In the inaugural event of the Trinity Business Ethics Speaker Series initiated by Trinity Business School, Profs. Maximilian Schormair, Daniel Malan, and Kenneth Silver, stakeholder theory and business ethics spokesman, philosopher and author Prof. Ed Freeman of UVA Darden School of Business presents the key primers behind business in the New Normal.
Related publication: The Power of And: Responsible business without trade-offs, by R. Edward Freeman, Kirsten E. Martin, and Bidhan L. Parmar, Columbia University Press.
The old story that business is about short-termism, greed, profit and self-interest – coupled with financial crisis, the global warming debate, racial tension and the impact of the Covid-19 pandemic – have given rise to a new debate on the ethics and nature of capitalism.
The debate refers to what has been termed The New Normal – a different view of how business must operate post-Covid. It is consciousness of the need for responsible business with purpose, ethics, values and sustainability being at least as important as profitability and, indeed, closely linked to it.
This new way ahead is supported by renewed interest in CSR and philanthropy, and an increase in sustainability and social enterprise initiatives. And it goes under the umbrella of a variety of names including conscious capitalism, inclusive capitalism, stakeholder capitalism or connected capitalism.
In his recent book, The Power of And: Responsible business without trade-offs, Prof. Ed Freeman and his co-authors focus on 5 major areas to provide a framework for responsible business in The New Normal.
1. Purpose and profit
Businesses and organisations all need to make profit in order to operate. But whether creating a startup or running a mature company, the purpose of business is not maximizing profit. Through their products and services, most entrepreneurs and companies are indeed attempting to make the world and people’s lives better, if only in a small way. Profit is important, though this has to be secondary to purpose. And the visible trend is that many companies are starting today because they want to do something good that makes a difference.
2. Stakeholders and shareholders
Business has always been and always will be about a set of stakeholder relationships and nurturing these over time. To make profits, a company needs good products, good customers, engaged and inspired employees, and a loyal community. Trust is an important factor. Everything is connected – products, customers, the community, the environment, shareholders. And it is much easier to see these various connections when a company has purpose.
3. Society and markets
Business is not simply a competitive, market institution. It is also a societal institution, where businesses are connected to other societal institutions. This can be seen in companies’ positive initiatives in the contexts of the Covid pandemic and global warming. This connectedness must also reach out to public policy and business strategy.
Human beings do not, as a general rule, try to maximize their own self-interest. While selfishness does exist, the majority of people are capable of giving, great acts of kindness and cooperation. They also are natural communicators and have to be in order to do business, innovate, solve problems, find solutions. It is rather this aspect of human nature that makes business and capitalism worthy, not scarcity and economic trade-offs.
5. Business and ethics
Ethics are intrinsically linked to human behaviour and because people do not leave their values and ethics out of the company or organisation they work for, ethics must not be separated from business. Ethics need to be blended in to the business dimension and discussed, especially at a time when there is an abundance of fractious debate in society.
A final message from Prof. Freeman is one of legacy. Businesses in the New Normal would be wise to ask themselves what good they have done, on a daily basis and over time – and which links to purpose, stakeholders, society, humanity, the planet and our ethics.
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