HBS Research: The Role of Business in Society
Many people believe that society needs to change for market capitalism to be sustainable – and it turns out a surprising number of business leaders are among them. That’s the finding of a recent series of forums, organized by three Harvard Business School professors in Europe, East Asia, Latin America and the United States and hosted by such prominent figures as Jamie Dimon, CEO of JPMorgan Chase. Based on these discussions, the HBS professors advance a bold proposal – that business itself – not government, or even public-spirited nonprofits – should lead the charge to make the necessary changes to our capitalist system.
The book that chronicles these forums and presents the organizers’ resulting proposal is Capitalism at Risk: Rethinking the Role of Business, by Joseph L. Bower, Herman B. Leonard, and Lynn S. Paine, who say their research resulted in a set of “radical conclusions.” First, the authors concluded that the global social, political, and economic environment is not an immutable external framework to which businesses must passively respond, but rather something that firms themselves can affect through their actions. Second, it’s therefore not appropriate to consider this external environment to be “outside the appropriate purview of management.” Their third conclusion, then, is that “business leaders must, for the sake of the health and sustainability of the very system on which they depend, become better positioned to ameliorate the disruptive forces that may otherwise impinge on market capitalism.”
This is a message worth paying some attention because it addresses what future leading minds in the business world must learn to be successful. A practical graduate school education – a business school education more than others, and a Harvard Business School education perhaps most of all – permanently shapes the outlook of future industry leaders. And yet even Harvard itself has recognized the heavy criticism of the MBA industry of late. A cohort of current managers, many of whom received Harvard MBAs, have come under attack for failing to take into account externalities like financial systemic risk, extremes of income inequality, and environmental impacts.
The influence of prevailing business teachings were evident among forum participants, some of whom agreed that “executives are fiduciaries for their shareholders, and spending money to benefit the public beyond what the law requires would violate these duties.” Some also agreed that “business efforts to promote public goods may also be challenged as a usurpation of governmental authority or an illegitimate interference in the democratic process, particularly if the goods at issue are not (yet) highly valued by the broader society.”
Bower, Leonard, and Paine say that this outlook is outmoded. Business, they say, must see itself as part of the broader policy-making sphere and as a leader to serve the public good. They see this not as an act of corporate social responsibility, but as enlightened self-interest.