Jack Hough of Barron’s focuses on corporations that want to do more than just earn profits.
This past week, the Business Roundtable, a group of chiefs from nearly 200 companies, said it has changed its mind about the purpose of a corporation. It’s not just to serve shareholders. It’s to serve all “stakeholders,” including customers, employees, suppliers, and communities. The country seems divided between people who say that the companies don’t really mean it and people who worry that they do.
It will be fine. Treating workers, customers, and other partners well is good for business. Companies will still report earnings per share, not earnings per stake. It’s just that our democracy has gotten a little cranky and weird, so consumers seem to want our capitalism to pitch in on odd jobs shaping society. …
… There will be disagreement over which do-goodism is good. The chief of a big agrochemical company told me this summer that organic farming is bad for the environment, because crop yields are lower, which means more land and water must be used, and because more tillage is required, more soil is lost. Now, at grocery stores, I just stand in front of the lettuce wondering what to believe.
There’s good news. If the ethical-industrial complex insists on one thing, it’s that doing the right thing leads to higher profits and excellent returns. One interpretation of this is that we should pay careful attention to the virtue scorekeepers when investing. But I like a reverse-engineered approach: If we search for prosperous and promising companies, we’re probably identifying virtuous ones indirectly.
How would they make all that money without being good?
