Marjorie Kelly
YES! Magazine / Op-Ed
Published: Sunday 22 April 2012
“The aim isn’t to endlessly grow gross domestic product or to create wealth for a financial elite, but to generate the conditions for the flourishing of life.”

Can There Be “Good” Corporations?

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Our economic system is profoundly broken. To anyone paying attention, that much is clear. But what’s less clear is this: Our approach to fixing the economy is broken as well. The whole notion of “fighting corporate power” arises from an underlying belief that there is no alternative to capitalism as we know it. Starting from the insight that capitalism has become virtually a universal economy, we conclude that our best hope is to regulate corporations and work for countervailing powers like unions. But then we’ve lost before we begin. We’ve defined ourselves as marginal and powerless.

There is another approach. It’s bubbling up all around us in the form of economic alternatives like cooperatives, employee-owned firms, social enterprises, and community land trusts. We don’t recognize that these represent a coherent, workable alternative to capitalism, for two reasons.

First, we haven’t acknowledged what unites them. Second, we don’t have a name for this seemingly disparate batch of alternatives.

Ownership unites them. That’s the reason that these different models represent change that goes deep. It’s the reason this change is fundamental, enduring, and real. This transformation doesn’t depend on the legislative or presidential whims of a particular hour, but is instead a permanent shift in the underlying architecture of economic power. 

The alternatives emerging in our time represent an unsung ownership revolution. This revolution is about broadening economic power from the few to the many and redefining the purpose of economic activity. The aim isn’t to endlessly grow gross domestic product or to create wealth for a financial elite, but to generate the conditions for the flourishing of life.

Here we confront the second consideration—the need for a name. We can call this new economy the generative economy. The word generative is from the Greek ge; it’s the same root form found in the word Gaia and means “the carrying on of life.” The generative economy is one whose fundamental architecture tends to create beneficial rather than harmful outcomes. It has a built-in tendency to be socially fair and ecologically sustainable.

Options like worker ownership and cooperatives not only spread wealth but ensure that owners are local, hence more likely to care about local ecological impacts. And they allow enterprises to reject the growth imperative endangering the biosphere. Generative enterprise does not answer to the demands of the finance system, which locks publicly traded companies into a growth path in order to keep stock prices inflated.

In writing the book, Owning Our Future: The Emerging Ownership Revolution, I’ve been traveling around and visiting places where this new economy is bubbling up. Here’s some of the good news I have to share: Generative ownership isn’t just about small, local, founder-run companies. It’s possible to keep the soul of these companies alive even at large scale, and long after the founder is gone.

Founded on Fairness

Consider, for example, the John Lewis Partnership (JLP) in England. It’s the largest department store chain in the country, with 35 department stores and 272 Waitrose grocery stores. Revenues of this company are more than $11.5 billion. If placed into the Fortune 500 list of the largest U.S. corporations, JLP would settle in around 212—a little higher than Starbucks. It’s 100 percent owned by its employees.

The John Lewis Partnership is built around the value of fairness. The founder, John Spedan Lewis, who created its democratic structure about a century ago, believed that traditional ownership was unfair because dividends paid to shareholders for doing nothing were obscene when workers barely earned subsistence wages. The stated purpose of the company he created is to serve the happiness of its employees, or, as the company calls them, partners.

To see if this firm was real, I flew to London and visited a few of its stores—including a Waitrose grocery store. I met a butcher at the meat counter wearing a white linen fedora, a crisp white shirt beneath a green-striped apron, and a bow tie. The hats were required, he explained. But wearing a tie every day was his choice. “I just feel more dressed,” he told me. People notice touches like that at Waitrose, where pay raises are given for performance, including such things as “being a tidy person,” John said. He told me about his sister, Carol, who also worked at Waitrose and had just been diagnosed with cancer. “They’ve been really good,” he said, referring to the company. “There’s a budget set aside for people like this. She’s been off for three months, and they’re holding her job.”

When employees at Waitrose and other JLP stores face a family emergency, they can seek a grant or loan from the Committee for Financial Assistance. That committee, composed of and elected by employees, controls the special budget John referred to and makes decisions outside the chain of management. Help from that fund—plus the commitment to hold Carol’s job—took “the money side of worries away,” John said.

