Field Notes: Ford’s Forum on the Power of Markets

The Ford Foundation has released a collection of eight pieces discussing inequality in the modern economy and how businesses, civil society organizations, governments, and communities can facilitate change that benefits society. Below are highlights of a few. 

The Aspen Institute's Judy Samuelson looks at the prevalence of MBA backgrounds among business leaders and the decision making mentality associated with it. She says that through adjustments to the education system, the next generation of leaders will consider the negative impacts of their decisions on society and focus more on long term sustainability for success.

If we want to tackle the big questions of our day—poverty, climate change, human rights—we have to look at the bigger system of capital markets and private sector decision-making. And that takes us to how do you move the beast—to take a longer-term view and curb short-term thinking in business and capital markets. We need to change the paradigm of what's taught in business schools and the narrative about what constitutes business success that dominates boardrooms. The thinking in classrooms and boardrooms is tightly connected. That is, what is the purpose of the corporation? How do you measure success—and over what time frame? And importantly, how do you make high-quality decisions that stand the test of time? Thinking long-term requires executives to consider who is most affected by the business decision and thus needs to be at the table, or consulted, in order to make a good decision that will stick.

The B Team's Rajiv Joshi says corporations used to address the needs of communities on a large scale, and, as such, were held accountable by their customers. He argues that over time, however, this symbiotic relationship deteriorated as investor’s returns became the focus of corporations. He hopes we can revive the old way:

We believe there is a bright future for business—an inclusive model of capitalism that could really drive sustainable prosperity. It looks like a world in which business has the right aspirations, where we’re celebrating the right kind of leadership and where there’s true accounting—a world where companies don’t just look at the financial bottom line but actually look at the true impacts of their production in terms of the resources they’re using from nature and the impacts they’re having on society.

It looks like a world where business models not only do zero harm to the planet but also provide a net positive contribution—restoring ecosystems and sustaining nature. A world in which the structures of business have changed, and the corporation exists with the obligation to drive not just shareholder value but meaningful value for all stakeholders. Where capital has true returns and starts flowing disproportionately into companies that actually generate long-term value for people and the planet.

The future of capitalism needs to be about ensuring that there’s full transparency and that businesses are free from corruption, that businesses are held accountable for the kinds of goods and services that they produce and how they produce them, where people and the planet are represented at the highest levels within companies and throughout their supply chains wherever decisions are made that affect them.

Yale’s Robert Schiller highlights the need for regulations to foster a more inclusive and equal economy. He says that companies do have incentives to self-regulate and are creating new ways of doing so:

In the United States especially, corporate law has emphasized that boards of directors have a duty of loyalty to their shareholders. And our U.S. corporate law has resisted the idea of multiple stakeholders. So the U.S. model has been that corporations owe their loyalty to the people who put up the money to start the company—the shareholders—and beyond that only to uphold the law. They shouldn’t be promoting their community or “giving gifts.”

But that thinking has changed recently. Notably, there has been a movement in just the past three years for creating a new corporate form called the “benefit corporation.” Now half of the 50 U.S. states have it, and more will have it soon. The idea is that the company, when it’s founded—or later it could convert to a benefit corporation—puts in its charter multiple goals. Profits is one, but something like promoting the community or cleaning the environment is another. Then no shareholder could sue them for pursuing those things. In fact, a shareholder or anyone could sue them if they don’t pursue their idealistic goal. So they become identified as a corporation with a lofty goal or goals. There are now about 1,000 of these corporations. They’re all small, but it’s interesting that it happened in America, which had been the most capitalist country.

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