Category: Commentary

In late May, the U.S. Securities and Exchange Commission (SEC) announced it was proposing a new regulation for the disclosure of ESG data.

Washington D.C., May 25, 2022 —

The Securities and Exchange Commission today proposed amendments to rules and reporting forms to promote consistent, comparable and reliable information for investors concerning funds’ and advisers’ incorporation of environmental, social and governance (ESG) factors.  The proposed changes would apply to certain registered investment advisers, advisers exempt from registration, registered investment companies and business development companies.

“I am pleased to support this proposal because, if adopted, it would establish disclosure requirements for funds and advisers that market themselves as having an ESG focus,” said SEC Chair Gary Gensler.  “ESG encompasses a wide variety of investments and strategies.  I think investors should be able to drill down to see what’s under the hood of these strategies.  This gets to the heart of the SEC’s mission to protect investors, allowing them to allocate their capital efficiently and meet their needs.”

The proposed amendments seek to categorize certain types of ESG strategies broadly and require funds and advisers to provide more specific disclosures in fund prospectuses, annual reports and adviser brochures based on the ESG strategies they pursue.  Funds focused on the consideration of environmental factors generally would be required to disclose the greenhouse gas emissions associated with their portfolio investments.  Funds claiming to achieve a specific ESG impact would be required to describe the specific impact(s) they seek to achieve and summarize their progress on achieving those impacts.  Funds that use proxy voting or other engagement with issuers as a significant means of implementing their ESG strategy would be required to disclose information regarding their voting of proxies on particular ESG-related voting matters and information concerning their ESG engagement meetings.

Thus, did the SEC, a global leader in using disclosure of material facts to improve the outcomes of financial capitalism, let slip that with ESG, beauty is in the eye of the beholder?  From a disciplined standpoint of valuation methodology, ESG is chaos on stilts.

To bring about its desired order in investing markets, the SEC’s notice of its proposed regulations is 362 pages long, not quite as long as Qur’an, but likewise a challenge to memorize.

John C. Wilcox, Chairman Emeritus of Morrow Sodali, has written a short commentary titled “Beyond ESG – An Integrated Approach to Governance, Investing and Regulation” that I wanted to share with you:

“Time for a Name Change” is the title of a thought-provoking article posted recently on LinkedIn by Stephen Davis, Senior Fellow and Associate Director at Harvard Law School’s Program on Corporate Governance.  Davis argues that the acronym “ESG” has outlived its usefulness and needs to be replaced.  Writing largely from the viewpoint of investment professionals, he suggests a new term: “360-degree investing.”  I agree with Davis that a new term to replace ESG is urgently needed.  But while “360-degree investing” works for asset managers, it does not work for companies.  Even so, Davis’s key point makes sense – “ensuring that both investors and companies take account of risks and opportunities that lie outside conventional accounting.”  To replace “ESG” for companies, as well as investors, I would propose use of the already familiar term “integrated.”  One of the dictionary definitions of integrated is: with two or more things combined in order to become more effective.  Applied to evaluating business enterprises, an integrated approach could effectively combine environmental, social and governance considerations together with traditional financial and accounting metrics.  In addition to inclusiveness, an integrated approach could lead to more realistic regulation aligned with the way businesses are run day-to-day.  Corporate managers must constantly keep their eyes on the road, juggle multiple risks and opportunities, monitor competitors, listen to customers and stakeholders, adjust to market changes and react to ad hoc events.  Managing a business enterprise is itself an exercise in integrated thinking and organization.

In support of the proposed integrated approach, here are a few points to be considered:

1. We should build on the concept of “integrated reporting” that has already achieved widespread acceptance globally.  The International Integrated Reporting Council (IIRC) has long promoted efforts to reduce companies’ siloed organizational structures and encourage holistic corporate management and reporting.  The IIRC is now a part of the Value Reporting Foundation, which also includes SASB and which through the IFRS Foundation has established the International Sustainability Standards Board (ISSB).

