I'm a big fan of Michael Porter, but his latest piece, "The Big Idea: Creating Shared Value," left me a bit flat. The premise of the article is that our capitalist system is currently “under siege,” with the public blaming business for social, economic, and environmental problems. In order to legitimize business in the public’s eyes, Mr. Porter and his coauthor, Mark Kramer, propose that corporations shouldn't just focus on profits– they need to create "shared value," which they define as: "policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress."
The authors go on to say that the idea of corporations creating "shared value" will start to blur the lines between for-profit and non-profit entities. And while I understand their point, I don’t think that this "shared value" concept is the big idea that is going to revitalize capitalism – for a few reasons…
#1. "Shared value" is already an innate concept in organizations where the management lives where they work. If you live in the community where your company operates, you are always concerned about advancing the economic and social conditions surrounding you. The problem arises when there is no connection to the community. Whether you’re dealing with absentee landlords of real estate or corporate entities, it's hard to care about what you never see and people you'll never meet.
#2. The issue of “shared value” isn't what is going to blur the lines between for-profit and non-profit organizations. That distinction is strictly an issue of repatriation of profits—do profits go to shareholders or are they reinvested? There are many mercenary non-profit organizations that have as little "shared value" as their for-profit counterparts.
#3. We will never have "shared value" in publicly-traded companies. Executives of publicly-traded companies won't be in the positions long if they don't maximize quarterly earnings—a goal that can never be consistent with advancing "economic and social conditions in the communities in which it operates."
In theory, I am a huge supporter of the "shared value" concept that Mr. Porter and Mr. Kramer forward. But in practice, I think we can all recognize that it will take more to "legitimize" business.
The authors go on to say that the idea of corporations creating "shared value" will start to blur the lines between for-profit and non-profit entities. And while I understand their point, I don’t think that this "shared value" concept is the big idea that is going to revitalize capitalism – for a few reasons…
#1. "Shared value" is already an innate concept in organizations where the management lives where they work. If you live in the community where your company operates, you are always concerned about advancing the economic and social conditions surrounding you. The problem arises when there is no connection to the community. Whether you’re dealing with absentee landlords of real estate or corporate entities, it's hard to care about what you never see and people you'll never meet.
#2. The issue of “shared value” isn't what is going to blur the lines between for-profit and non-profit organizations. That distinction is strictly an issue of repatriation of profits—do profits go to shareholders or are they reinvested? There are many mercenary non-profit organizations that have as little "shared value" as their for-profit counterparts.
#3. We will never have "shared value" in publicly-traded companies. Executives of publicly-traded companies won't be in the positions long if they don't maximize quarterly earnings—a goal that can never be consistent with advancing "economic and social conditions in the communities in which it operates."
In theory, I am a huge supporter of the "shared value" concept that Mr. Porter and Mr. Kramer forward. But in practice, I think we can all recognize that it will take more to "legitimize" business.
Perhaps "enlightened self-interest" or "not just for profit" may be more apt?
Bob
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