A company’s values and norms can
resonate to some extent with their societal counterparts by the company providing
goods and services of value to customers resulting in a reduction of their
suffering or increase in their happiness. Providing a net-value (the value to
the customer less the price) to people can resonate with societal values and norms
that esteem happiness and frown on suffering from want. Indeed, a utilitarian
ethic can apply to the provision of as much value as possible in the form of
goods and services that reduce the suffering or increase the happiness of as
many people as possible. Legitimate wealth can “result from having provided a
significant amount of value to a significant number of people.”[1]
Even fortunes, according to this ethic, are justified by the provision of “a
very unusual form of value to a very unusual number of people.”[2]
Utilitarianism is popularly known from the expression, the greatest good to the
greatest number (i.e., of people). Of course, an ethic justifies what should be, whereas the extent to which a
company’s values and norms approach those of society is a descriptive matter. Describing the degree of fit is not to say that
a company’s values and norms should (i.e.,
normatively) have that degree of fit, or even more. Ethical reasoning would be
needed to supply the normative contention; such reasoning involves
argumentation that the extant societal values and norms should be held generally speaking and specifically by companies.
The fact that the values and norms of many German companies in the NAZI era
resonated with societal values and norms is not to say that the managements should have sought to fit organizational
values and norms with NAZI values and norms. The field of business & society,
which is oriented to the degree of fit that exists descriptively between a
company (or the business sector) and a society (or internationally-held values
and norms), is thus distinct from business ethics, which is oriented to
providing ethical justification for what managers and companies should do. With regard to the former
field, companies can orient themselves even closer to societal values and norms
than by providing value to customers and even taking other stakeholder
interests into account by being primarily oriented to taking on a serious
societal or global problem. In terms of business ethics, such an orientation
can be said to be one that a company should have because an unusual number of
people (even beyond customers and other stakeholders) could receive an unusual
amount of value. Climate-change is such a problem, and Heliogen’s breakthrough
exemplifies such an extraordinary mission.
Generally speaking, a mission
that is primarily geared to solving a serious societal (or global) problem goes
beyond providing value to customers and even taking into account the interests
of other stakeholders. In such a mission, a society or even the species itself is
the main recipient of the extraordinary value even though customers receive value
too. Whereas the traditional business model is geared to profiting by selling
value to customers, a company’s mission that is dominated by providing
extraordinary value to a society or to humanity worldwide views profiting from
sales to customers as a means. An opportunity cost thus exists in such a
mission due to the profit forgone from customers due to the orientation being
foremost to the macro problem.
Even though spending capital to
solve a macro problem is not the same as paying externalized costs of the
problem, an opportunity cost can arise if the net present value of the profits
in the long-term is less than the R&D spending up-front. Even if the
mission fits within the traditional business model (i.e., the net present value
is more rather than less), the risk taken on because the substantial R&D
outlays are not met with immediate profits can be said to be an opportunity
cost in pursuing an intractable societal or global problem by coming up with a
breakthrough. The opportunity cost can be viewed as paying such that future
externalized costs of the problem will not occur. Of course, if a company
solves the entire problem, rather than merely reducing that which has been
making and would otherwise make the problem worse, most or all of the current externalized
costs may disappear and thus not need to be paid. Such a company has in effect
taken upon itself the relevant externalities (i.e., covering those costs
otherwise left to society).
By externality, I mean a cost
that under the traditional business model is borne by society (or humanity)
rather than by a company or the business sector. For example, as of 2020, companies
had not had to pay even a fraction of the costs of climate change even though
the business sector had contributed to the problem by polluting. The default
stance under the traditional profit model is typically defensive; a less common
proactive stance is to reduce the company’s contribution of the problem, such
as airlines did in using more efficient engines. An even less common stance is
to be primarily oriented to reducing the contributions from other sources and
even to solving the macro problem itself. As argued above, just the risk taken
on can put this stance beyond the traditional business model. Such a stance, in
being oriented beyond customers and even other stakeholders to focus on a
societal problem, fits under another paradigm. This is not to say that it is
based on corporate social responsibility, for a company does not have a
responsibility to orient itself to reducing or solving a societal problem
except as may happen as a result of providing value to customers. Indeed, a
company’s founding investors and management may want to tackle a societal problem, rather than feeling obligated. In the case of climate
change, the likely downside for the species already known in 2019 could be
enough of a motivation even if the founding investors and management do not
feel responsible for the problem.
Even though a responsibility may
not pertain, the organizational values and norms of a company oriented to
minimizing or solving a societal problem stand a good chance of approaching
their societal counterparts—closer than from merely satisfying customers and
even other stakeholders. That is to say, beyond stakeholder management, externalities
management can be said to be oriented to societal (or macro) level problems. Such
management had been rare, at least by 2020, because few companies had been principally
oriented to societal or global problems without simply relegating them to a
corporate social responsibility program as if out of a sense of responsibility.
Whereas the literature on stakeholder management and CSR had been around for
decades by 2020, not much was written on externalities management that subordinates
profit-seeking to reducing or solving a societal problem.