2. We need to eliminate the “zero-sum” thinking that pits ESG against traditional accounting and financial metrics.  One of the most important lessons we have learned from the emergence of ESG is that these so-called “intangibles,” “externalities” and purportedly “non-financial” factors do in fact have measurable financial impact on companies.

3. It is no longer appropriate to refer to E, S and G collectively or to treat them as a separate category of issues distinguishable from the traditional business considerations captured in spreadsheets and financial reports.

4. Instead of pitting shareholders against stakeholders, we should recognize that they share a common interest in companies’ wellbeing, financial success and sustainability.  Indeed, the new generation of millennials and GenX shareholders, together with leading institutional investors, such as BlackRock, are already asserting that ESG issues are integral to their evaluation of the companies they own.

5. We need to put an end to the pushback against ESG that is coming from a variety of sources, including academics, hardline capitalists and politicians.  Ideology and politics should not play a lead role when we are considering what is best for businesses, stakeholders and the capital markets.

6. It is time to reexamine the traditional prescriptive, investor-based definition of “materiality.” ESG has made us aware that financial materiality needs to be addressed from multiple stakeholder perspectives.

An integrated approach to materiality can best be accomplished by companies internally, using what Uber Technologies in a comment letter to the SEC on climate change describes as an individual “company-specific materiality assessment”1 to supplement legal standards.  We need to admit what has always been true: companies, not regulators, ultimately decide what is material to their business.  An integrated approach to materiality would require a more flexible legal definition, including a comply-or-explain option, that could accommodate “company-specific materiality.”  ESG has had a transformative effect on companies, redefining the corporate social compact, highlighting the materiality of E, S and G issues and introducing important new criteria, such as corporate purpose and culture, human capital management and sustainability.  Companies are learning how to factor these issues into their business strategy and how to disclose them.  Investors, in turn, are adapting to these demands and looking more deeply into the inner workings of the companies they own.  Standardization and comparability are still needed.  Regulators in the EU and the United States are not far behind with new laws and proposed new disclosure requirements.  The hope is that global regulators, NGOs and independent standard-setters, in collaboration with the IFRS Foundation and the ISSB, will work together to promulgate disclosure requirements that encourage an integrated approach to management and governance, thereby enabling companies to “tell their own story” to stakeholders and the capital markets.

Of course, the Caux Round Table simply proposes to modernize valuation methodology with the application of risk assessments of the management of stakeholders and the addition of human and social capital accounts to balance sheets.

The SEC is also investigating the asset-management arm of Goldman Sachs with respect to its ESG funds.  Regulators have concern that marketing ESG labeled funds can be a superficial way to sell financial products, not on the basis of sound risk analysis and realistic valuations, but more to address the status and reputation needs of investors to demonstrate their concern for climate change or diversity in the workplace.  Such funds facilitate the flow of capital to firms which take those concerns as their business objectives.

On the other hand, LG Chem believes that its investing in chemical recycling, biodegradables and renewable energy, in battery materials like carbon nanotubes and in new drugs for gout and some types of obesity, will find markets and drive profits.  It calls this strategy investing in “ESG values.”

Professor Diane Coyle at the University of Cambridge writes that “the movement towards ESG reporting certainly highlights important issues … But the belief that companies can solve such pressing issues – through pursing ESG standards or otherwise – is deeply flawed. …At root, demanding that companies use ESG metrics would effectively be asking private companies to legislate social outcomes.  The calls for companies to put social aims at the heart of their activities mean placing small numbers of executives in powerful political, economic and social roles.  But business leaders should not be left free to make what are, in fact, important collective decisions. … Corporate executives should consider the moral aspects of every choice they make. But some of the questions raised about corporate responsibility and ESG reporting do run headlong into political choices.”  (Foreign Affairs, Jan/February 2022)

A recent news flash is that Elon Musk wants out of his deal to buy Twitter.  He claims he was misled as to its value and that the company has not provided sufficient data for him to assess its true worth as a capital asset.

