In Capitalism and Freedom (1962), the late American economist Milton Friedman wrote: “There is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”
During the 50+ years following the book’s publication, the meaning of Friedman’s quote has been debated in C-suites around the world, particularly the “rules of the game.” The widely held interpretation is one of a status quo; as long as it’s legal the corporation has fulfilled its role in society.
With Friedman’s legacy in mind, the majority of leaders and their boards tend to focus on regulatory compliance as the “golden rule” and push the “soft stuff” like culture, trust, employee engagement and community off to the side, or perhaps to a functional silo that then creates a “set of rules,” a “program” or a philanthropic PR campaign.
But a small and growing cadre of CEOs are no longer accepting Friedman’s theory as gospel. One of them is Howard Schultz, CEO of Starbucks.
In January, Schultz was the first CEO to be honored with a Lifetime Achievement Award by Trust Across America. And in his recent annual address to shareholders, Schultz asked his audience to consider two questions:
1. What is the role and responsibility of a for profit company?
2. What is the role and responsibility of all of us as citizens?
We asked members of our Trust Alliance and our Top Thought Leaders to weigh in on Schlutz’s video and questions, and are sharing a few of the responses.
Nadine Hack said: We’ve always had backward-looking fear-mongers concurrent with forward-looking hope-givers. So, like Schultz, I choose to be optimistic, caring, and a committed participant in expanding awareness of and desire to effect positive change
Bob Vanourek said: Regulations to set boundaries are necessary, but real reform must come from within. Organizations at the board and CEO level must set the overarching goal to be excellent, ethical, and enduring.
Mark Crowley said: The greatest good businesses can do for society is to honor the human beings they employ. Giving workers respect, appreciation and fair treatment will only strengthen us. One only needs to look at Starbucks financial success to confirm this.
Linda Fisher Thornton said: People have tried shortcuts that go around respect, civility and tolerance, but there is no acceptable shortcut on the road to profit (or power) that “goes around ethics.”
And finally, Donna Boehme provided this summary: Every Board and C-Suite has a duty and responsibility to ensure that their respective business is conducted consistent with relevant legal and ethical standards. Each individual has many roles (as parent, citizen, voter, shareholder, professional, etc.) and spheres of influence where they can uniquely promote and support ethical and trustworthy behavior.
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As Howard Schultz framed on stage at its recent annual shareholders meeting: “Sadly, our reservoir is running dry, depleted by cynicism, despair, division, exclusion, fear and indifference.”
He suggested citizens refill the reservoir of the American Dream, “not with cynicism, but with optimism. Not with despair, but with possibility. Not with division, but with unity. Not with exclusion, but with inclusion. Not with fear, but with compassion. Not with indifference, but with love…It’s not about the choice we make every four years. This is about the choices we make every day.”
Starbuck’s mission is to inspire and nurture the human spirit — one person, one cup and one neighborhood at a time. Howard Schultz continues to live that mission through both his words and actions.
Barbara Brooks Kimmel is the CEO and cofounder of Trust Across America-Trust Around the World whose mission is to help organizations build trust. Now in its sixth year, the program’s proprietary FACTS® Framework ranks and measures the trustworthiness of over 2000 U.S. public companies on five quantitative indicators of trust. She’s also the editor of the award winning TRUST INC. book series and the executive editor of TRUST! Magazine. She can be contacted at [email protected].
[Editor’s note: Neither Barbara Kimmel nor Trust Across America are paid by Starbucks. Barbara is a long-term shareholder in the company. Her favorite Starbucks beverage is a nice cappuccino in the winter. She also likes their half and half (lemonade/iced tea) and has been known to indulge in a 400 calorie frappuccino from time to time — usually when challenged by one of her skinny sons.]
We need to celebrate and publicize more leaders like Howard Schultz. As Jeffrey Pfeffer has said, "when we change what we measure, demand, and reward, workplaces will change." Schulz is a pioneer in those areas.
In 1996, it was the founder of a social business who argued against Friedman with a business model putting people before shareholder returns. The arguments made in 1996 have echoed through movements like consicous capitalism and B Corporations ever since.
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