Managing Leadership^®

The question of corporate social responsibility has taken on numerous dimensions over recent years. And now Bill Gates has added a new one, called Creative Capitalism, by means of which he wants to encourage corporations to seek out social approbation, in addition to profits.

But such an aim will not be adopted as a principal or coequal goal alongside of profits without more than moral encouragement. If it doesn’t increase or threaten the bottom line, it isn’t likely to happen. This effect could be approached through combinations of tax incentives and regulatory concessions, perhaps. Even popular campaigns to support or sanction, as appropriate, corporations for their social behavior, as we have seen in recent years, can have at least superficial influence in this area.

But that isn’t what Gates is talking about. He wants a motivation to engage in this sort of behavior that arises inherently from within the organization. Please see two contrasting viewpoints on this, by Gary Becker and Richard Posner, at The Becker-Posner Blog. They discuss this from the perspective of its consistency with capitalist economic theory, arriving at somewhat differing opinions.

Along related lines, some while ago, I involved myself in the reinstatement of a dormant program that had been intended to develop certain competitive advantage clusters in a particular region. Unfortunately, I was soon compelled to abandon my (pro bono) efforts on behalf of this project, which, sadly, faded away yet again.

The problem was that its managers felt the logic of the endeavor was sufficiently compelling to cause the clusters to spring forth, essentially, on command. Their approach consisted almost entirely of idealistic haranguing of their targets amplified by the latest internet technology. The proposed development and use of market incentives to promote centers of commercial gravity around which such clusters might, with proper oversight, naturally develop seemed too abstract, and lacking in doctrinal purity.

But managers - even directors - of businesses owned by others shouldn’t be making fundamental decisions like this about strategic identity and purpose on the basis of doctrinal or social service issues on their own initiative. ln the end, you do well by finding new ways to do business, not new excuses for doing it.

It must be said that the general human condition - virtually everywhere in the world that is able to interact with the capitalist economic system - is improving in breathtaking ways largely due to - not in spite of - current profit-centered incentives. The way to keep it improving is to find and facilitate market-based ways for people to benefit each other.

And, in fact, the peculiar mechanisms of capitalism are beginning to drive just such a process. As mature markets become saturated, attention is turning to low-income segments of domestic markets, and to lower-income economies, generally. And we are learning that while individual disposable income in these segments is lower than in other parts of the market, the segment as a whole is commonly larger, and often substantially so. As a result, business is beginning to explore the needs of these market segments, and to find ways to serve them, to the sustainable benefit of all.

That, it seems to me, is real creative capitalism. What do you think?

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Today’s tip: In light of our recent discussions here of shareholder influence in the corporate system, please see this terrific piece from The Economist about an industrial town in California. Cities are, after all, incorporated by the state with similar requirements related to their legal structure and operation. And this one has a residential population (shareholders, if you will, or owners) of only about 90, but a daily working population (customers) of around 45,000. Well worth your time.

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