I like using the word “worth” in such a case where a company makes money off social media.

We can learn from a play on words – worth can indicate cash value, but it also can indicate the intangible qualities of goodness, which are honorable, highly thought of, but not necessarily reducible to the “cash nexus” that Karl Marx was so fond of disparaging.

Twitter, on the stock market, is a highly valued cash asset, but is its business of social media worthy of our esteem and appreciation?  Is social media worthy of a great civilization?  Why should society pay a lot of money for a service that sows division, corrupts social capital and engenders low self-esteem, resentment, despair and hurt feelings in many lives?  Why not treat social media like guns, drugs and alcohol?

The root words for our modern English word “worth” are:

Old English weorþ “significant, valuable, of value; valued, appreciated, highly thought-of, deserving, meriting; honorable, noble, of high rank; suitable for, proper, fit, capable;” from Proto-Germanic *wertha- “toward, opposite,” hence “equivalent, worth” (source also of Old Frisian werth, Old Norse verðr, Dutch waard, Old High German werd, German wert, Gothic wairþs “worth, worthy”), which is of uncertain origin.  Perhaps a derivative of PIE *wert- “to turn, wind,” from root *wer- (2) “to turn, bend.” (https://www.etymonline.com/word/worth)

The root word for our modern English word “wealth” is: mid-13c., “happiness,” also “prosperity in abundance of possessions or riches,” from Middle English wele “well-being.”  Farther back, the root concept in Proto Indo-European was “wel” or to wish, to choose, to prefer, to desire.

With the narrative of wealth, our choosing to be happier is welded to the materialism of money and assets at the lower levels of Maslow’s hierarchy of human needs, not to the higher levels, where well-being flows more from our internal possession of pride, courage, love and resilience.

Musk argues that Twitter has failed in producing data on how many actual human users it has.  His challenge is that if many “tweets” come from bots and not real people, the revenue potential of the company is better projected using a lower number of “users” because bot use of Twitter won’t generate any value to the company.  Bots are free-riders.  Twitter makes its money by receiving data on human persons to be used more effectively to exploit their needs and desires through advertising to them.  Twitter accounts which can’t produce data which is wealth producing can’t add value to the company’s asset value.  Thus, Twitter’s current market value is not realistic, just what the herd of market players is willing to believe it is worth.

The simple formula for calculating the value of a firm is to project future revenues and then discount those future earnings back to the present to arrive as a net present value of future income.  A company which will most likely earn $100 in the future is worth more today than a company positioned to earn only $50 over that same span of time.

Valuation is the heart and soul of capitalism.  It is simultaneously the interdependent vascular and nervous systems of the firm and the private economy.  Valuation draws forth capital and sends it around to the different cells to energize them with life.  Valuation gathers information and processes it in order that the system’s boney structures are nourished and its dynamic muscles and ligaments can move optimally, resulting in work.  Without good valuations, there is system disfunction – chaos, loss, lethargy, the death of bankruptcy.

Turning profits into capital is often analyzed as paying a return on financial capital – dividends to owners and interest to creditors and amortization of their loans.

But a firm has other forms of capital which need tending: its stakeholders, those who keep it alive and kicking healthily, are also capital assets.  Employees – human capital – need salaries and benefits and respect; the social capital of governance and culture needs constant attention and that is a cost to the firm.  Cultivating customers with quality and attractive prices, with developing and popularizing brand appeal, is a responsible use of gross earnings.  The social capital of community needs to be kept healthy and not degraded through responsible behavior, good citizenship and charitable donations.  Managing and paying for a better environment is another use of profits to sustain a capital asset of the firm.  These expenditures on improving capital assets are costs met with gross earnings and so a factor in how the firm “profits” from its business model.

Just focusing on the “net” cash profit determined on the P&L statement short-changes the value of the company.  Not paying a return today on all its forms of capital threatens the firm’s ability to earn money in the out years.

