In my classes, I like to make the point that discussion of business ethics, CSR, sustainability, stakeholder capitalism and moral capitalism are relevant to real business decision-making and profitability.
Here’s an example of this:
Howard Schultz, the founder of Starbucks – very successful and very wealthy – is returning to the company as its CEO – for the second time, his third term at the helm. Why? Can’t a profitable company just keep on making money?
The news report mentioned challenges in its Russian and Chinese markets and rising costs. My guess is that it is a third challenge or rather, threat, which had brought the founder out of retirement to again revamp the business model.
This third challenge is unionization of employees. When baristas are union members, what will happen to the quality of Starbuck’s product – not coffee, but shopping experience?
Schultz said, “I know the company must transform once again to meet a new and exciting future where all of our stakeholders mutually flourish.”
Institutional investors worry that the unionization campaign has the potential to cause reputational damage – i.e. loss of customers and pricing pressure. They will have more confidence in the company with Schultz back at the helm and so keep its stock price up.
The lesson here is that employees are a capital asset, not just a cost. They are social and human capital contributions to profitability and need to be appropriately compensated, tangibly and intangibly. Starbucks needs to offer an alternative to whatever a union might offer employees, otherwise, employees will vote for a union and the company will suffer from the entropic forces so often associated with union shop stewards.
The CEO is also a human capital asset. Unlike dollars or euros, CEOs are not fungible, one replaceable by another.
Moral capitalism is all about the conjunction of social and human capitals with financial capitals.
It takes more than money to make money.