How to make business a force for good

Guy Dauncey is a practical utopian. He lives on Vancouver Island.

Most of us know that “business as usual” isn’t working. Alongside its many obvious benefits, it has brought us the climate crisis, the biodiversity crisis and the affordable housing crisis. We have been told a thousand times that the free-market economy is the best and indeed the only type of economy that works, but surely, there must be a better way. There are thousands of businesses that serve the well-being of the planet, and we thank them, but voluntary effort is not enough. We need government action. The urgency of these crises demands the full transformation of business. So let’s get started.

  1. Enact a social-purpose business act

It was not that long ago, before the shift to financialized capitalism in the 1980s, when every business owner knew what his or her purpose was. We need to reclaim business from the cold steely clutches of maximized shareholder value. To achieve this, Canada’s Parliament and the United States Congress should each pass a social-purpose business act, which would invite every business to adopt a new charter in which they would state their social purpose and agree to a number of commitments that reflect the United Nations’ 17 Sustainable Development Goals, including annual reporting on their climate goals and impacts. To give the act teeth, after five years, every business that has not adopted the new charter would lose access to government procurement contracts, pay higher corporate taxes, and pay higher interest on bank loans, courtesy of central banks. I suspect that for many businesses the new charter would be welcome, and not pose a problem – 73% of executives surveyed by the United Way’s Social Purpose Institute believe that having a social purpose helps their company navigate today’s turbulent environment.

  1. Strengthen social-purpose governance

One of the new charter’s expectations would be for companies to have 50% women and racial diversity on their boards. In 2021, women held 23.4% of the board seats among TSX-listed companies. In 2018, just 5.9% of the directors in the Financial Post 500 were people of color, whereas they make up 23% of Canada’s population today. For larger companies, governments need to legislate diverse, publicly appointed boards of trustees who would be a voice for the public good, and for nature.

  1. Form partnerships with labor unions

It makes no sense to deny your workers the inherent human right to organize. Governments in North America need to pass legislation similar to Germany’s, which requires workers to elect representatives to make up a third of the boards of companies with between 500 and 2,000 employees, and 50% in larger companies. A healthy partnership would open the door to jointly negotiated benefits such as Germany’s kurzarbeitwhich allows employers to send workers home or reduce their hours at times of economic crisis, with the state picking up a large portion of their lost income, or something like Sweden’s job security councilsinto which employers pay 0.3% of their revenues to retrain laid-off employees and help them find new jobs.

  1. Overcome the oligopolies

What chance does a smaller business have if a rival company is permitted to merge with its competitors and control the market, which has happened among Canada’s supermarkets, banks, telecoms companies and newspaper chains? Is it right that a handful of companies can use their oligopolistic power to increase prices and drive down wages? We need Parliament to legislate the breakup of the oligopolies and restore a competitive market.

  1. Encourage employee ownership

What can an owner do if she wants to retire but has no transition plan? In its 2022 budget, the federal government said it would amend the Income Tax Act to introduce employee ownership trusts. But the government needs to complete its work on the planned trust, which would assist employees to buy their business, either as a workers’ cooperative or an employee stock ownership plan (ESOP), supported by legal advice and financial loans. The benefits would be many. In the USfollowing the 2008 crisis, employee-owners were four times less likely to be laid off, according to the National Center for Employee Ownership. ESOP workers have 25% greater retirement funds and receive 5 to 12% more in wages. Over 10 years, ESOP companies have 25% higher job growth. In the US, the Fifty by Fifty initiative aims to grow the number of employee owners to 50 million by 2050.

  1. Require personal responsibility

Limited liability corporations are deemed to be “persons” that have – among other things – the right to employ people, buy land and extract resources. They are granted life in perpetuity and can thrive, however much harm they cause to people or planet. If their owners and directors want to avoid legal liability for a crime, they create a subsidiary to carry the blame; in this way they enjoy immunity if they commit a human rights or environmental violation. By all the principles of moral philosophy, blame should be attached only where there is agency. Only people have agency. Executives, directors and investors should bear the responsibility for their misdeeds, not the corporation. Such a change, enacted in law, would increase risk to shareholders and directors, requiring them to exercise greater social responsibility while reducing risk to the planet, communities and workers, who have for far too long been on the rough end of corporate gain-seeking .

  1. Adopt a cooperative mindset

The Italian region of Emilia-Romagna has a strong cooperative business tradition. Using what’s known as the Emilian model, private businesses there engage in a cooperative clustering in which they pool funds to invest in joint research and development, purchasing, training, technology transfer and exports. They help each other by sharing contracts and subcontracting to rivals, knowing that the altruism will be reciprocated. In consequence, Emilia-Romagna has become one of Italy’s most prosperous regions, with the fourth-highest per capita income, the fourth-lowest unemployment, and the least inequality between rich and poor in Europe. It’s hard to legislate for such a cultural shift, but the government could go out of its way to promote this kind of sharing and cooperation, since the benefits are so clear.

As for banking and finance? That’s for another day.

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