Now, for capitalism to be sustainable, profits must be channeled into capital.  Just making profits is not capitalism, only extracting rents.  Taking profits out without using them as a return on capital is eating the seed corn.  That is stripping assets of long-term value, turning a firm into a wasting asset, like oil in the ground.  Heedlessly extracting rents is akin to rushing headlong into the tragedy of the commons.

Thus, we can learn a lot about capitalism from the Elon Musks of the world.

Yesterday’s murder of Shinzo Abe, former Prime Minister of Japan, is one more disturbing “sign of the times.”  Along with Putin’s invasion of Ukraine, with tactics that prioritize destruction of the civilian environment; Covid; China’s hegemonic military intrusion into the South China Sea; the collapse of public support for President Joe Biden in the U.S.; the resignation of Boris Johnson as Prime Minister of Great Britain; and the success of populist autocratic nationalisms, such an individual act points to systemic destabilization in the current era of human history.

Which leaves us, once again, to ask the question: “What is to be done?”

If what the Biden Administration touts as the “liberal world order” is in decline, what will take its place?  The old Athenian realism that, “The strong do what they can, the weak suffer what they must?

Can we find and have the skill and fortitude to construct a new reality of social justice for all?

But how does one overcome destabilization?  Where can be laid the foundation for system and reliable expectations of life, liberty and the pursuit of happiness, both individual and communal?

The Caux Round Table was founded to consider meliorating capitalism, creating for that purpose ethical principles for business.  It then recognized that capitalism lives within a cocoon or chrysalis of government and so advocated ethical principles for government, as well.

The third sector of civilization is society – families; civil organizations of church; healthcare; education; philanthropy; and other mediating structures of journalism, rotary clubs, etc.  We have, therefore, suggested ethical principles for civil society organizations.

On learning of former Prime Minister Abe’s murder by a 41-year-old individual male, as a learned reflex, I thought immediately of previous assassinations of political leaders – Abraham Lincoln, the Archduke Franz Ferdinand – or the sectarian murders carried out by Islamist extremists.  In those cases, the motivations had in origin in some political or religious grievance.  But what if this murder was not political in any sense?  What if it was just the craving of a dysfunctional man living uncomfortably with his anger and resentments?

I then thought of John Hinckley and his attempt to kill President Ronald Reagan.

In recent mass shootings in the U.S., the perpetrators have been isolated, alienated males from dysfunctional families, young loners drifting aimless through life.  To me, they seem overwhelmed by some psychosis, which breeds in their minds a compelling narrative of victimization and justified rage, which legitimates their psychosis as a rational response to life, as it has impinged on them.  One such destabilized young man then takes his revenge, I suppose, first on his mother and another on his grandmother and only after that on innocent, young children.

Which leads me to ask: do we also need ethical principles for a moral society?

Such a society, I presume, would not be dysfunctional or destabilized.  It would be neither nihilistic, nor theocratic.  It would sustain an equilibrium between the individual and the collective, using one to check excesses in the other.

As American philosopher William James proposed, “The community stagnates without the impulse of the individual.  The impulse dies away without the sympathy of the community.”

My optimism that technology can save us from disastrous climate change (just as it gave us the run up to potentially disastrous climate change) is rewarded when I run across reports of constructive innovations.

A Swedish steelmaker, SSAB, is building a plant that a year ago refined iron ore for the production of steel with the emission of water vapor.  Oxygen atoms must be stripped from iron ore to get iron.  Then, iron is transformed into steel.  SSAB’s new plant uses hydrogen instead of CO2 heavy coke, hydrogen separated from water by renewable energy.  Then, the hydrogen is heated to about 1,600 degrees Fahrenheit and injected into a furnace containing iron ore pellets.  The hydrogen combines with water in the iron ore to form water vapor, leaving behind “sponge” iron. The “sponge” iron is melted with recycled scrap to make steel.

