Chet has a Master's Degree from the University of Michigan and was a principal in a design firm for many years.
During the difficult economic times of recent years, the media has provided us with many examples of corporate bad behavior, particularly among large financial institutions. Those who follow the news have noted increased discussion and action around ideas such as increasing the minimum wage, as Seattle, Washington, has done, the concept of conscious capitalism and the goal of living wages for all workers. Meanwhile, strikes and walkouts have been occurring at some of the large fast food chains in protest of poor conditions and low wages.
In the midst of all of this is the emergence of conscious capitalism. Not a new philosophy, but one whose time has surely arrived, conscious capitalism is based on the idea that corporations should work for the economic and social benefit of all. Another way of stating this is that companies should not prioritize the maximum return on investment for shareholders to the detriment of workers and society at large. This does not mean that corporations are not expected to make a profit, but rather to include profit as only one of several measures of success.
For many people, this is a change in their idea of how businesses are supposed to operate. You may wonder if the concept of corporate capitalism can work or if it is just an idealistic approach that is doomed to failure. Let’s take a look at a few companies that are using some of the principles of conscious capitalism.
Whole Foods Market
Whole Foods may be the best known example of conscious capitalism. In fact, the company’s CEO, John Mackey, is co-author of a book on the topic. The first Whole Foods Market opened in Austin, Texas, in 1980. The company is now nationwide and has bought out numerous regional natural food chains during their growth process. Neither Whole Foods or Mackey are controversy-free. Despite some criticism for high prices and supposed elitism, Whole Foods Market is generally ranked high for their environmental policies and efforts to be socially responsible. In particular, their policies towards employees are of interest.
Mackey is a Libertarian with strong anti-union and anti-government regulation inclinations. For a large corporation, the business structure of Whole Foods appears to be very decentralized. Regional and local managers are given a lot of autonomy to decide what products to carry and which vendors and suppliers to use. The company encourages promotion and advancement from within. Whole Foods is consistently ranked in Fortune magazine’s “Best 100 Companies to Work For.”
The CEO-to-worker pay ratio at Whole Foods is capped at 20-to-1. According to Bloomberg media, that ratio averages over 200-to-1 for companies on the Standard & Poors 500 Index. The pay ratio has been known to top 1000-to-1 for some large corporations. The Whole Foods statistic means that corporate executives earn a maximum salary of about $600,000 annually compared to $15/hour, which is typical for their lower tier employees. Many corporate businesses pay closer to minimum wage for most of their workers. Using the 200-to-1 ratio, an employee earning $8/hour is working for a CEO that earns over $3,300,000 per year. (It should be noted in all of these examples that stock options and other forms of compensation can push CEO earnings higher.) Whole Foods executives are well-paid, but so are all of their employees.
The Container Store
The Container Store bases their operating philosophy on their own Foundation Principles, which they established in 1988. Employees, like their customers and vendors, are highly valued and treated with respect. The company has held events such as “National We Love Our Employees Day.” This appears not to be just lip service. Full-time sales staff earn close to $50,000 per year, well over twice the minimum wage. Their turnover rate is less than 20 percent and, like Whole Foods, The Container Store is consistently ranked high in Fortune’s “Best 100 Companies to Work For.”
The company also gets involved in local communities where their stores are located. There is a seemingly endless list of events and fundraisers they have held to support local organizations, charities and individuals in need.
Some quick service restaurants may be worthy of inclusion on lists of companies that practice conscious capitalism, including Chipotle and Panera Bread. At the end of each business day, Panera Bread donates all leftover bread and baked goods to food banks and similar local charities. Panera also operates community cafes. Though there are, to date, only five of these in the US, the cafes let customers pay only what they can afford or wish to pay. The community cafes operate as nonprofits, separate from their traditional restaurants.
Though they score points for their efforts in local communities, Panera Bread may not rank as highly in their employee policies and corporate culture. They do some job skills training for at risk youth, but their pay scale is only slightly above average for fast food restaurants and not—for many workers—in the range of a living wage.
There are numerous other companies that can be noted for their commitment to environmental, economic justice and social issues. Tom’s Shoes gives away a pair of shoes for each pair it sells. The Body Shop not only has a philanthropic foundation, but has helped their suppliers in remote locations and “third world” countries form business cooperatives to help protect their communities and earn a more sustainable living. Costco employees earn about $17 an hour compared to $10 - $12 an hour at Sam’s Club. Costco has a lower turnover rate and a profit rate per employee that is twice as high as Sam’s Club
Several business blogs refer to a study where 28 firms that practice conscious capitalism performed 10 times better than S&P 500 companies. It makes sense. Happy employees are productive and provide good service. Good service brings customers back. Giving to communities and worthwhile causes builds good reputations and perhaps good karma, as well. Conscious capitalism is a model that benefits business, their employees and those they serve.
© 2013 chet thomas