Capitalism — like most isms — has many faces.
In the eighteenth century, it produced the military-political piracy of the East India Company, and in the twenty-first, the philanthropy of the $47bn Bill and Melinda Gates Foundation.
It has the capacity for profoundly significant choices.
Economies are capitalist if they are dominated by private capital and free markets. Over the last few centuries, whatever its pluses and minuses, capitalism has proved more durable than any state-run system, and it now reigns over most of the globe.
However, despite its longevity and ubiquity, it is now manifestly not working for all. Poverty, income inequality, the climate crisis, slave labour, and a host of other ills — some existential — are all its children.
Consequently, and more pressingly following the economic destruction of the 2008 global financial crisis, there is a movement to reorientate capitalism towards responsible behaviour and outcomes.
This year saw the fiftieth anniversary of Milton Friedman’s seminal New York Times article concluding that the sole purpose of a company is to generate profit for its shareholders.
A lot has changed since he wrote those words.
Today, companies are assessed not just on the profits they generate and the risk they bear to do so, but on the manner in which those profits are generated. Today’s capitalism seeks to include all a company’s stakeholders, and not merely its shareholders.
Out of this movement — also known as corporate sustainability — the idea of “ESG” has bubbled to the surface as a leading metric. “E” assesses a company’s stewardship of the environment; “S” looks at its social responsibility towards employees, customers, suppliers, and wider society; and “G” captures its approach to governance, diversity, executive pay, and internal controls.
These metrics, however, are merely indicators: a range of numerical data points like the results of a blood test. The real insight is to understand what is driving them.
But so far, there is no widely shared sense of what generates good ESG results. To say they come from a focus on responsible capitalism reveals nothing. Doctors encourage wellness in humans by promoting healthy lifestyles. The question for companies is therefore: what kind of corporate culture produces strong ESG results?
The answer, we proposed recently in a Harvard Business Review article, is an ethic we have named “corporate philotimy”. This derives from the ancient Greek word philotimo (φιλότιμο), which is a big, bold, inspiring, untranslatable virtue.
Its etymology is philos (love) and timē (honour), and it describes a bursting amalgam of decency, dignity, honesty, truthfulness, altruism, and integrity. It is a person’s internal ethical compass of knowing right from wrong, and their duty to choose what is right.
A company with a strong sense of corporate philotimy does not merely pay lip service to responsible capitalism: it lives the values in its DNA. It does not greenwash to be seen as looking after the environment: it builds care for the planet into its culture. It does not relax after creating slogans about respecting its people: it prioritises diversity, equality, and paying proper wages worldwide.
Today, it is clear that governments and intergovernmental associations are unable or unwilling to address many of the planet’s and society’s most agonising problems, not least the climate crisis and growing wealth inequality. It is now falling to investors and companies — some of which are wealthier than most countries — to address these issues within the framework of responsible capitalism.
It is therefore in everyone’s interest for corporate philotimy to become the bedrock of the next phase of capitalism. If it does not, the consequences for the planet and all its life forms — including human — have never been more dire.
Main image credit: Getty