The traditional steel making process produces 8% of the world’s CO2 emissions.  SSAB proposes to use electric furnaces to turn iron into steel.

Secondly, there is a systemic problem with electricity transmission grids moving green electricity.  The grids use alternating current, which must oscillate between 50HZ and 60HZ. With fossil fuels and nuclear power maintaining that stable oscillation by the inertia of the generating turbans of older plants.  With wind and solar power, there is no or too little inertia in the grid.  So, flywheels need to be added to the grid to provide the needed inertia.

In Scotland, a new plant has been built housing two giant flywheels, each of which weighs 194 tons and rotates 500 times a minute.  But existing fossil fuel stations could be repurposed to house flywheels and generate inertia for the grid.

Thirdly, researchers at MIT have soaked an order-eating clay used in cat litter with a copper solution.  The resulting compound can capture methane from the air and convert it to CO2, which is a less harmful greenhouse gas.  Devices containing this helpful compound can be put in the vents of coal mines and cattle barns to absorb methane.

If methane emissions were to be reduced by 45% by 2030, projected warming would be reduced by ½ a degree Celsius by 2100.

Another clay, zeolite, has tiny pores which permit it to function as a filter for methane.

Fourth, Alphabet (Google), Meta, Shopify and Stripe and the sustainability practice of McKinsey have pledged $925 million over nine years to buy technology which would remove CO2 from the atmosphere.  It is estimated that humanity needs to remove 6 billion tons of CO2 a year from our atmosphere by 2050.

The first message sent by the new technology of the telegraph in May 1844 was “What hath God wrought?”  The text was a bit misleading because an American had invented the telegraph and the U.S. Congress had paid for construction of the first telegraph line from Washington, D.C. to Baltimore, Maryland.  Neither Samuel Morse, nor the Congress, had much divinity to speak of.

But apparently, Morse’s “message” was of deeper meaning.  He took the question from the book of Hebrews in the Bible referring to God’s plan for the Hebrew people to achieve greatness in a land reserved for them.  I think Morse was not only referring to prospects for his own native land, but to God’s plan to have humanity invent new technologies in his creation.

Now, when we contemplate the impacts of social media, should we again praise God for what we have done to ourselves?  Is social media part of a loving and gracious God’s plan for humanity? Or maybe it’s a plan of the jealous God of the Old Testament who takes care in his own ways of the recalcitrant among us who “walk not in his ways?”  Who knows for sure?

Reid Hoffman, co-founder of LinkedIn, recently wrote an encomium to his invention in the Wall Street Journal.  His case is: “Today’s young people haven’t been ruined by social media. They’ve been equipped to unleash the power of a new technological era.”

He complains about the narrative that social media has turned them “into entitled narcissists, hopelessly distracted by superficial and trivial concerns.”  He then cites a 2018 Pew survey that found members of Gen Z valuing social media as “a key tool to connecting and maintaining relationships, being creative and learning more about the world, keeping them in touch with their friend ‘feelings.’”

Hoffman finds the Gen Z cohort living lives characterized by participation and community.

He also touts the value of growing up as a “we” and not an “I’ because careers today are all about the team, not the individual.  The individual, more and more, counts for less and less.

No wonder young people are more and more anxious and depressed.  They, themselves, don’t matter all that much.  Without safe spaces provided by “community,” their personal lives have little purpose and less meaning.  Their lot is not to find vocations, but to slog away as dependent cogs seeking recognition from the machine and always vulnerable to cancelation by the mob action of others.

In short, these network natives have little sense of personal agency.  That’s God’s plan for humanity?

But Hoffman believes that “adaptability is the new stability,” so that personal and professional networks are essential to developing that adaptability.

On the other hand, Jonathan Haidt gave us a very different take in the May issue of The Atlantic. His commentary offers as its thesis, “How social media dissolved the mortar of society and made America stupid.”

