It strikes me that as we think about the purpose of business and of our business in particular we need to consider politics. This may be an alarming idea, surely individual politics is a matter for the individual? Well yes but if you see your business beyond profit or financial gain for its own sake and talk of stakeholder interests and a unifying purpose which is intended to do “ good” in some sense, then you are very close to a political view – not necessarily party political of course but nevertheless, political. It’s important to explore the connection between business purpose and individual politics because where there is major inconsistency between the two then the fit between individual and company may be weak, leading either to a compromised business purpose, or alienated individuals or some combination of the two.

Defining terms for a moment, we might say the conventional view of business purpose is to make profit, or to create financial gain for itself and its owners, management and team members – probably in that order. The firm’s activity might be to make garden sheds but the sheds are purely a means to a financial end. The quality and price of these sheds will be purely a function of costs, the market’s requirement and the level of competitiveness in that particular sector. An ambitious and free thinking marketer might land in that business and start talking of customer satisfaction, long term affinity. They might explore product or service enhancements – a five year re-stain plan, the portable shed, the modular extendable shed, the garden themed shed, the child’s shed, the shed that’s really an extra room shed etc. But whilst this might give the company a stronger connection with its customers, it doesn’t provide a non-financial purpose. Exploring sources of possible tension then, if team members knew that the wood was sourced from non- renewable forests, that the transport was arranged from countries with poor worker’s rights, that the supply chain was just not something the management were concerned about except in terms of time, price and quality of materials.

What if the only females employed in the business were either junior admin staff or relatives of senior management? What if diversity in all its forms were alien to the owner managers? What if the CEO took the cream and the team were largely on minimum wages? Of course if the team members were unaware of these issues then there would be no tension. But if the team were “woke” then tensions might surface. If the owner managers were not prepared to countenance a more balanced approach to business then the outcome might be – lower staff retention, or an unhappy ship where even the bare commercial objectives were compromised. The picture we paint is where the team members as individuals have a world view where concern over the environment, over social issues and fairness are all very important to them. If the place they spend their working lives in doesn’t seem to reflect these concerns then it becomes clear that individual politics clashes with business culture and purpose.
If however, a business defines its purpose in a much more holistic frame, what follows for how it should be run?

One of the many issues around fairness is the distribution of income and wealth. These are considered political issues but haven’t until recently become agenda items within businesses. But that’s changed and the ratio of CEO remuneration to average staff remuneration has become a cause for concern. Average staff remuneration compared to national average is not yet a relevant metric but perhaps will become so. At a national level very broadly a left leaning government might engender a flatter distribution of income and wealth than a right leaning government. But there is no clear thinking underpinning such leanings. Such thinking today tends to be dismissed as ideology and we are all pragmatists now aren’t we? The limiting case right leaning view might be that people are entitled to what they have and earn and any interfering with that is in principle a bad thing and will lead to a talent drain and or wealth creators working less hard. The left leaning view might say no, resources should be distributed in accordance with need so equality of outcome is the shape we are looking for. The former view would emphasise the rights of the individual, the latter the rights of society. I’m exploring here what kind of political view a purpose driven business suggests. The limiting case right and left positions are rarely seen anywhere.

Capitalist leaning countries embrace a central or regional set of resources which are spread out according to need. And almost all left or socialist leaning countries encourage the growth of private wealth as an engine of growth for all. Leaving aside the important point that trickle down or cascade theory applies less well in newer, lower staffed, tech companies there is in effect a convergence of views between countries. Yet again there is no coherent thinking behind this and certainly no agreed basis for applying such thinking at an individual company level. One potential way of thinking about this lies in the work of John Rawls – former Professor of Philosophy at Harvard. In his key work – A Theory of Justice where to cut a very long book short, his thinking was that we start from an in principle position of equal outcomes but should vary that if unequal outcomes would benefit the rest. So an example might be an inventor who wishes financial reward in return for her talents. If such an inventor comes up for example with “the wheel” then we can immediately see how the rest of us might benefit. On this basis the distribution of wealth and income might be hugely skewed to the talented but the rest would have no problem with it. However, the limit to such unequal spread comes from a consideration as to how much reward the wheel inventor would need to motivate her inventiveness. Using the principle of diminishing marginal returns we might suggest that she wouldn’t need that much. Would she need more than 10 times the average pay? If she were limited to that might she down tools on further inventions or isn’t it more likely that doing good interesting work is what talented people like to do? Moreover, there is enough evidence that inequality is itself a source of discontent.

So a social democratic business runs to a purpose and sees itself as a community of shared values and rewards its people primarily for being a member of that community with some uplift if such would benefit the rest, with some sort of inequality cap. Where a company requires outside capital then the expected return for capital should always be what might be termed “reasonable” and we’d expect that part of the equity gain would be shared by the community within the business. The next question concerns process – how decisions are taken. How many companies do we know that work on a democratic basis? I don’t know any. The best firms are meritocracies and the worst are autocracies, though we have to acknowledge that some leaders are so able that an autocratic approach can yield great success. The best we can aim for on democratic business is one where the leaders consult as a matter of course, where freedom of expression is unquestioned and where glass ceilings are unheard of. The extra nuance here is that a social democratic business must, like any democracy, be run by, of and for the people but the idea of people must embrace the wider community as defined in the company purpose.

Brendan Llewellyn