Management geared to
externalities can be problematic, especially for publically-traded companies,
whose managements are bound by fiduciary duty to look primarily at the
short-term returns to stockholders. This duty is firmly grounded in property
rights. Can such managements afford to put solving societal problems as
foremost? Heavy R&D spending upfront with (admittedly healthy) profits only
if and after a breakthrough has been invented and implemented by customers is
not the typical way of attracting and retaining equity capital. Language in the
charters would have to specify the primary purpose of the company as meaning
that expedited profiting would be excluded or subordinated to reducing or
solving a particular societal problem. A company’s default purpose is
admittedly to make a profit, but property-rights give the owners (i.e., the
stockholders) the right to set another purpose in place of the default, in
which case investors have no reason to be upset when the purpose is pursued
even at the expense of quarterly earnings and dividends.
By 2020, climate change had
emerged as a major problem facing humanity with dire consequences being
predicted to occur in decades rather than centuries. Heliogen, a start-up
funded in part by Bill Gates, the founder of Microsoft, and at least one other
billionaire, commenced as such a company oriented to inventing a product that,
when sold to industrial customers, would significantly reduce carbon emissions
and thus hopefully stave off the worst of the dire consequences. That is,
Heliogen put its capital toward discovering a breakthrough that would reduce
future externalizable costs even though the company’s high R&D costs would
not be met with profits for some time. With a focus on achieving a breakthrough
that would be of significant value to the world even beyond stakeholders, the
company’s management must have known that profits would be long-term-oriented, rather
than relatively short-term profits from incremental values sold to customers.
The secretive clean-energy
company announced in November 2019 that artificial intelligence and a field of
mirrors could be used together to significantly reduce greenhouse emissions by
industry. The invention could generate extreme heat above 1,000 degrees
Celsius—a temperature that is about a quarter of that which is on the surface
of the Sun. “The breakthrough means that, for the first time, concentrated
solar energy can be used to create the extreme heat required to make cement,
steel, glass and other industrial processes. In other words, carbon-free
sunlight can replace fossil fuels in a heavy carbon-emitting corner of the
economy that has been untouched by the clean energy revolution.”[3]
These industries were “responsible for more than a fifth of global emissions,
according to the EPA.”[4]
Accordingly, Soon-Shiong, who sat at the time on the Heliogen board, said, “The
potential to humankind is enormous . . .
The potential to business is unfathomable.”[5]
Indeed, the company’s mission was of
such scope, rather than merely to finding a better way to make cement and
steel, that a breakthrough could result. Externalities management is geared to
making an enormous contribution to humanity. Even having an unfathomable
potential to other industries can be viewed as lying within the purview of such
management, as distinct from stakeholder management. Of course, this is not to
say that something of value would or could not be sold to customers for a profit,
but the emphasis lying elsewhere makes both Heliogen and externalities
management distinct.
Such a mission as does not
prioritize the traditional business model can be attractive to investors who
have already made their fortunes by prioritizing that model and have gone on to
worry about problems facing humanity not currently being adequately addressed
by business and government. Heliogen provided a way for Bill Gates and at least
one other billionaire to put their wealth to use on a global problem that could
even render the species itself extinct. Start-up companies can be vehicles for
rich former titans to turn their attention to such serious problems with a
feeling not of responsibility, but, rather, of satisfaction from having saved
the species. In other words, having been satisfied by playing within the
traditional business model, the aspirations of former titans can shift to the
societal or global level even if without having given up profiting completely.
In the early twentieth century, Andrew
Carnegie and John D. Rockefeller retired from business to turn to charities.
Among other things, Carnegie sponsored a library in Pittsburgh and Rockefeller
founded a university in Chicago. In fact, Rockefeller, through his foundation,
gave away roughly half of his fortune.[6]
Both men had been ruthless in business; whether their respective giving
afterward justified their business conduct (e.g., Carnegie against labor and
Rockefeller against competitors) is another question. Rockefeller went so far
as to view both his monopoly and charitable giving in Christian terms. In God’s Gold, I untangle whether
Rockefeller’s monopolistic tactics (i.e., his business ethic, or lack thereof)
can be justified by his religious mission in business and giving. For my
purposes here, it suffices to say that neither titan would have viewed his
respective company and charitable giving as being oriented to making a breakthrough
on a humungous global problem. Indeed, Rockefeller filtered requests for his
charitable giving by how efficient the money would be used; he was primarily
oriented to using his fortune to solve a hitherto intractable serious problem
facing mankind as Bill Gates was. Gate’s orientation was doubtless on keeping
climate change from being an existential threat to future generations.
Externalities management is admittedly not a
good fit for the vast majority of companies, which are oriented to maximizing
profits while minimizing risks, but not every company must be made to fit
within the traditional business model. A company can be formed and utilized in
a way that puts profit-making through the funnel of externalities management
geared to reducing or solving macro problems. Such a raison d’etre is distinct
from undertaking a social responsibility program or being motivated by a sense
of responsibility because such a company is not likely to be responsible for
the problem even if some of its investors, as former titans of industry, were
in their “other life.” The priority in such a company is that of reducing the
costs of, or solving outright, an intractable societal or global problem,
rather than self-blame or blaming others. This priority is why profit-seeking
is regarded as secondary.
1. Rod Burylo, The Wealthy Buddhist:
Buddhist Ethics, Right Livelihood, and the Value of Money (Nepean, Canada:
The Sumeru Press, 2018).
2. Ibid.
3. Matt Egan, “Secretive
Energy Startup Backed by Bill Gates Achieves Solar Breakthrough,” CNN
Business, November 19, 2019.
4. Ibid.
5. Ibid.
6. Skip Worden, God’s
Gold: Shifting Sands of Christian Thought on Profit-Seeking and Wealth, available
at Amazon.
