For some people, capitalism is the most efficient way to distribute scarce resources, promote equality, foster co-operation and inspire innovation. For others, capitalism is responsible for the degradation of the environment, an increase in inequality, and decreased mental health. What if capitalism could regenerate all forms of capital such as environmental, social and psychological as well as financial?
Balancing the needs of all stakeholders is the aim of Conscious Capitalism. It’s a movement founded on the ideas of Whole Foods co-founder John Mackey and marketing professor Raj Sisodia. But does society need conscious capitalism? Most companies already say they hold themselves to account for the ‘triple bottom line’; people, environmental and financial. But do they treat these stakeholders equally? Once you get behind the finely crafted words of the PR and Marketing departments most companies continue to exploit and trade-off their stakeholders in the service of their financial investors. When found out, they get accused of ‘greenwashing’.
Why is the reality so often divergent from the intention?
One explanation could be found in how the financial markets operate. Big businesses tend to be owned by shareholders rather than by their founding entrepreneurs or families. The problem with companies on a stock exchange is that the managers and executives are the legal agents of the shareholders, its owners. In our society, many people, and organisations, hold shares in companies purely as a financial investment. All they are interested in is getting a return on their investment. They want to see the company’s executives and managers ensure it makes good profits to increase shareholder value. When all that matters is profit, then moral or values-based decision-making can get lost.
Another explanation could be that businesses are designed to behave like psychopaths. Although psychopathy is not an official psychiatric diagnosis, the term is generally used to describe people who suffer from a condition where they demonstrate socially irresponsible behaviour, disregard or violate others’ rights, and have an inability to distinguish between right and wrong and have difficulty with showing remorse or empathy. Businesses get this diagnosis because they are designed to pursue just one aim, profit, with no regard to the impact this has on people or the planet. Therefore, if left to their own devices, businesses would behave like psychopaths. So, they need rules to govern their behaviour and protect people and the planet. This tendency towards psychopathy has increased over the last few decades with neoliberal deregulation and more businesses floating on stock exchanges.
Conscious capitalism would argue against these explanations by saying that the purpose of a business is not to pursue profit as its only aim. Instead, its purpose is to serve society and, if it can do this effectively and efficiently, the business will be rewarded with a profit. Serving society inevitably involves regenerating all capitals such as environmental, social and psychological. Therefore, the leader of a conscious business needs to persuade its financial investors that regenerating these capitals is also in their interest. This is a complex argument to make. It is far easier for business leaders to say they are focusing on purely increasing financial capital.
Do we have enough leaders who are able to work with the level of complexity needed to persuade investors of the need for treating all stakeholders equally?
Advocates of conscious capitalism say that it is only possible if we have enough conscious leaders. They talk a lot about increasing the awareness of leaders and helping them to focus on their intention. But awareness and attention are just aspects of our consciousness. We have states of consciousness, such as being aware; lines of consciousness, such as cognition, emotion and behaviour, and stages of consciousness. By developing our states and lines of consciousness we can develop up the stages of consciousness. The higher we develop, the more complexity we deal with in our work. We use a Seven Stage Model of Consciousness Development. To perform well in a traditional capital business, a format developed during the Industrial Revolution, it has always been viewed that leaders need to develop only to stage 4. However, today due to the increasingly volatile, uncertain, complex and ambiguous environment, it is believed that stage 4 leaders are now in over their heads. Stage 4 leaders certainly have not got the capability to lead a ‘conscious business’. We believe that if conscious capitalism is to become more of a reality than rhetoric, businesses need to be led by stage 6 leaders.
A PWC survey carried out in 2015, using a model developed by Bill Torbert, found that only 8% of leaders had developed to stage 6 (none were found to be at stage 7). The majority of leaders (52%) were is functioning at stage 4. Business still has the leadership needed to create the industrial revolution, not to deal with its aftermath.
Why is there a shortfall in the capability needed to lead businesses today?
Most leadership development still focuses on teaching knowledge and training skills. This is called horizontal development. The development of a leader’s consciousness up the stages is called vertical development. If horizontal development proceeds ahead of vertical development, the person cannot cope with the complexity and sophistication of the knowledge and skills. Consequently, they will oversimplify what they are being taught, or their brain will crash, and they will be unable to learn anymore. If vertical development proceeds ahead of horizontal development, the person will not have the tools needed to work with and communicate the complexity they are seeing. As a result, they are likely to become increasingly detached from other people and their organisation. To be effective, people in the workplace need both horizontal and vertical development, and they must proceed at equal rates.
So, if capitalism is to be conscious then we need businesses to balance the horizontal development of their leaders with their vertical development. We need leaders to develop their consciousness alongside their skills and knowledge.
10th March 2021