I also visited the company’s Peter Jones department store, entering through an arched doorway with the legend inscribed in stone, “Here is Partnership on the scale of modern industry.” There I encountered a mid-level manager named Harry Goonewardene, who served on the Partnership Council, an elected body of employees that works alongside the board of directors.

“How did you get on the council?” I asked him. “Did you campaign?”

“Very much so,” he said. “I stood at the door and grabbed people, told them, ‘Hi, this is who I am.’” He carried himself as a city councilmember might, calmly, with an air of dignity that was almost arresting. He was impeccably dressed in a dark suit and had dark olive skin—he is from Sri Lanka, I was later told. He lacked that harried, pinched sense one often sees among floor managers at other retailers. A meeting of the Partnership Council would be held soon, he told me, during which an adjustment to the pension scheme would be discussed. 

Each year, the company contributes to pension accounts a sum not far below employees’ annual pay; employees aren’t required to contribute anything. However, they are not eligible until they have completed three years of work, and people were concerned about that. “A committee has been looking at this, and we’ll take it back to constituents and present a plan,” he said. By “constituents,” he meant the workers.

John and Harry are among the 76,500 employee-owners of the John Lewis Partnership. If the ultimate perquisite of being an owner is the right to pocket some of the profit left after the bills are paid, then these employees are genuine owners. Each year, after the firm sets aside a portion of profits for reinvestment in the business, the remainder—generally between 40 and 60 percent of profit—is distributed to employees. One clerk named Emma told me her recent bonus was 2,000 pounds [U.S. $3,264]. “I spent some on a holiday in the Canary Islands,” she told me. “It was my first holiday in four years.”

Every employee at JLP, from shop clerk to the chairman, gets a bonus representing the same percentage of individual pay. As one manager told me, “In the worst year, it’s 8 percent, in the best year, 24 percent” of salary. Last year, the annual figure was announced with fanfare on the floor of the company’s store on Oxford Street, where a partner held up a poster reading “18%,” and employees clapped and cheered. That bonus amounted to about nine weeks pay.

Here we begin to see what is revolutionary about the John Lewis Partnership. Employees in this firm are not a countervailing power. They’re not legally outside the firm, negotiating with it. They are the firm.

From shareholders to stakeholders

This concept represents a kind of revolution akin to the shift from monarchy to democracy. In the American Revolution, the founding generation didn’t attempt to regulate or restrain monarchy. They created a new source of political power and sovereignty that they controlled themselves. The revolution they began is one that we are in a position to finish today. That previous generation democratized the political aspect of sovereignty. But our politics and economy are so intertwined that imbalances in wealth and ownership have eroded our political democracy. To fix this, we need to democratize the economic aspect of sovereignty.

Today the ruling oligarch in our economy is capital. Only capital has the right to vote inside most companies, and only capital has a claim on profits. Serving capital—maximizing returns for absentee shareholders—is the goal of publicly traded companies.

In the generative economy, ownership is rooted instead in the hands of stakeholders connected to the life of the enterprise. In some cases, these are employees. They can also be community members, as with municipally owned electric plants and wind installations. In the case of credit unions, the depositors are the owners.

With a farmer-owned cooperative like Organic Valley—a Wisconsin firm with more than $700 million in revenue—the owners are the suppliers, the people who produce the organic milk, cheese, and eggs that the company distributes. While the purpose of JLP is to serve employee happiness, the purpose of Organic Valley is to save the family farm. Both JLP and Organic Valley share certain ownership design patterns: a combination of rooted ownership and a mission that is not about maximizing profits but serving the needs of life. Protecting and enhancing the biosphere is integral to Organic Valley’s operations, since it deals only in organic products. The company helps its new farmers through the rigorous process of going organic, which means company growth translates into wider restoration of soils and watersheds.

There are many other benefits the company produces. Farmers benefit from healthy income. Employees benefit from stable jobs and rewarding work. Customers benefit from chemical-free food. Investors in the firm’s preferred stock benefit from dependable rates of return. Farming communities benefit from the return of vitality that flows from farmers’ prosperity.

Through enterprises like these, we can begin to grasp the principles that we could use to create a generative economy:

§  1. There is an alternative to capitalism. This is the heresy that the keepers of the temple do not wish us to utter. It is possible to organize a large, sophisticated, modern economy that tends toward fair and just outcomes, benefits the many rather than the few, and enables an enduring human presence on a flourishing Earth.

