of the leaders said they participate in the Global Compact to increase trust in their company.

It seems to work. Among the other (rather dull) reports of the summit I found a study by Goldman Sachs that revealed the financial benefits of being responsible. It showed that among six sectors (energy, mining, steel, food, beverages, and media) companies that lead in implementing environmental, social and governance policies have outperformed the general stock market by 25 percent since August 2005. That’s a pretty good thing.

But these reports were written in stodgy UN-ese, so I turned to other sources — a study of corporate social responsibility by the VanCity Credit Union in Vancouver, an ethical investment organization where I once parked a little money. The VanCity researchers had questioned 47 “thought leaders“ about the future of CSR, Some were optimistic, others pessimistic, but they all agreed that within ten years, CSR will become mainstream within business, even if not within public consciousness.

This change will reflect the growing influence of stakeholders — consumers, employees, shareholders, suppliers, NGOs, governments, and business partners. The “thought leaders” expect that

“CSR companies in the future will be increasingly moving from identifying and managing stakeholders and their social issues to active engagement of stakeholders in issues of mutual concern. Many are calling this stakeholder dialogue, as distinct from one-way communication or two-way consultation. ... Indeed, some thought leaders see the future CSR company engaging its stakeholders in co-production... A few see the emergence of new governance models, predicting an increased role for stakeholders in governance, such as stakeholder councils and other forms of engagement.”

Now we’re getting somewhere! I have claimed all along that what capitalism needs is not to abolish corporations but to make them accountable. And this “stakeholder council” idea is pretty close to the solution that I envisage. I’d like to require that all corporations have on their board of directors persons representing all the major stakeholders – including consumers, employees, environmentalists, who could be chosen from large panels elected by civil society organizations comprising citizens concerned about those particular issues.

Capitalism is a brilliant invention, but it’s far from democratic. The changes that we’re seeing here indicate promising ways of making the economy more democratic and more accountable and just.