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Conscious Capitalism

“Even the most determined profit-maximizers may find ideas” in John Mackey‘s new book “that challenge deeply held beliefs,” writes Alan Murray in The Wall Street Journal (1/17/13). Mackey, of course, is the founder of Whole Foods, and along with Bentley College marketing professor Raj Sisodia is co-author of Conscious Capitalism. In it, they seek to re-define “the true nature of capitalism.” Their essential argument is that “entrepreneurs who start successful businesses don’t do so to maximize profits … They are inspired to do something that they believe needs doing. The heroic story of free-enterprise capitalism is one of entrepreneurs using their dreams and passion as fuel to create extraordinary value for customers, team members, suppliers, society, and investors.”

They offer an unapologetic, enthusiastic, and thoroughly positive view of capitalism: “Business is good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it lifts people out of poverty and creates prosperity.” The conscious capitalist considers the needs “of all its stakeholders … everyone touched by the business: employees, suppliers, customers and affected communities as well as investors.” This principle informs Whole Foods’ compensation plan, in which everyone knows “what everyone else is making; the top seven executives make exactly the same pay and bonus; and total cash compensation for those at the top is capped at 19 times the average,” versus most companies where they “earn more than 100 times the average.”

These conscious executives are “primarily motivated by service to the purpose of the business and its stakeholders, and not by the pursuit of power and personal enrichment.” Conversely, “when any profession becomes primarily about making money, it starts to lose its true identity and its interests start to diverge from what is good for a society as a whole.” The pitfall of this brand of capitalism is that it “threatens to seduce business leaders into taking their eyes off the profit ball,” as some suggest has happened to Pepsi CEO Indra Nooyi. However, as the authors write: “Free market capitalism is one of the most powerful ideas we humans have ever had. But we can aspire to even more. Let’s not be afraid to climb higher.”