§  2. Getting there is not only about regulation but about emergence. As organizational change theorist Margaret Wheatley writes, “emergence” refers to what happens when local actions spring up and connect through networks. Without warning, emergent phenomena can occur, such as the rise of the organic food movement. Such movements rely not on central leadership but on shared vision. 

§  3. The generative economy is not a legal exercise but the embodiment of an emerging value system. Companies in the generative economy are built around values; the John Lewis Partnership’s core value is fairness, while Organic Valley’s core values are sustainability and community. 

§  4. Generative values become enduring through the social architecture of ownership. The generative economy is built on a foundation of stakeholder ownership designed to generate and preserve real wealth—resources held and shared by our communities and the ecosystems we live in. These enterprises don’t have absentee ownership shares trading in a casino economy, but ownership held in human hands. 

Today’s major corporations may seem eternal. But as economist Joseph Schumpeter observed, creative destruction is ever present in capitalism. In industrialized nations, an estimated 15 percent of jobs are destroyed every year, and new jobs replace them. It’s the same with companies. Hypothetically, a new economy comes into existence every seven years. In the long run, battling the dinosaurs of today may be less important than getting the next economy into the right kinds of ownership.

We can’t get where we need to go by starting with corporations and asking how to restrain them, regulate them, or rein them in. We need to start with life, with human life and the life of the planet, and ask: How do we generate the conditions for life’s flourishing? Will we continue to rely on ownership architectures organized around growth and maximum income for the few? Or can we shift to new ownership models organized around keeping this planet and all its inhabitants thriving?

Our greatest challenge lies in the realm of imagination and ideas. Imagine, for example, if the energy aroused by Occupy Wall Street were channeled into achievable strategies that supported ownership alternatives. Such strategies could include the Move Your Money campaign to shift bank deposits to cooperative and community banks or a push for major legislation to advance employee ownership (an alternative favored by both left and right). Imagine if campaigns like these were unified as a single movement for a generative economy. We might create an unstoppable force—a movement less about regulating corporations as they are and more about building living enterprises as we want them to be. 



ABOUT Marjorie Kelly

 

Marjorie Kelly wrote this article for 9 Strategies to End Corporate Rule, the Spring 2012 issue of YES!Magazine. Marjorie is a fellow with the Tellus Institute in Boston and director of ownership strategy with Cutting Edge Capital. Her new book, Owning Our Future: The Emerging Ownership Revolution, will be published in June 2012 by Berrett-Koehler Publishers.

 

These ideas are definitely

These ideas are definitely thought provoking, and from my perspective represent a step in the direction we need to head, however,I doubt that in a political system such as ours that these ideas could ever be realized. The federal system that is the basis of government of the USA stands in the way of any truly progressive change. We are still fighting political battles under the guise of states rights, but what those battles really represent is an inability of the people of this country to come to terms with the ugly facts of the founding of this nation, especially all the "great compromises" which did things like maintain the institution of slavery, and now in this era have hobbled our government which seems incapable of the compromises that are so necessary. Perhaps if we instituted a South African type of Truth and Justice Commission, outlawed all political campaign contributions by any entity other than a registered voter and severely limited dollar amounts (hasta la vista PACs and Super PACs) and the entire Supreme Court stepped down to demonstrate a true commitment to a more pure Judiciary devoid of the nebulous concept of strict construction, then we might be able to start taking small steps down this path. I am all in favor of the type of changes the author proposes, but I think any lasting change must be founded in the political system. The weeds and parasites must be eliminated for the garden to truly flourish.

After reading this account of

After reading this account of John Spedan Lewis and his concept of who should benefit from the profits of a business, my nearly dead faith in humanity has been restored somewhat. After all, why should profits go to "investors" who do NONE OF THE WORK?

In a similar vein, that idea is why Germany is so strong economically. Workers sit on the corporate boards of the companies for whom they work. They have a say in the operation AND THE PROFITABILITY of the very company where their time and labour is so heavily invested.

The capitalistic economic

The capitalistic economic system is so enmeshed with the political system that I believe capitalism is here to stay, but that doesn't mean we shouldn't work to advance a parallel system that is democratically structured, such as the employee-owned company/generative economy described in this article. This will be challenging, since capitalism with its enormous power, money and control is entrenched in nearly every system in society, and today's monopolistic capitalism squelches, merges with or bankrupts competition.

