Essay: Case analysis of Conscious Capitalism: What Is It? Why Do We Need It? Does It Work?

Case analysis of “Conscious Capitalism: What Is It? Why Do We Need It? Does It Work?”
The primary concept of this case is ‘Conscious Capitalism’ which introduces a new holistic approach of doing business that seeks for the winning situations for all stakeholders by creating a higher purpose and foster the well-being of all stakeholders from various aspects. This new emerging paradigm eventually is more beneficial for the firm and the shareholders compared to the outcome of chasing after the profit maximization. “Conscious Capitalism: What Is It? Why Do We Need It? Does It Work?”  illustrates how conscious capitalism could be the future business model that not only the benefits itself, but also impacting the overall stakeholders, constituencies and the world, and yet the movement of conscious capitalism could be a long process to be implemented in reality with interfering critics in place.
Case Background
After analyzing the case, it can be evaluated that free market capitalism had brought incredible accomplishments and improvements to the economy, yet there are some criticisms in place. In order to create a great business, it is important for this free-enterprise capitalism to be built around ethical principles where the concept of conscious capitalism is applied to benefit all parties with share value creation rather than maximizing profit.
Subsequently the key theme that can be extracted from the case is the ‘four principles’ of the conscious capitalism which involves ‘purpose orientation, integration of stakeholder, conscious leadership and conscious management culture’ (Weiss, 2014). This ensures that a conscious business exists with the purpose of creating an optimal value for all stakeholders beyond just generating profit, acknowledging the entire ecosystem and the importance of interdependent stakeholders, under the leadership of a conscious business who shares the firm’s value and its higher purpose, which all leads to an organization with a conscious culture that inspire more innovation and commitment.
Based on my analysis on the case, it is obvious that conscious capitalism is ultimately practiced by Firms of Endearment (FoEs) where they foster the humanization of company experience in order to create greater value for its customers, employees and all other respective entities. The updated performance and financial analysis of these FoEs in comparison to the other firms provides me with an evident that conscious companies have always outperformed. This evident is supported with the research information available from the Harvard Business Review in which Schwartz (2013) stated that the companies that companies that engage in conscious capitalism have achieved the performance results, which is 10 times better that those that did not.
On the other hand, regardless of the case illustrating the great benefit that conscious capitalism brings to the marketplace, the society and the world in countless way, I believe there are still the dark and the destructive side of the capitalism. Even in the case, (Weiss, 2014) clearly mentioned that capitalism was under attack with many criticisms turning it into a profit maximizing machine despite the achievements that free market capitalism had brought over 200 years. Also, there is an argument raised by the critics of conscious capitalism that the model is still not acknowledged and practiced by every business in the market, since they assume that emphasizing on the well-being of the stakeholders by paying employees more than the industry range, treating the suppliers well and fairly, etc. can have a huge impact on the firm’s bottom line of the company.
Moreover, even though the financial research of conscious companies has proven with amazing results such as higher profits and premium ROEs compared to S&P 500, DJIA and Russell 3000, it is obvious that the number of these compared companies are still much higher that of conscious companies. In other word, there are still only minority companies that truly practice conscious capitalism as of today. In my opinion, it is due to the majority of the firms’ belief that it is impossible for them to eliminate profit from the top primary concern. Besides, Aschoff (2017) also argued that the idea of conscious capitalism can only be applied on if the business is in the phase of thriving. If the business happens to struggle at any moment, their primary concern will shift to the ‘profit’ again.
Additionally, (Aschoff, 2017) mentioned that not all stakeholder shares the equal purpose in this global economy and thus, even the businesses with the best intention may sometimes end up running back to achievement of larger profit or winning competition.  The author also inserted his opinions that one way to solve this problem would be through legal obligations and the demands that place people before profit.
Therefore, after analyzing the case thoroughly and carefully, some key issues that I extracted include the criticism towards conscious capitalism, the need for the legal compliance to encourage more ethical and conscious businesses and finally, the need to convey the message the importance, opportunity, and the benefit in the marketplace for more businesses to start practicing the organizational change under Conscious Capitalism paradigm.
Alternatives
The alternatives for the problems can be generated through basic principles from the four key principles of conscious capitalism.
One alternative for more business to practice conscious capitalism and respond to its criticism is by encouraging businesses to reflect on the existence, which may eventually lead to increase their “consciousness” for better existence. According to the information available from Forbes magazine, Smith (2016) stated that this alternative can be initiated by defining each firm’s higher purpose. Even though this is the proper step and a good alternative for more companies to pursue conscious capitalism, it was rejected. Unfortunately, many business firms around the world are being operated without a clear sense of higher purpose. This is due to the fact that these businesses have described themselves as what they are selling instead of what they make possible, which makes the alternative impossible for them (Smith, 2016).
