Making a Business "Conscious"
John Mackey opened a small health food store in Austin in 1978, which in 1980 merged with another local natural foods store to form the foundation on which Whole Foods Market was born. Mackey has led Whole Foods Market since the beginning through mergers and internal development to create a FORTUNE 500 company. Whole Foods is now one of the top 12 supermarket companies in America and the world's largest natural foods retail chain.
Mackey says his business philosophy is to act with care and responsibility toward all of the various stakeholder groups of the company and to operate Whole Foods Market with social and environmental responsibility. He was named 2003 Entrepreneur of the Year by Ernst & Young.
Justin Fox: So what is conscious capitalism?
John Mackey: First you have to understand the basic principles of capitalism that help capitalism to flourish and be successful or if you don’t have these principles it’s not going to work. One is you have to have property rights. We know in countries like in South America, for example, that don’t have well established property rights, it’s very hard to create a real type of entrepreneurial climate. You have too much of the economic activity goes underground. It goes in a sense to the underground markets and people will not invest for the long term if they can’t be assured that they retain rights to their property, if it’s going to be arbitrarily confiscated by governments or bureaucracies that really undermines the ability for capitalism to flourish.
You also need the ability to trade your property and trade it to pretty much whoever you want to. If you can’t do that, then in a sense you’re not going to optimize the economic system. You also need a rule of law. Laws and regulations that are well understood, so you can factor those into your business decisions and you can adapt and adjust... and those rules, the rule of law needs to be applied equally to everyone, so it’s not selectively applied against you. For example, at Whole Foods if we go into a city and they have regulations about cheese in the Health Departments, and they say "Your cheese has to be refrigerated," it’s fundamentally unjust if those rules are applied to Whole Foods Market, but they’re not applied to our competitors—which I might add does happen in New York City some. But in general America has consistency in our applicational laws.
So those are some of the key principles for the economic system and then you need to have conscious businesses and a conscious business is one that becomes conscious of its higher purpose. A purpose is very important to the conscious business. It’s not just about maximizing profits and shareholder value. It’s becoming aware of the deeper purpose that a business has. Secondly, it’s recognition of the stakeholder model, that stakeholders, the customers and employees, investors, suppliers, larger communities, the environment are all interdependent on one another and you operate the business in such a way that it’s not a zero sum game. You’re trying to create value for all of these interdependent stakeholders, not just maximize shareholder value or maximize profits.
Thirdly, you need to have what we call conscious leadership. Leadership that... or you could also call it "servant" leadership, one that is in a sense identifies their own flourishing with the flourishing of the organization. It’s not an ego-driven type of project where the leadership is trying to maximize their own personal gain. They’re trying to serve the organization and its purpose.
And fourthly you have to create a conscious culture, a culture that its strategies, structures and processes allow the organization to fulfill its higher purpose, implement the stakeholder model, allows conscious leadership to flourish. And all four of those key principles tend to interact with each other, so the conscious capitalism, the larger sense consists of those fundamental economic principles I outlined combined with a series of conscious businesses that are exchanging with each other in a conscious way with purpose, with stakeholder model and with conscious leadership.
A conscious business is not just about maximizing profits and shareholder value. It’s becoming aware of the deeper purpose that a business has.
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