An expert on ethical leadership analyzes the complicated history of business people who tried to marry the pursuit of profits with virtuous organizational practices—from British industrialist Robert Owen to American retailer John Cash Penney and jeans maker Levi Strauss to such modern-day entrepreneurs Anita Roddick and Tom Chappell.
Today’s business leaders are increasingly pressured by citizens, consumers, and government officials to address urgent social and environmental issues. Although some corporate executives remain deaf to such calls, over the last two centuries, a handful of business leaders in America and Britain have attempted to create business organizations that were both profitable and socially responsible. In The Enlightened Capitalists , James O’Toole tells the largely forgotten stories of men and women who adopted forward-thinking business practices designed to serve the needs of their employees, customers, communities, and the natural environment. They wanted to prove that executives didn’t have to make trade-offs between profit and virtue. Combining a wealth of research and vivid storytelling, O’Toole brings life to historical figures like William Lever, the inventor of bar soap who created the most profitable company in Britain and used his money to greatly improve the lives of his workers and their families. Eventually, he lost control of the company to creditors who promptly terminated the enlightened practices he had initiated—the fate of many idealistic capitalists. As a new generation attempts to address social problems through enlightened organizational leadership, O’Toole explores a major question being posed today in Britain and America: Are virtuous corporate practices compatible with shareholder capitalism?
Is it possible for a business to make money without exploiting workers, polluting the environment, dodging taxes (and other social responsibilities), or swindling customers? Well, sure. Probably, anyway. At least for a while, under certain conditions. But it's not as easy as one might think. And those that try often fail. In this book, a business professor at the University of Southern California profiles some 'enlightened' business leaders who have tried, and he explains why so few large corporations have been able to adhere to the enlightened principles of their well-meaning founders.
I'll try to summarize a few key points that I took away from this below. *SPOILER ALERT* It all comes down to money.
Every now and then, someone with high ideals will start a business that respects all its stakeholders: owners, workers, customers, the local community, the environment, humanity in general.... It acknowledges its impact on them and its responsibilities to them. That's an 'enlightened' way of looking at business.
But there is another way, a Wall Street way. Many people in the business profession seem to believe that the primary business of any business is to make money. In their eyes, a business has a fiduciary responsibility to maximize profits for its owners/investors. And that's pretty much its only responsibility. Everything else, such as making better products, providing good service, creating jobs, responsibly discarding industrial waste..., aren't necessary. A business still might do such things, as long as they don't lower profits, but it isn't obligated to. If it can get away with making cheaper products, charging its customers more, cutting its workforce, working them harder, paying its remaining employees less, discarding its trash in the local duck pond, and then selling the dead ducks as a secondary product line, then that's what it should do. That's good business. Profit comes before all else.
So, when in the course of events and the passage of time, control of a business passes from its original enlightened founders and into the hands of investors, priorities change. The business that had once been someone's life's work, possibly with a goal of making at least one small corner of the world a better place, comes under the control of people who view it as little more than another profit generator. With little or no personal stake in the business, it's employees, or the surrounding community, the investors demand higher profits. New managers are brought in, managers who share the 'normal' business school outlook. With a keen eye and the ethical principles of loan sharks, they review the practices of the newly acquired business and discard those that don't add to the next quarter's profits. If the business still can't generate the level of profits needed, they have no qualms about dismembering it and selling the parts.
The author doesn't really provide any solutions to this state of affairs. Sadly, it seems to be an unavoidable consequence of free market capitalism. He is writing, as the subtitle states, a collection of cautionary tales to warn current and future entrepreneurs of what to expect if they seek to go public by selling stock to investors. He's warning them that they have to decide if the 'soul' of their company matters more than the money they can get from selling it.
The book brings several different stories of a variety of companies, which are very very interesting. The problem is that the amount of stories is so large that the book somehow loses the momentum and turns into "more of the same" very quickly. I believe it wouldn't be an issue if the author's opinion about the whole picture was presented in the beginning of the book, but the way the chapters were organised made the middle of the book (the stories themselves) be repetitive.