For this "generative economy" to succeed, there would have to be Congressional legislative support. Certain Congress members are not likely to vote for legislation that is against the interests of their pay masters; therefore, a majority of voters would need to vote for politicians favorable to a generative economy. I believe that with or without a parallel economy, giant corporations need to become subordinate to our democratic government, instead of dominant or equal to our government as presently exists. In order to reduce some of their run amok power and money, citizens need to push to: raise corporate taxes (fair share taxes) push for fair markets, fair competition and fair trade agreements - decrease monopolies, enforce regulations to protect the health and safety of workers & the public, reduce outsourcing, overturn "Citizens United" with a Constitutional Amendment, push for public fiancing of campaigns to help level the playing field, and end unauthorized, undeclared wars and the profiteering from wars. None of these efforts will succeed overnight, but citizens pushing for them and for a generative economy may be enough to reverse the obscene greed and power grabs of present-day capitalists and move this generative economy forward.

Some shocking facts from AFL-CIO: (April 19, 2012)

1) The average CEO now makes an astonishing 380 times what the average worker makes. That ratio used to be 42 times in 1980.

2) The average CEO of an S&P 500 company makes an average of almost $13 million a year - a nearly 14 per cent increase.

3) S&P 500 companies last year had more than $1 trillion amassed in cash.

That's enough money to create a living-wage job, for a year, for every single American who is unemployed, underemployed or has stopped looking for work.

...sorry for the typo:

...sorry for the typo: (change "fiancing" to financing - of campaigns)

1) Companies win by having

1) Companies win by having some kind of competitive advantage. Many times this is through economies of scale, R&D patents and/or first mover advantage in the market (innovation). All this typically requires MONEY which brings us to point #2 below
2) The forgot about the "capital" in capitalism. If that is your competition (it is) you need to determine how your model will be self-funded by the company-owner model. If not, the company becomes beholden to its investors. It is very possibly investor greed your article should be targeting instead of those "bad" corporations. Follow the money.

The issue here is not whether

The issue here is not whether there can be good corporations but what features to good corporations have. The answer is that good corporations respect all their stakeholders and the way to get this to occur in corporations is to appoint a CEO who is respectful as the CEO is directly responsible for setting the culture. Kotter and Heskett are two Harvard Business School Professors who studies the link between corporate culture and performance. They studies 200 of the world's largest organisations over an 11 year period. Kotter and Heskett (1992 p. 11) found that firms that respected all their stakeholders performed significantly better than those that did not:
"We found that cultures that emphasized all the key managerial constituencies (customers, stockholders and employees) outperformed firms that did not have those cultural traits by a huge margin. Over an 11 year period they grew their average stock prices by 901% versus 74% and grew their net incomes by 756% on average versus 1%."

This research has been played down as it exposes the use of systemic power as the key to corporate performance, something the elite do not want the public to be aware of. However it means that bad corporations can be fixed by replacing the CEO and they are likely to become more profitable as well.

THERE WILL ONLY BE GOOD

THERE WILL ONLY BE GOOD CORPORATIONS WHEN THERE ARE AMERICAN ONLY CORPORATIONS WHO ARE MAKING, SERVICING AND SUPPORTING PRODUCTS MADE 100% HERE IN AMERICA. IT IS THE GOVERNMENTS RESPONSIBILITY TO CHANGE TRADE POLICY TO MAKE THIS HAPPEN.

CAPITALISM IS NOT A BAD THING BUT VULTURE CAPITALISM IS, AND THAT WAS CREATED WHEN CLINTON PASSED NAFTA, GATT AND SET UP THE WTO TO SHIP THE ECONOMIC WEALTH OUT OF OUR COUNTRY. BOTH BUSH AND OBAMA HAVE CONTINUED THIS POLICY OF DESTRUTION (-SEE ‘NEW WORLD ORDER’ AND AGENDA 21).

TO ACHIEVE YOUR GOAL OF ‘GOOD CORPORATIONS’ (AND TO SAVE AMERICA) WE MUST CUT IN HALF FOREIGN IMPORTS OF EVERYTHING WE CONSUME THROUGH IMPORT QUOTAS AND TAX POLICIES; SET UP A SPECIAL CLASS OF ‘AMERICAN’ CORPORATIONS (95%)’, AND THEN THE MARKETS WILL TAKE CARE OF THE REST FOR THEY WILL THEN ANSWER TO US.

