A Manifesto for Better Business

However, the free market capitalist system that underpins the way we do business has many flaws. It sometimes fails – hence the 2008 recession. It can lead to extreme inequality in personal wealth and income, and unless regulated can pursue goals (selling polluting cars) that are against society’s greater interest. These flaws have become ever more concerning in recent years as globalization, allied to rapid advances in technology, have greatly increased the number, size, and power of multi-national companies and the influence they have on our lives.

Regular stories of greedy executives and fraudulent practices have added to a sense that the system is stacked against the ordinary individual and have led to a growing public mistrust in business corporations; with politicians from President Macron to Elizabeth Warren calling for change and to the UK’s main opposition party electing leaders who openly call for an end to capitalism.

The Leopard's dictum that "Everything must change so that everything can stay the same" may appear cynical but it is critical to the survival of the free market system and to our continued striving for prosperity. Business leaders need urgently to find a credible reply to a steadily increasing volume of criticism.

So far, the defenders of capitalism have failed to find a convincing voice or to offer any significant ways to improve how business is perceived. Now, in his new book, Prosperity: Better Business Makes the Greater Good, Colin Mayer, Professor of Management Studies at Oxford University’s Saïd Business School, provides answers and a coherent manifesto for change.

Central to Mayer’s argument is that companies’ public purpose has been “progressively eroded by shareholder primacy” which has led to the pursuit of profit alone as a purpose for business. This, he says, is no longer tenable and “Business thinking and education need to move on to define a purpose that is aligned with their activity and role in society.”

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While emphasising how business corporations are powerful instruments for advancing human well-being, Mayer calls for a reinvention of the corporation centred on values and a purpose that encompasses social good. He calls for ownership to be in the hands of investors with a real interest in long-term sustainability and in corporate governance that holds business leaders accountable both for defining corporate purpose and for delivering it. He envisions a world of “purpose pursuing people and companies, enabled by law, committed by regulation, partnering with government” that can realize the corporation’s full potential to contribute to economic and social wellbeing of all.

The argument against any sort of external intervention to legislate about business purpose is that it can curb freedom, quash creativity and entrepreneurship, and hamper performance. Mayer’s pragmatic approach largely avoids this by focusing not so much on the players but on the rules of engagement in the game – public policy, the legal framework, taxation, and purpose-driven regulation – and by calling for business leaders themselves to act.

Mayer’s book goes with the spirit of the times. At a time when corporations – from Apple to Walmart – are bigger than many national economies, public attitudes are shifting. The millennial generation seems to have higher expectations of CEO activism than their predecessors. And furthermore, there is increasing evidence that organizations that have a clear and motivating purpose that engages their employees in creating value for their customers have higher levels of performance and customer satisfaction.

Prosperity: Better Business Makes the Greater Good, Colin Mayer, published by Oxford University Press, 2018, ISBN 978-0-19-882400-8