Haidt claims that Americans are disoriented, cut off from one another and from the past, unable to find common truth.  Haidt observes that users of social media learned how to present themselves as a brand, not as a person, putting on performances designed to spruce up their brand appeal.  Brand to brand relationships are not friendships, nor do they build trust in others, a form of social capital most needed in democracies.

Social media became a blood sport, a game of likes and clicks.  Thousands of unknowable strangers lifted you to fame or buried you in ignominy.  The new social game encouraged dishonesty and mob dynamics.

Haidt is of the opinion that social media has magnified and weaponized the frivolous.  He reports that, according to a recent Edelman Trust Barometer, people living under the autocracies of China and the UAE have more trust in their institutions than do Americans, Brits and South Koreans.

He notes that when people lose trust in institutions, they lose trust in the narratives told by those institutions.

He quotes Martin Gurri saying that the digital revolution has fragmented the public and “it’s basically mutually hostile.  It’s mostly people yelling at each other and living in bubbles of one sort or another.”  It is a discourse regime where stage performance crushes competence and “nothing really means anything anymore – at least in a way that is durable and on which people widely agree.”

In other words, those communities touted by Reid Hoffman are not wholesome and healthy expressions of social capital, but rather, are toxic and insidiously corrosive of human commitment to the common good.

Social media has given more power and voice to the extremes, while reducing the power and voice of the moderate middle.  The online world of networking has allowed, Haidt claims, a small number of aggressive people (“jerks,” he calls them) to attack a much larger set of victims.  This may result because non-jerks are easily turned off and drop out, leaving the stage to the jerks.

But people who try to silence or intimidate their critics become more stupid in the process.

Social media has privileged confirmation bias – selecting to heed those who think as you do – which is the most pervasive obstacle to good thinking in people.

Haidt alleges that after 2010, American institutions got stupider en masse “because social media instilled in their members a chronic fear” of getting attacked and belittled or worse.  “Participants in our institutions began self-censoring to an unhealthy degree, holding back critiques of policies and ideas… that they believed to be ill-supported or wrong.”  In short, the communications technology made everyone more stupid.

It was a Gresham’s law at work – stupid people drive away smarter ones.  Thus, has technology created a “stupefying” process.

A third recent article which bears on our assessment of the goods and bads – the net impacts – of social media was written by Arthur Brooks in the March issue of The Atlantic.  He looks at our innate need for self-affirmation – satisfaction with our lives.  As a living system, our body tries to maintain stable conditions, avoiding extremes.  This is called homeostasis.  When we experience a shock – alcohol, drugs, emotions – our brains work quickly to get us back to the status-quo ante.

So, when we experience a lift from, say, success, our brain puts us back in our pre-happy state and so we act to get that happy feeling once again.  This is called the hedonic treadmill.  Once our sense of self-worth turns not on our inner convictions, but on what others do or don’t do for us, on externals, like money or position, Brooks says we will run from small victory to small victory, but never get “no satisfaction,” as Mick Jagger famously complained in song.  Without internalizing the insights of the Stoics and the Buddha, our race through life is, as Schopenhauer said, like drinking seawater; the more we drink, the thirstier we become.  And the same is true of fame.

How do we link this struggle against homeostasis with social media?  When we see ourselves only as others see us, we have become objects, no longer in control of our satisfactions, always needing the next hit of reassurance, the sense of power over others, validation of ourselves from submission to their norms and tropes.  Social media attaches us to others dysfunctionally and so triggers a need for more and more exposure to seeking what we are attached to.  This is the state social media puts us in if we do not defend ourselves from within using our moral sense and good conscience.

Brooks goes on to contrast haves with wants.  He argues that while we can never have enough, we can manage our wants and so slow the pace of wanting to have more and more.  He advises that the sources of happiness are intrinsic – “They come from within and revolve around love, relationships and deep purpose.”

There is very little of that on social media.

