by: Idris Mootee

It is an overly simplistic idea that managers should put shareholders interest at the expense of other things. It is important to create economic value for shareholder, but there should be other considerations. Let's think about it, shareholders don’t create value—only employees (their creativity and commitment) do, when they deliver engaging customer experience or design lust-worthy products. Shareholder primacy is an inherently self-limiting ideology. It is not properly taught in B-schools. What about corporate social responsibility? (Photo below: Scott Danielson)

CSR is not about just giving back to society at the expense of shareholders. A smart CSR strategy should allow the firm to benefit from these actions. It is not a donation strategy. Firms can choose to see the emerging importance of CSR as a threat or as an opportunity. One-way of framing CSR as an opportunity is to think of CSR activities as generating public goods that all of society may benefit from (and which customers, suppliers, and employees may enjoy creating). Enacting socially responsible practices that “expand the pie” and create “humanistic companies”—or firms of endearment—seek to maximize their value to society as a whole, not just to shareholders. They are the ultimate value creators: They create emotional value, experiential value, social value, and have course, financial value. People who interact with such companies feel safe, secure, and pleased in their dealings.

Here is a good book, “Firms of Endearment” by By David B. Wolfe, Jagdish N. Sheth and Rajendra S. Sisodiais about gaining “share of heart,” not just share of wallet. It’s about aligning stakeholders’ interests, not just juggling them. It’s about building companies that leave the world a better place. Most of all, it’s about why you must do all this and how to get there from wherever you are now.

These Firms of Endearment are companies’ people love doing business with. Love partnering with. Love working for. Love investing in. Companies for whom “loyalty” isn’t just real: it’s palpable and driving unbeatable advantages in everything from marketing to recruitment. It is not just about “corporate social responsibility”: it’s about building companies that can sustain success in a radically new era. Every company should have at least two bottom lines.

The authors call this an Age of Transcendence, as people increasingly search for higher meaning in their lives, not just more possessions. This is transforming the marketplace, the workplace, and the very soul of capitalism. Increasingly, today’s most successful companies are bringing love, joy, authenticity, empathy, and soulfulness into their businesses: they are delivering emotional, experiential, and social value—not just profits. Firms of Endearment illuminate this, the most fundamental transformation in capitalism since Adam Smith. It’s not about “corporate social responsibility”: it’s about building companies that can sustain success in a radically new era.

Original Post: http://mootee.typepad.com/innovation_playground/2008/12/just-in-case-you-didnt-know-shareholders-dont-create-value-employees-do-shareholders-only-provide-yo.html

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