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Our Chair Emeritus, Lord Daniel Brennan, just spoke to me about the impact of our times on bringing into question the optimism necessary for a work such as that attempted by the Caux Round Table.  He suggested making a statement incorporating many wisdom traditions to the point of having faith and, from faith, being courageous.  Here are my thoughts for your reflection.

No doubt responding to concerns over the growing inequality of wealth between the top 1% and 10% of families and the far greater number of “other” families, the Biden administration is proposing an innovation in taxation.

The proposal is to tax accumulated wealth directly, not income earned.

The proposed wealth tax is cast as a minimum tax which would assess 20% of the combined income and the increase in value of assets of households worth more than $100 million, some 20,000 households in the U.S.

The tax on unrealized gains of financial holdings and imputed to closely held businesses would bring to the government a share of increasing prosperity reflected in rising prices of equity stocks (and perhaps other financial assets).  So, if speculation and trading push nominal stock prices up, the owners of such shares, even if they don’t sell their shares, would pay money to the government.

Similarly, if the economy grows and private companies become more profitable, an imputed new capital value for the company would be determined and a tax in real money would be paid based on that imputed value.

The proposal has its complexities and would generate more money for governments during times of inflation, when real values are constant or falling.  But the proposal focuses attention on the moral question of what do very wealthy people owe to the society which permits them to so thrive.

In my classes, I like to make the point that discussion of business ethics, CSR, sustainability, stakeholder capitalism and moral capitalism are relevant to real business decision-making and profitability.

Here’s an example of this:

Howard Schultz, the founder of Starbucks – very successful and very wealthy – is returning to the company as its CEO – for the second time, his third term at the helm.  Why?  Can’t a profitable company just keep on making money?

The news report mentioned challenges in its Russian and Chinese markets and rising costs.  My guess is that it is a third challenge or rather, threat, which had brought the founder out of retirement to again revamp the business model.

This third challenge is unionization of employees.  When baristas are union members, what will happen to the quality of Starbuck’s product – not coffee, but shopping experience?

Schultz said, “I know the company must transform once again to meet a new and exciting future where all of our stakeholders mutually flourish.”

Institutional investors worry that the unionization campaign has the potential to cause reputational damage – i.e. loss of customers and pricing pressure.  They will have more confidence in the company with Schultz back at the helm and so keep its stock price up.

The lesson here is that employees are a capital asset, not just a cost.  They are social and human capital contributions to profitability and need to be appropriately compensated, tangibly and intangibly.  Starbucks needs to offer an alternative to whatever a union might offer employees, otherwise, employees will vote for a union and the company will suffer from the entropic forces so often associated with union shop stewards.

The CEO is also a human capital asset.  Unlike dollars or euros, CEOs are not fungible, one replaceable by another.

Moral capitalism is all about the conjunction of social and human capitals with financial capitals.

It takes more than money to make money.

I just ran across a global map (mercator projection) of countries ranked for their levels of “happiness.”  The distribution of levels of perceived “happiness” is very interesting for what it implies as to the sources of “happiness.”

Here is the map:

Now, the inference I make is based on older survey results which showed that “happiness” scores across humanity do not vary directly with money.  As I recall, up to a point, more money leads to feelings of being happier, but after a point (about $10,000 US), more money does not lead to more happiness. These results track with Abraham Maslow’s theory of human needs rising from a foundation of security and survival needs up to the intangible of self-actualization.

The conclusion is that much of happiness results from social and psychological/emotional factors, such as trust in self and others.  So, the acquisition on an individual level and the accumulation on a social level of social and human capitals will lead to more happiness.

The work in Bhutan on Gross National Happiness as a more meaningful measure of success than GDP works on a similar understanding of the human.

Therefore, one might be tempted to conclude that building out moral capitalism and moral government will result in more happiness or as Jeremy Bentham advocates, “The greatest good for the greatest number.”

Advocates for private firms (capitalism) to produce “public” goods to solve common problems, like global warming, often seek an “incentive” for firms to produce what they can’t sell at a profit to private customers.  One incentive more and more recommended is the reward provided by private investors to private firms which deliver benefits and outcomes valued by those investors.

For example, last November, at the COP26 gathering of leaders, a major announcement was the pledge of the Glasgow Financial Alliance for Net Zero – a global coalition of over 450 finance firms across 45 countries, jointly managing $130 trillion – to align their financing activities to achieve net-zero emissions by 2050.  Those asset managers, in theory, would provide financial capital to firms working to achieve net-zero emissions or deny financial capital to those firms not working to achieve net-zero emissions.

Our colleague in The Netherlands, Herman Mulder, with his colleagues at the Impact Economy Foundation, has long been thinking seriously and successfully about how metrics can shape the business models of private firms.

Recently, he shared with me a short essay of his published by the Bretton Woods Committee on how finance could be a game changer in shifting private sector impacts to net positive.  You can read it here.