So, did God plan for us to have social media or have we presumptuously built ourselves a tower of Babel which will end up leaving us divided and without community?

Marcus Tullius Cicero was a remarkable jurist and student of the moral sense. But in his time, his Roman Republic was rotting from within.  Executed on orders of Mark Antony, Cicero lived until the death throes of his beloved republic.

Once, however, he – without knowing it – put his finger on the disease which was eating away at the life force sustaining Republicanism – the culture which valued and sustained a res publica – a “common thing.”

This month of June in 59 BC, 2,081 years ago, Cicero wrote a letter to his friend, Atticus.

Atticus, as I recall, was out of Rome in Greece on a business trip.  The triumvirate of Crassus, Pompey and Julius Caesar was in power unconstitutionally.  Crassus allegedly fixed elections and bribed juries.  Pompey had legions loyal to his person.  Caesar had smarts.

Cicero wrote: “We are held down on all sides.  We don’t object any longer to the loss of our freedom. … All with one accord groan of the present state of affairs, yet no one does or says a thing to better it.”  The only one to speak or offer open opposition is a young Curio.

All this, wrote Cicero, dolor est maior, cum videas civitatis voluntatem solutam, virtutem adligatam: “only makes sadness the greater for we see that the will of the community is not tied down, its virtue is in chains.”

Whenever virtue is in chains, the state does not belong to citizens, but to those who dictate the terms and conditions of life.

That is the way some years ago, the Caux Round Table took for its motto the Latin phrase – Virtue is not Chained:

A recent story in the Wall Street Journal reported that Unilever is associating its product Hellmann’s mayonnaise (full disclosure: Hoa and I buy Hellmann’s) with a mission to curb food waste.

For example, in the post-industrial consumer economy of the U.S., each year, 108 billion pounds of food is wasted.  That equates to 130 billion meals and more than $408 billion in food thrown away each year.  Shockingly, nearly 40% of all food in America is wasted.

This follows a “brands with purpose” business strategy adopted by Unilever CEO, Alan Jope.

Some resist this strategy of associating virtue with the products and services provided by capitalism on the grounds that companies should not go “woke” and attempt to impose political, social or cultural outcomes in free societies.  Consumers, it is said, should have the right to follow their own values in the way they spend their money.

But as I argued almost 20 years ago in my book, Moral Capitalism, the values of capitalism come from consumers, from buyers, not suppliers.  Consumers, on the whole and in sub-markets, determine the outcomes of capitalism.  If no one wants a product or a service, any company planning to supply it will quickly run into market failure.  Investors and lenders will only fund such a profitless company for so long, unless they look at it as a charity meeting some deserving need, like a church or a homeless shelter and become donors.

Now, in ethics, Aristotle described happiness as a combination of active virtue and having sufficient material goods.  Thus, for Aristotle, a consumer of mayonnaise who wants to act virtuously, while selfishly enjoying the taste and other sensible physical properties of the concoction, is seeking personal happiness.  Such consumers can use their money freely in the marketplace for food to realize, on their own, their personal understanding of happiness.

The modern psychologist, Abraham Maslow, provides an alternative understanding of why Unilever’s brand with purpose strategy is a sound business model.  Maslow has a different, but rather similar take on happiness than Aristotle.

Maslow described individuals as seeking various kinds of happiness, from the most material and mundane to the most abstract and intangible.  He also proposed that people first seek to satisfy basic needs and then proceed to reach out for more and more intangible forms of  “the good,” as Aristotle would say.

Maslow’s famous hierarchy of human satisfactions is:

From my point of view, Alan Jope is selling in one jar of mayonnaise a product that 1) satisfies a basic need of food, but also 2) provides the purchaser with an opportunity to experience self-actualization and 3) perhaps also meet esteem needs in being appreciated by others who worry over food waste and belonging needs to be part of a cultural community which also worries over food waste.

