“We have so many people who are suffering,” says Kurt Landgraf, the former president and CEO of DuPont Merck, and now the CEO of ETS, the nonprofit educational-testing company, where he is championing an ambitious new project to study and try to reverse declines in economic opportunity. (I consulted on the project.) “If we don’t do something to change the trajectory” of the economy, these people will eventually become “advocates for more-extreme change,” and “we as a country will experience significant social upheaval.” Landgraf told me that most of the corporate executives and board members he knows are beginning to share this concern.
Chief executives have been among the biggest financial beneficiaries of “unsustainable” capitalism. But according to Roger Martin, the head of the Martin Prosperity Institute at the University of Toronto (where I am a fellow), and a strategy consultant to CEOs, including Procter & Gamble’s A. G. Lafley, their lavish pay doesn’t fully compensate for being part of a dysfunctional system. Too many CEOs, Martin said, “focus on the short-term, pump up stock prices, make a bundle, and leave the company before it all comes crashing down. That is not an ethical life, that is a miserable life.” And its lack of inherent rewards, he told me, is itself one reason why many CEOs don’t stay long in their positions.
For those CEOs who aren’t quite so troubled by leading an unethical life, the sustainable capitalists have another argument—that their approach is a better way to make money over the long term. At least some evidence exists that companies that look beyond quarterly earnings, and that make exceptional efforts to treat workers as “stakeholders,” weather crises better and see higher long-term profits.
“People ask, ‘What is the cost of being sustainable to your portfolio?,’ ” Blood said. “Actually, we think that by being sustainable, it gives us a better chance of delivering returns to our clients.” Intellectual champions of this view now include Barton; Harvard Business School’s Michael Porter, the father of the theory of national competitive advantage; and Mohamed El-Erian, the CEO of PIMCO, a $2 trillion global investment-management company.
Barton precisely dates the moment Western capitalism started to go off the rails: it was 1970, when Milton Friedman first advocated maximizing shareholder value as the paramount duty of the chief executive. That notion—which reduced issues like employee well-being to “externalities” that shouldn’t concern a company’s manager—helped catalyze a divorce of business from society. As Friedman said, the job of business was business, and that was it.
What made it possible to sell this version of capitalism to society was the promise that if business were allowed to simply get on with the job, all of us would be better off. Businesses were, as Mitt Romney’s 2012 presidential campaign had it, “job creators”; burdening them with additional responsibilities would be self-defeating.