I would give the book 4 stars if I hadn't felt like a burden to read half of it, because the stories are really interesting; but it wasn't a book that fun to read all the time, so 4 stars is too much for it.
The title says it all: The enlightened capitalists (who cared about the workers’ pay and living condition, environment, suppliers and customers well) tried to do well by doing good, but then they eventually failed. That happens even when they were able to follow the Golden Rule and make good profits and revive their town and workers are happy and suppliers and customers are fairly treated! Why?
The reasons: 1. They eventually sold to a big public corporation that behaves normally, that is, their main mission is to maximise profits for shareholders 2. They went public themselves and were under activist shareholder pressure to maximise profits 3. The founder retired or died and the next generation leader did away with all the good practises 4. It is just genuinely hard to be good 5. The public does not really care whether a company is socially responsible or not 6. It is generally felt that if corporate leaders want to do good, they should found a non-profit instead. 7. Their success exposed the other leaders, economists, media, and they ostracised the founders, or picked bones about their practices.
So according to O’Toole these businesses cannot change the overall climate of most companies. Yet business practices had indeed improved by leaps and bounds! Just a century ago workers worked in terrible conditions, child labour was rampant, and there were no environment standards. Now things are much better, with worker compensation etc. So I think he is too pessimistic. The other thing is too many examples were given, making this book too long and soon I could not tell the leaders apart. So a 4 star book.
I actually went into this book expecting him to be more negative about Enlightened Capitalism, but he's strangely positive. I do wish that he spent more time on B-Corps and Social Entrepreneurship. I also wish there was more about alternative theories of the role of corporations, corporate entrepreneurship, gig economy, etc
It took me a while to finish this book - for which I take full responsibility. The tardiness was completely my fault, not that of the literature. What a timely read. It would be wonderful if this inspiring work were put into the hands of business leaders all over our country.
The author had high hopes that socially conscious ideals would be worked into our capitalist economic system back in the 70's and 80's, but our traditional practices took strong rein once more. The expectations that businesses exists solely to make a profit and create handsome returns for their shareholders and investors is taken as law, which it is not. In our current climate, I see a priming of opportunity for employers to creatively enact changes that focus on transforming their business models. The prioritization of much wider considerations for the lives of employee and customer, and vise-versa, could alter our society for the good of all.
The Enlightened Capitalists contains a collection of stories of business leaders whose motivation sprang from various impetus, humanist to Christian, to improve upon society as they created valuable products and services. While the financial gain of profit was never abandoned (excepting one company), the goals of improving the world AND their community was built into each foundation. Just as good were the later summary paragraphs that reviewed the lessons and examples as well as looked forward to what we might be able to still hope for and accomplish. There is so much opportunity if we cared enough to dare it.
As we look around for bright ideas and suggestions for how to make our world a better place, the lives and lessons of these brilliant hearts and minds stand as brave testimony of the worthiness of the goal and the sacrifices necessary for the undertaking. Now, as then, you will be forging a contrary path - but it is the right one.
I spent my career at one of the companies described in the book (SAIC). The description of the company, its extraordinary success, the employee ownership approach instituted by Bob Beyster (founder, CEO, president, inspirational force) are all accurate. The section in the book on Lincoln Electric does, in fact, sound a lot like the approach Beyster took at SAIC (as noted in the book).
This business model works and it works at scale. Corporate America and the Federal government should spend a lot more time trying to incentivize and replicate our approach and a lot less time trying to dictate policies that make no sense, especially those imagined by politicians with zero experience running a large and successful company.
A book of stories with few answers. Each chapter tells the story of a different executive who found ways to make their company moral as well as profitable. In most cases they failed, in a few (and only the ones that didn't go public) they were able to build a lasting institution.
O'Toole gives a quick summary of the company, what made them successful, how they were enlightened and what happened after the founder disengaged. In the depressing majority of cases, the companies reverted back to bread and butter capitalism, but there seem to be a few, such as Lincoln electric and Johnson and Johnson that found an enduring corporate culture beyond shareholder value.