Thus, both Unilever’s strategy to do “good,” as their customers are now more willing to purchase participation in bringing about such good and the proposal that companies should have a “purpose” over and above profit, shows capitalism evolving along the lines proposed by Maslow – from meeting basic needs to more and more selling opportunities to meet psychological and self-fulfillment needs.

I predict that the market, as driven by customers, will sort out those companies that can meet real needs that customers are willing to pay for satisfying and those that fail to produce goods and services for which there is no demand.

It should come as no surprise that, with the astounding success of capitalism over the last 300 years in creating wealth, humanity today can enjoy living where, more and more, psychological needs and self-fulfillment needs are achievable.  Wealth has enabled so many to meet their basic needs so that they can now aspire to meeting needs higher on Maslow’s hierarchy.  Thus, it is only natural that the forces of capitalism – demand and supply – are now focused more and more on helping us meet those more abstract needs.

But when business seeks to meet psychological and self-fulfillment needs, it begins to trespass into the social spheres of culture and politics, which are contentious, as different people value different kinds of psychological well-being and have different ideas about what self-fulfillment is all about.  What I insist is good for me may be anathema to you, so do I get to cancel you or do you get to cancel me?  Moreover, who between us should be the guide to best business practices?

I recently ran across a saying of American President Harry Truman which I had never seen before, but which goes to the moral core of the Caux Round Table’s Principles for Government.

Our foundational principle for moral government is that public office is a public trust.  No trust gives ownership, personal dominion to be willful, arbitrary or capricious over the powers and assets held in trust.

President Truman once said to a reporter: “Two persons are sitting at this desk.  One is Harry Truman and the other is President of the United States and I have to be sure that Harry Truman remembers on all occasions that the President is there too.”

We recently posted more short videos on relevant and timely topics.  They include:

–Inner and Other Directed Personalities

–The Mechanics of Pay

–The Work of Morality

All our videos can be found on our YouTube page here.

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The U.S. is experiencing a second episode of a multi-billionaire attempting to pull the strings of democracy as a puppet master.

This raises grave issues for the possibility of capitalism faithfully supporting moral government. Since Aristotle and Mencius, it has been noted that, as a moral fact, “power corrupts and absolute power corrupts absolutely.”

In its ethical principles for the ownership of wealth, the Caux Round Table advocates self-restraint on the part of the wealthy and subordination of their drive for dominion to ethical principles of moral government, first and foremost that public power is a public trust.  When a person has such arbitrary and capricious power in any form, that power confers upon them an office of responsibility for protecting and enhancing the common good, that power becoming a constructive trust held on behalf of the community.

Now, the first U.S. multi-billionaire I hold up for scrutiny is Mark Zuckerberg.  In 2020, he and his wife gave some $400 to $419 million (estimates found in the press) to an effort to help Democrats get more voters for Joe Biden in an effort to defeat Donald Trump.  Whether they succeeded as planned is contested.  Their effort was revealed early in 2021 in Time Magazine.  The caper is now known as “Zucker Bucks” or “Zuck Bucks.”

Private money from a multi-billionaire was given, gratus, to public and quasi-public workers collecting ballots in the 2020 elections and recording voter choices.

The charge is that many of those “public servants” collected ballots from persons not entitled to vote and recorded their votes as legitimate, thus preventing the genuine will of the people from being dispositive in our politics (see the book Rigged: How the Media, Big Tech and the Democrats Seized Our Elections by Mollie Hemingway).

Recently, Elon Musk gave us a second tale of a multi-billionaire seeking to impact the American democracy, also in the arena of free thought and political choice – the life blood and oxygen of any humanized constitutional democracy.

Musk has proposed to buy Twitter for $44 billion, take it private and make it a platform for free speech.  Here, private power is being used to promote a moral end – free speech for all.

Again, as with Putin’s invasion of Ukraine, I am forcefully reminded of the Athenian ethic as reported by Thucydides: “The strong do what they can; the weak what they must.”

I don’t know about you, but that is not an ethic I can tolerate.