You need to persevere so that when you have done the will of God, you will receive what he has promised. —Hebrews 10:36 NIV
The current popular paradigm of capitalism is marked by short-term thinking, greed, and poor governance. Because of these sins, there is increasing risk of government intervention into and control over the business systems of the world. Pundits generally offer remedies from a naturalistic perspective, which is at best incomplete and at worse erroneous.
Early in 2011, Dominic Barton, global managing director for McKinsey & Company, offered his assessment of how to remedy the problems in business (See Below). First, thinking in terms of months must be replaced by thinking in terms of years. Second, serving shareholder greed must be replaced by serving all stakeholders. And third, the governing bodies of organizations must function as owners bringing true value and wisdom to the management of organizations.
While Mr. Barton’s comments are helpful, they are from a naturalistic viewpoint; that is, his perspective is limited to solutions in the natural with no thought to the underlying spiritual reality. As an alternative, consider a biblical approach.
A biblical approach recognizes that physical reality is a manifestation of underlying spiritual reality. It recognizes that God blesses alignment with himself and therefore the real answer is to seek solutions aligned with God’s will and ways. This is the theme of the above text. To those who persevere to do God’s will until the end—by inference in accordance with God’s ways—they will receive God’s reward. Here are some thoughts on using a biblical approach to transform the current popular paradigm of capitalism.
The naturalistic approach of moving from management based on months to management based on years is helpful but incomplete. Since God is multi-generational, a more biblical view of management is multi-generational. Management must think beyond themselves to future generations. Decisions must be made looking at decades if not centuries.
The “greed is good” philosophy is clearly not virtuous. Barton’s antidote is to focus on serving all stakeholders, not just shareholders. This is a positive step but incomplete. A more complete view would be to pursue serving the Lord first and stakeholders second.
Regarding the issue of poor governance, Barton’s solution is to have boards govern as owners. Certainly this is a step forward, but a more profound view is to seek boards composed of people who know how to discern God’s will and God’s ways.
Here is your business tip. Capitalism as an economic and business philosophy is not doomed to fail. When capitalism fails, it is due to the way people practice it. The best way to remedy the current flawed practice of capitalism will not be found in naturalistic thinking but in biblical thinking. The only sound way to build an organization is based on a biblical worldview. To develop a biblically sound paradigm of capitalism requires godly people—workers and management—who are committed to living according to God’s will and God’s ways. Capitalism, when so practiced, will be an efficacious economic and business philosophy.
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Listen to Dr. Chester’s presentation on:
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“Capitalism for the Long Term”
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Available either as a PodCast or audio download.
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The near meltdown of the financial system and the ensuingGreat Recession have been, and will remain, the defining issue for the current generation of executives. Now that the worst seems to be behind us, it’s tempting to feel deep relief—and a strong desire to return to the comfort of business as usual. But that is simply not an option. In the past three years we’ve already seen a dramatic acceleration in the shifting balance of power between the developed West and the emerging East, a rise in populist politics and social stresses in a number of countries, and significant strains on global governance systems. As the fallout from the crisis continues, we’re likely to see increased geopolitical rivalries, new international security challenges, and rising tensions from trade, migration, and resource competition. For business leaders, however, the most consequential outcome of the crisis is the challenge to capitalism itself.
That challenge did not just arise in the wake of the Great Recession. Recall that trust in business hit historically low levels more than a decade ago. But the crisis and the surge in public antagonism it unleashed have exacerbated the friction between business and society. On top of anxiety about persistent problems such as rising income inequality, we now confront understandable anger over high unemployment, spiraling budget deficits, and a host of other issues. Governments feel pressure to reach ever deeper inside businesses to exert control and prevent another system-shattering event.
My goal here is not to offer yet another assessment of the actions policymakers have taken or will take as they try to help restart global growth. The audience I want to engage is my fellow business leaders. After all, much of what went awry before and after the crisis stemmed from failures of governance, decision making, and leadership within companies. These are failures we can and should address ourselves.
In an ongoing effort that started 18 months ago, I’ve met with more than 400 business and government leaders across the globe. Those conversations have reinforced my strong sense that, despite a certain amount of frustration on each side, the two groups share the belief that capitalism has been and can continue to be the greatest engine of prosperity ever devised—and that we will need it to be at the top of its job-creating, wealth-generating game in the years to come. At the same time, there is growing concern that if the fundamental issues revealed in the crisis remain unaddressed and the system fails again, the social contract between the capitalist system and the citizenry may truly rupture, with unpredictable but severely damaging results.
Most important, the dialogue has clarified for me the nature of the deep reform that I believe business must lead—nothing less than a shift from what I call quarterly capitalism to what might be referred to as long-term capitalism. (For a rough definition of “long term,” think of the time required to invest in and build a profitable new business, which McKinsey research suggests is at least five to seven years.) This shift is not just about persistently thinking and acting with a next-generation view—although that’s a key part of it. It’s about rewiring the fundamental ways we govern, manage, and lead corporations. It’s also about changing how we view business’s value and its role in society.
There are three essential elements of the shift. First, business and finance must jettison their short-term orientation and revamp incentives and structures in order to focus their organizations on the long term. Second, executives must infuse their organizations with the perspective that serving the interests of all major stakeholders—employees, suppliers, customers, creditors, communities, the environment—is not at odds with the goal of maximizing corporate value; on the contrary, it’s essential to achieving that goal. Third, public companies must cure the ills stemming from dispersed and disengaged ownership by bolstering boards’ ability to govern like owners.
None of these ideas, or the specific proposals that follow, are new. What is new is the urgency of the challenge. Business leaders today face a choice: We can reform capitalism, or we can let capitalism be reformed for us, through political measures and the pressures of an angry public. The good news is that the reforms will not only increase trust in the system; they will also strengthen the system itself. They will unleash the innovation needed to tackle the world’s grand challenges, pave the way for a new era of shared prosperity, and restore public faith in business.
1. Fight the Tyranny of Short-Termism
As a Canadian who for 25 years has counseled business, public sector, and nonprofit leaders across the globe (I’ve lived in Toronto, Sydney, Seoul, Shanghai, and now London), I’ve had a privileged glimpse into different societies’ values and how leaders in various cultures think. In my view, the most striking difference between East and West is the time frame leaders consider when making major decisions. Asians typically think in terms of at least 10 to 15 years. For example, in my discussions with the South Korean president Lee Myung-bak shortly after his election in 2008, he asked us to help come up with a 60-year view of his country’s future (though we settled for producing a study called National Vision 2020.) In the U.S. and Europe, nearsightedness is the norm. I believe that having a long-term perspective is the competitive advantage of many Asian economies and businesses today.
