Socialism isn't the answer, but capitalism must be fixed

By Martin WhittakerOpinionFOXBusiness

What is conscious capitalism?

First United Bank & Trust President Greg Massey gives his definition of “conscious capitalism.”

In recent months, a growing number of CEOs have warned about a possible lurch toward socialism in America amid mounting concerns that today’s version of capitalism is broken.

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JPMorgan Chase CEO Jamie Dimon stressed in his annual letter to shareholders this year that socialism would be “a disaster for our country,” noting that it “inevitably produces stagnation, corruption and often worse.” (Growing up in the 1970s in Britain, I remember this first hand.)

Legendary investor Warren Buffett echoed these concerns earlier this month at Berkshire Hathaway’s annual meeting, rejecting socialist policies and declaring capitalism “a miracle” in America.

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Though the societal stress fractures created by unbridled capitalism are undoubtedly real, the concerns of these CEOs are understandable. But lurching to so-called "socialist" reforms is not the only way to get America’s economy working for more people. In fact, only a small fraction of Americans today say they think socialism is the solution.

A more viable alternative to the current “crisis in capitalism” is hidingin plain sight: it is a “just” alternative.

We have surveyed more than 80,000 Americans, asking what matters most regarding “just” business behavior – in other words, the business practices ordinary Americans believe U.S. companies should prioritize, ranging from worker treatment to customer safety to investments in communities and the environment.

Across demographics – high-income, low-income, men, women, millennials, boomers, Democrats and Republicans – Americans expressed remarkably consistent views on how the private sector should rebalance its priorities.

Specifically, Americans want companies to prioritize worker issues like fair pay, good benefits, equal opportunity, and career development most of all,  followed by customer treatment and privacy, beneficial products, environmental impact, job creation, community support, as well as ethical leadership and long-term financial growth.

Significantly, these priorities are almost the direct opposite of those that Americans believe companies are actually setting today, with 59 percent of Americans believing that the top priority in the eyes of the corporation is to serve its shareholders.

What these surveys make clear, however, is that while Americans do believe the private sector needs to adjust its priorities, the solution is not to reject capitalism, it’s to shift it onto a better track.

Americans want a capitalist economy that is fair and just, that they have a genuine stake in, and that they feel is working for them, not against them. Balancing the interests of all stakeholders, not simply feeding shareholders, is the key.

A fair day’s pay for a fair day’s work. Being treated as a human; supporting local communities; sourcing locally; providing good jobs. These are the things that matter today to the majority of Americans.

Better business

The good news is that this more balanced approach is actually better business. Each year, we rank the 1,000 largest publicly-traded U.S. companies according to how well they perform on the priorities of the American people. And the top-performing companies are not only driving change on the issues Americans care about most, they also exhibit lower investment risk and provide greater returns.

For example, the U.S. companies that are best-aligned with the priorities of the American public cumulatively outperformed the Russell 1000 by 3.8 percent from November 2016 to April 2019. Not only that, but the companies in our JUST Index pay their median U.S. worker 7 percent than the excluded companies, recycle 9x more of their waste, give 4x more of their pre-tax profits to charity, and paid 60 percent fewer worker safety fines, to name a few attributes.

The most just 20 percent of companies in every sector we rank have outperformed the bottom 20 percent by 9 percent per year in live trading over the past two and a half years.

The results are even more pronounced at the company level. Microsoft, ranked as last year’s most “just” company, has been on a winning streak, and last year even briefly reclaimed its spot as the world’s most valuable publicly traded company. At the same time, Microsoft excels in promoting work-life balance by providing child care assistance, regularly conducts and discloses its pay equity analyses, and has achieved 100 percent carbon neutrality.

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Another highly-ranked company, Procter & Gamble, has returned 38 percent since November 2016, nearly double the 22 percent return of the S&P 500 Consumer Staples index over this period. P&G has committed to 50/50 representation of women and men across the company, aims to eliminate sending all of its manufacturing waste to landfills by 2020, and is highly rated for its customer satisfaction and customer service practices.

Trust is a two way thing. Deepening public trust in capitalism as a force for greater good requires companies to place a little more trust in the public’s vision for American capitalism.

TickerSecurityLastChange%Chg
JPMJP MORGAN CHASE & CO.111.35+0.58+0.52%
BRK.ABERKSHIRE HATHAWAY INC.305,362.00-993.00-0.32%
MSFTMICROSOFT CORP.126.22-1.85-1.44%
PGPROCTER & GAMBLE COMPANY107.33-0.12-0.11%

By shifting corporate behavior onto a more just course, we can breathe life back into the American Dream and restore faith in markets and business as the best path to mutual prosperity. Now is the time to act.

Martin Whittaker is CEO of JUST Capital.