A good corporation

A good corporation compensates its CEO a maximum of 8 times what it pays it least compensated worker.

If you want to get rid of the

If you want to get rid of the GREED and CORRUPTION of the "Rich and Powerful Corporations, Companies, Intitutions and Organizations these are the BEST answers for the United States of America and the Citizens.

We as TAX-PAYERS should DEMAND that our Government through the Congress STOP all Subsidies to the Capitallistic Corporations, Companies, Intitutions and Organizations and use that money to give grants and low interest loans to groups who want to start these kind of operations.

I agree with JIMBO2150 when he said "I wished that we had let the biggest banks fail. No TARP, no cronyism, just the American people bringing this country back to where it needs to be."

Reports from Europe today have negative information that provides the proof to once and for all bury the concept that this country needs to go to an extreme austerity budget. All of the countries in Europe have switched to the severe austerity programs and here is what the end result has been: [1.0] the Economic growth has been a negative 3.0% and the unemployment has risen each and every year. The unemployment for those 18 to 35 is now at 20%. [2.] In the United States of America where the Conservatives, Republicans and Tea-Party member have fought for us to go on a sever austerity budget and make severe cuts in programs, we actually bailed out the Financial Institutions and some Corporations and we provided some stimulous and the unemployment in the United States has slowly been droping and is at 8.1%. We are adding jobs to the country each and every month. The gross domestic product is rising at a rate of 2.5% I would say that President Barack Obama is going the RIGHT direction and that the Conservatives, Republicans and Tea-Party members should support what he wants to do.

What a thought provoking

What a thought provoking article. Indeed, corporations don't have to be evil. Evil corporations are mostly, a relatively recent phenomenon.

There was a noted acceleration in the "evil corporation" after the supreme court chose George W Bush as president. Then again, after 9/11. It's almost as if it were a sort of "plan".

I believe in a progressive

I believe in a progressive tax system for individual income of at least 20 brackets to $20,Million. I also believe in a progressive Corporate tax system of say; $0.-$10,Million @ 20%, $10,Million-$50,Million @25%, and all corporate income over $50,Million @ 30%. That seems Fair and Balanced.

The regenerative economy that

The regenerative economy that Marjorie Kelley describes is most attractive, but the challenge is getting there in large measure. It isn't about good or bad corporations, but about the illegitimate rights the corporate form has accumulated over generations of court decisions. Nothing less that a constitutional amendment will open the way for more than a smattering of regenerative institutions and practices.

Oh, we have to end "corporate

Oh, we have to end "corporate personhood" if the nation is to survive.

It does have a name, however,

It does have a name, however, and it's not new: Distributism - http://en.wikipedia.org/wiki/Distributism

I agree for the most part,

I agree for the most part, but we don't even need to get rid of capitalism. Just the ridiculous corporatism that is replacing it. People have already shown they can rally around, buy from, invest in, and support companies and brands that support the common good and focus on customers and employees over excessive greed. The problem today comes from the rampant "we need money now" mentality in the highest levels of management and incumbent Wall Street investors. Just like many companies today trying to "control" their customer's views of the products we need to "control" the investors' and executives' views of business. The idea that maximum profit is good is actually not for the economy. You get back into the bubble-burst mentality. We need slow and steady growth to keep the economy flowing properly. But that growth can not continue to go only to management. It has to be spread to all employees. We also need to get rid of the wage = experience = importance mentality. You've heard it from the top banks in the US... "We need the best, so we hire the most expensive and demanding executives." Just because you are paid more does not make you better at your job. Just makes you more greedy. Personally, I wished that we had let the biggest banks fail. No TARP, no cronyism, just the American people bringing this country back to where it needs to be. Maybe we could have started over with new ideas instead of supporting corporatism and greed. Responsible Capitalism is what we need.

"Responsible Capitalism" is

"Responsible Capitalism" is true entrepreneurship where individuals risk their own captial every day to build a company. What does an MBA risk when getting out of school, getting a job in a big corporation and moves up the chain based on political acumen and responding to the short term views of the average public corporations? What assets, what risk does that corporatist take?

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