I wish there was more framing of the issues, the chronological order seemed to tell the story of society's attitudes towards business rather than ways in which enlightened capitalism could play out. The last few chapters synthesizing the stories are quite flimsy, the author spends more time complaining about big tech (which was unfortunately missed in all of the case studies) than picking apart the patterns that worked and those that didn't.
4 stars for the topic, 2 stars for the execution.
Raw notes: ~Lincoln Electric ~Johnson & Johnson corporate culture ~don't go public if you want to benefit somebody other than shareholders, due to the regulatory underpinnings
I don’t read business books, as a rule, so the style and content of this book was pretty new to me. I learned a lot from it, and my understanding of capitalist enterprise was definitely expanded. It helped me to consider, as a corporate employee, where I want my career to go and the types of firms I’d like to work for. I’d probably give this as a gift to a business school student. Overall the book was clear and well-written, though possibly a bit overambitious. I listened to the audiobook, which was over 19 hours long, so I’d assume the book to be 500 pages or so, which is probably too long for the subject matter and intended audience. I could see myself buying this to have as a reference for the future, and returning to individual sections on their own.
Based on the huge amount of stories told by the author, does he believe virtuous corporate leadership can be compatible with shareholder capitalism? Without a doubt, the author admits it is extremely difficult for business leaders to do good, but it is also no excuse for not trying to do so. The author wishes that "by understanding how hard it is to behave virtuously, the next generation will succeed where many of the pioneers failed." As the author has put in the conclusion with his favorite quote from philosopher Garrison Keillor, "You get old and you realize there are no answers, just stories," I think this explains the importance of the volume of the stories told in this book.
They tried. Business is pulled in two different directions: to make money and be a positive corporate citizen. The book tells the stories of dozens of business leaders who try to make their businesses go above and beyond the level of good expected.
Such early leaders often turned from social good to paternalism.
Most of companies' period of greater good come to an end. The decision to be so good is based on the decision of the leader at the time. As leadership changes, the devotion to the social good activities wavers and gets lost.
Good read. Profiles of business owners who attempted to do well by their employees. Sadly, the majority of the businesses abandoned their good doing in search of profits after Wall Street got their hands on them.
Essentially, it's a book showing how capitalists have proven capitalism won't/can't work to support everyone and save the planet. The author doesn't say it in so many words, but he's, essentially, without knowing it, advocating for democratic socialism.
I learned from this survey of 500 years of enlightened capitalists & what worked or didn't in their broader purposed businesses. Some addressed externalities and others simply did "good". None really endured past the enlightened leader. Most came from altruistic motivations, not pragmatism or business sense. One takes away a jaded view, which is sobering but maybe also a bit cynical as historians can be. Good grounding and thought provoking anyway. Nothing is new? Or is it.
Give or take 20 business biographies from the dawn of the industrialization to modern times about founders and business owners who tried to do good, but whose legacy was rarely lasting beyond their lives. There is certainly a lesson or two for companies trying to dial in their engagement of environmental, social and governance values and balance them with their fiduciary duties.
James O’Toole strings a number of great historical accounts together from US and UK business history together to paint a picture of enlightened capitalism across different eras.
Most notably, he provides a sobering view on the successes of these enlightened capitalists and their ability to affect meaningful change.
Eventually, he ties these historical accounts back to the present day with examples like Whole Foods and Patagonia, to reflect on the trends that make this movement all the more powerful today.
While O’Toole does not provide a highly optimistic view on the future, he balances facts that are both positive and negative, including new types of governance structures and public / investor opinions. Overall he provides the reader space to draw their own conclusions and ends with a call to action for those inspired to make a change.
If nothing else, this presents a great fairly well-balanced representation of the difficulties of enlightened capitalism (today social enterprises, benefit corporations, etc) and is a must read for anyone looking to start a business with this mindset.
A wonderful book about business people who set an example for today's environment. You will read about people you may know nothing or little about and their contributions, such as James Penney, Robert Owen, Milton Hershey, Levi Strauss, Ken Iverson, etc.