Conscious Capitalism: what is It?

The primary concept of this case is Conscious Capitalism’ which introduces a new holistic approach of doing business that seeks for the winning situations for all stakeholders by creating a higher purpose and foster the well-being of all stakeholders from various aspects. This new emerging paradigm eventually is more beneficial for the firm and the shareholders compared to the outcome of chasing after the profit maximization. “Conscious Capitalism: What Is It? Why Do We Need It? Does It Work?”  illustrates how conscious capitalism could be the future business model that not only the benefits itself, but also impacting the overall stakeholders, constituencies and the world, and yet the movement of conscious capitalism could be a long process to be implemented in reality with interfering critics in place.

Case Background

After analyzing the case, it can be evaluated that free market capitalism had brought incredible accomplishments and improvements to the economy, yet there are some criticisms in place. In order to create a great business, it is important for this free-enterprise capitalism to be built around ethical principles where the concept of conscious capitalism is applied to benefit all parties with share value creation rather than maximizing profit.

Subsequently the key theme that can be extracted from the case is the four principles’ of the conscious capitalism which involves purpose orientation, integration of stakeholder, conscious leadership and conscious management culture’ (Weiss, 2014). This ensures that a conscious business exists with the purpose of creating an optimal value for all stakeholders beyond just generating profit, acknowledging the entire ecosystem and the importance of interdependent stakeholders, under the leadership of a conscious business who shares the firm’s value and its higher purpose, which all leads to an organization with a conscious culture that inspire more innovation and commitment.

Based on my analysis on the case, it is obvious that conscious capitalism is ultimately practiced by Firms of Endearment (FoEs) where they foster the humanization of company experience in order to create greater value for its customers, employees and all other respective entities. The updated performance and financial analysis of these FoEs in comparison to the other firms provides me with an evident that conscious companies have always outperformed. This evident is supported with the research information available from the Harvard Business Review in which Schwartz (2013) stated that the companies that companies that engage in conscious capitalism have achieved the performance results, which is 10 times better that those that did not.

On the other hand, regardless of the case illustrating the great benefit that conscious capitalism brings to the marketplace, the society and the world in countless way, I believe there are still the dark and the destructive side of the capitalism. Even in the case, (Weiss, 2014) clearly mentioned that capitalism was under attack with many criticisms turning it into a profit maximizing machine despite the achievements that free market capitalism had brought over 200 years. Also, there is an argument raised by the critics of conscious capitalism that the model is still not acknowledged and practiced by every business in the market, since they assume that emphasizing on the well-being of the stakeholders by paying employees more than the industry range, treating the suppliers well and fairly, etc. can have a huge impact on the firm’s bottom line of the company.

Moreover, even though the financial research of conscious companies has proven with amazing results such as higher profits and premium ROEs compared to S&P 500, DJIA and Russell 3000, it is obvious that the number of these compared companies are still much higher that of conscious companies. In other word, there are still only minority companies that truly practice conscious capitalism as of today. In my opinion, it is due to the majority of the firms’ belief that it is impossible for them to eliminate profit from the top primary concern. Besides, Aschoff (2017) also argued that the idea of conscious capitalism can only be applied on if the business is in the phase of thriving. If the business happens to struggle at any moment, their primary concern will shift to the profit’ again.

Additionally, (Aschoff, 2017) mentioned that not all stakeholder shares the equal purpose in this global economy and thus, even the businesses with the best intention may sometimes end up running back to achievement of larger profit or winning competition.  The author also inserted his opinions that one way to solve this problem would be through legal obligations and the demands that place people before profit.

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