Another alternative is to encourage well-known and successful ‘profit-oriented’ organizations, who already have been doing certain contribution to the society, to engage in conscious capitalism and influence the other business with the benefits it gained. However, Weiss (2014) argues that the bias thinking of pursuing self-interest, such as maximizing profit, is still prevalent in majority of businesses today. They still believe that the more the employees are paid, the lesser the company earns in profit. In my opinion, such businesses still cannot leave out the profit from their first priority, which automatically leads to the rejection of this alternative. Moreover, many of these successful firms are led by the older generation, who cares less about the environment and the ethical practices regarding the well-being of all stakeholders and are more profit-oriented to compared to millennials (Timm, 2014). This makes the alternative impossible for the firms to practice conscious capitalism.
Proposed Solution
Conscious capitalism itself is a huge concept as a whole. The control system and stakeholder relationship (self-regulation) of companies alone is not sufficient enough to improve its long movement in the business world. In order to better respond the critics of conscious capitalism and to encourage the firms to voluntarily and truly practice this system with higher purpose rather than chasing after profit, government also needs to play in important role in taking action for the firms to operate in a more ethically and responsibly.
Therefore, the most possible proposed solution for the issues as mentioned above would be to improve the law and regulations of the governments around the world regarding protection against customer and employee and alike. Beside the contribution of the government, corporates themselves need to find the balance between their own established control systems (including ethics programs, values, best practices, etc.) the external legal regulation to minimize the crimes committed, especially by unethical executives, which further strengthen the power of conscious capitalism. In the meantime, there must be a development of communication strategy to make the public, especially business leaders, to become aware of the ethical value and social value which are imperative contributions in the movement of conscious capitalism.
This criteria in this solution is related one of the stakeholder management approach that Joseph Weiss discussed in his book, where he highlighted that external regulations plays a vital role in delineating guidelines and practices for the firms to perform in an ethical and responsible way towards the society and their stakeholders. Weiss (2014) also added that the stakeholder relationship in a business established on mutual trust and ethical values, combined with regulation and legal constraint result in long-term economic gains for firms and its stakeholders.
Recommendation
The proposed solutions as shown above can be broken down into three main categories:
(1) improving the law and regulations of the governments to protect the rights of all stakeholders
(2) balancing the company’s self-regulation with external legal constraints
(3) encouraging successful conscious companies to help increase the awareness of conscious capitalism and its benefit
(1) Improving the law and regulations of the governments to protect the rights of all stakeholders
Even though a corporation needs to oblige the economic mandates of its shareholders, it is also imperative to respond to the legal claims from its stakeholders (Weiss, 2014). Hence, governments also need to ensure, its legal constraints fully protect legal rights of everyone associated to any business entities and make necessary changes and improvement to build a more ethical economy. Craig (2018) also argued that ‘Socially Conscious Brands’ will boom in the future, however, there are some political and social achievements that American employees are expecting from their governments such as guaranteed equal pay between genders, paid sick and maternity leave and guaranteed living wage for hourly labors.
(2) Balancing the company’s self-regulation with external legal constraints
As explained in the very first section, ethically conscious culture is one main basic to conscious capitalism. This requires a values-based leadership stakeholder management which can be achieved by balancing the “carrot” and “stick” approaches. Weiss (2014) argues that regardless of corporations trying to establish good relationships with its stakeholders by being considerate of their well-being, not all stakeholders or communities show honesty and fairness. Some might commit ethical misconducts at some point and push their motives towards maximizing profit or their own benefit just as the issue described above. Hence, Weiss (2014) stated that both stick and carrot (legal compliance and voluntary ethical inducement) approaches are essential to promote more productive and law-abiding leaders. Nevertheless, balancing between these two compliances are the most important of all.
(3) Encouraging successful conscious companies to help increase the awareness of conscious capitalism and its benefit
Many critics still believe that focusing on the well-being of stakeholders can affect the firm and the stock prices (Weiss, 2014). One main underlying reason for this cause could be the public’s lack of awareness on the benefit of Conscious Capitalism. This problem can be solved if the successful businesses that pursue conscious capitalism can help the world with this awareness through press and media by representing as the role model and conveying the idea that business can be both socially conscious and even more profitable as proven by performance and financial research FoEs and S&P 500 companies. In addition to that, building conscious capitalism can be more effective if it is engaged to the millennials. According to the information available from LinkedIn, Lattanzi (2018) suggested that millennials are the perfect partners for conscious capitalism. The author mentioned that millennials has more tendency to support the business leaders who are dedicated bring the better change for the world rather than those who solely interested in profit or power. This fits into the concept of conscious capitalism, and I believe companies led by millennial CEOs play an integral part and will be at the forefront for promoting an ethical business world.
All things considered, Conscious Capitalism is a great paradigm for to change the business world for the better, yet it still has some questionable issue in placed. Hence, the possible solution with a few ways has been proposed. However, this solution can only be successful only if all three suggested criteria are implemented fully by the corporations and the government for the widespread acceptance of Conscious Capitalism.