Stakeholder Capitalism and The Economics of Mutuality
Sep 13, 2020
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Jay Jakub, discusses the story behind the Economics of Mutuality. The podcast explores contrasting views on the social responsibility of business, introduces stakeholder capitalism and the story of Mars Corporation. It discusses the need for a new business model that incorporates non-financial forms of capital. The chapter provides an introduction to the series on stakeholder capitalism and encourages listeners to share the podcast.
Stakeholder capitalism challenges the traditional profit-focused model by recognizing the value of non-financial forms of capital.
By expanding the definition of profit to include social, human, and natural capital, companies can address societal and environmental challenges while remaining profitable.
Deep dives
The Emergence of Stakeholder Capitalism
The podcast episode explores the transition from the traditional profit-focused model of capitalism to stakeholder capitalism. It begins with the influential op-ed by economist Milton Friedman, which argued that the sole purpose of business is to increase profits. However, in recent years, the Business Roundtable, a group of CEOs, released a statement challenging Friedman's view and asserting that the purpose of business is to maximize value for stakeholders. This has led to the emergence of stakeholder capitalism as a new paradigm of business. The episode introduces a 10-part miniseries called '10 Things You Should Know About Stakeholder Capitalism,' which aims to highlight companies that embrace social responsibility while creating value for stakeholders.
The Mars Corporation's Journey Towards Stakeholder Capitalism
The episode shares the story of the Mars Corporation's exploration of stakeholder capitalism. In 2007, Jay Jacob, tasked with determining the right level of profit for the company, discovered the concept of economics of mutuality. This new business model sought to evolve capitalism by recognizing the value of non-financial forms of capital, such as social, human, and natural capital. Through initiatives in impoverished slum areas, the Mars Corporation demonstrated that focusing on non-financial capitals could lead to superior performance, including increased sales, retention rates, and profitability. By expanding the definition of performance to include all forms of capital, Mars successfully integrated social responsibility into its business model.
Synthesis of Profit Maximization and Social Responsibility
The podcast episode concludes by highlighting the synthesis between profit maximization and social responsibility in stakeholder capitalism. It emphasizes the need to redefine profit by including social, human, and natural capital on a company's balance sheet. This expanded scope of profit and loss drives profitable business models that address societal and environmental challenges, such as climate change and inequality. Stakeholder capitalism requires a shift in mindset and practice, where social aims become core outputs of a profitable business. The urgency to transition is underscored, as stakeholder capitalism presents a solution to wicked social problems. The episode encourages listeners to spread the message and facilitate the adoption of stakeholder capitalism.
Amanda met Jay after a mutual friend introduced them simply because he thought they would hit it off. They did, and soon Amanda was helping Jay to share his incredible journey with CEO’s all around the country.
If your company is interested in learning more about how to implement these ideas in your business, have a look at the brand new Economics of Mutuality consulting arm.
You can listen to more music by the artists we featured in the episode here.
