LET'S REDESIGN COMPANIES
Forget what you know about companies
WHEN DESIGN GOES WRONG
Shareholders' value - so last season
How do you measure a company's success? By its shareholder value.
For as long as I can remember I have found that reply deeply unsatisfying. The more you manage to "maximise shareholders' value", the better, they say. Why? Because there's an idea that because shareholders legally own the company, it should be run in their interest. This idea has heavily influenced the way companies are run - often with a short-term focus on profitability. What has been less important is how companies affect employees, the environment, societies and suppliers - basically everything we call external effects. They are rarely a factor when we define success. On the contrary, making sure actual costs (like pollution and burnt outs) don't affect your bottom line has become a strategy.
It seems we are so busy running the hamster wheel that we don't even question the foundational concepts.
Companies should not be run in the interest of its shareholders.
How could anyone even come up with the idea?
Perhaps the concept made sense back in the days.
It did. Way back, a company was normally just managed by its owner. Then companies started to grow bigger and owners had to hire managers. The idea of shareholder value was born at that time. In an effort to make sure those managers would act in the interest of the company and not just in their own, they were given shares. That way, their personal financial interests were aligned with the company's. Later on, in the 80s, it was argued that if a company put shareholders' interest first, it means the company is profitable (and apparently that seemed to be the most important thing).
Today, things look drastically different: there are usually thousands of shareholders and they can buy and sell their shares when they want. Yet, we seem unable to question that foundation. Despite its devastating effects.
Shareholders should be last on a company's priority list. Way more important are stakeholders like employees, customers and the environment. If we treat them well, chances are profits will follow. If shareholders invest wisely they can reap the benefits.
That makes sense.
Read: 23 Things They Don't Tell You About Capitalism - Ha-Joon Chang
THE GROWTH OBSESSION
Why we are wrong
Somehow growth became the sole recipe for success and welfare. If people just keep consuming and if there are investments, if Gross Domestic Product (GDP) keeps increasing, it's all good. To a certain point, perhaps, but in our Western world, a never-ending consumption does not lead to increased welfare and happy people. We've seen quite the opposite. More material belongings doesn't equal happiness. It undermines the foundation of our happiness. To be able to sell more products, firms constantly market new products, making us crave the latest version. As Tim Jackson explains in the report Prosperity Without Growth, "the relentless pursuit of novelty creates an anxiety that can undermine social wellbeing. Individuals are at the mercy of social comparison". What happened to us? Seriously, will a new bag or the latest iPhone make you more than temporarily happy?
Plus, the planet has said no long ago. Yet, our politicians seem to turn a blind eye and repeat the growth mantra. Beats me why. Did they just never think about it? Perhaps they realise that if they ditch GNP, they have to come up with something new and that's cumbersome? Easier to avoid that daunting task and just promote more consumption until the planet is depleted. Great plan! Because politicians aren't really held accountable for their actions: by the time results are shown, they've already moved on.
Also and sadly, the world we have designed is hard-wired to only look at numbers and profits. The hard facts. Mentioning happiness and wellbeing can make you seem naive, idealistic or irrelevant. But I think it's the opposite. It is naive and idealistic to think we can go on like today. It's naive to think continuous growth is enough to bring fulfilment to peoples' lives. It's realistic to claim we need to change. It's realistic to point out that as human beings we want to be healthy, happy, have functioning relationships, have a meaningful job and fully participate in society.
Like Tim Jackson puts it, our welfare today seems meaningless if it undermines the conditions of our prosperity tomorrow.
So we need a measurement that reflects that. Some are way ahead. Like Jacinda!
Tim Jackson's book Prosperity without growth.
Brilliant Jacinda Ardern who already replaced GDP with another measurement.
Live like you mean it
Back in the predominantly male pale stale days, CSR was something the marketing department dealt with by writing a check to an NGO every year. It was definitely a super comfortable tradition as you didn't have to change your own behaviour or worry about your company's impact on society.
That was considered enough then but most people realise it's not enough anymore. Instead, try to incorporate sustainability into your core business. Some companies seem to do an amazing work, like Patagonia.
Imagine if sustainability was the purpose of all companies, and if they are smart they make it profitable. Shouldn't a company's purpose be to offer products and services that improves people's lives and the planet? What if the food industry had as its purpose to provide us with healthy food! How can we accept the idea that a company is successful just because it makes a lot of money when employees are abused, the planet's resources are carelessly used and the product is not a sincere attempt to improve anything meaningful? Why are we being sold food that make us sick, hygiene products like creams that are cancerogenic? Something is fundamentally wrong.
Be an active consumers. Ask questions. Never trust the packaging.
Read about B.Corps, a way to use buiness as a force for good
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