Stakeholder capitalism

In my area the Market Basket grocery stores were between 20 to 30% cheaper than the competition given surveys and comparing the items I would shop for. Produce was fresh, name brands available for most any product should you wish. Staff was energetic and polite (often staff at other stores were polite but certainly not energetic). As best as I can tell Market Basket was making a profit, although perhaps not enough for the current Board. There may be other interested parties to be considered, but as a customer I have sorely missed the savings on food. As a customer I don’t feel optimistic about the situation.

Several chains were re-organizing shelves before this happened, and the placements of product are still difficult to decipher the organizing principles…which should be explained but are not, to make shopping easier for the customer.

Robert Reich points to a term not heard in general media much these days….stakeholder capitalism. We do need pithy handles when trying to discuss capitalism.

In recent weeks, the managers, employees, and customers of a New England chain of supermarkets called “Market Basket” have joined together to oppose the board of director’s decision earlier in the year to oust the chain’s popular chief executive, Arthur T. Demoulas. Their demonstrations and boycotts have emptied most of the chain’s seventy stores.

What was so special about Arthur T., as he’s known? Mainly, his business model. He kept prices lower than his competitors, paid his employees more, and gave them and his managers more authority. Late last year he offered customers an additional 4 percent discount, arguing they could use the money more than the shareholders. In other words, Arthur T. viewed the company as a joint enterprise from which everyone should benefit, not just shareholders. Which is why the board fired him.

we’re beginning to see the Arthur T. business model pop up all over the place. Pantagonia, a large apparel manufacturer based in Ventura, California, has organized itself as a “B-corporation.” That’s a for-profit company whose articles of incorporation require it to take into account the interests of workers, the community, and the environment, as well as shareholders. The performance of B-corporations according to this measure is regularly reviewed and certified by a nonprofit entity called B Lab. To date, over 500 companies in sixty industries have been certified as B-corporations, including the household products firm “Seventh Generation.” In addition, 27 states have passed laws allowing companies to incorporate as “benefit corporations.” This gives directors legal protection to consider the interests of all stakeholders rather than just the shareholders who elected them.

We may be witnessing the beginning of a return to a form of capitalism that was taken for granted in America sixty years ago. Then, most CEOs assumed they were responsible for all their stakeholders.