Introduction

Welcome to kind business.

We are all familiar with the positive feelings that are generated when we exhibit kindness,

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and yet this quality is rarely associated with business, which for many of us is where we spend most of our waking day. ‘Kind’ as a description of business scarcely exists, in fact the words ‘kind’ and ‘business’ rarely appear in the same sentence.

The purpose of this book is to provide an overview of how business could be conducted, if we are to respect people and planet while acknowledging the responsibility of business to produce returns for those who have invested in the company.

The book contains multiple references to authors, journalists, public speakers, researchers and advocates from a range of countries. In this sense it acts as a resource that helps to build the case for ‘business done differently’, including reports from CEOs who have experienced the transformative power of good business practice, and its effect of underpinning long-term sustainable returns for shareholders.

The book is designed to put forward thought-provoking concepts while inviting the reader to dive more deeply into any field that particularly takes their interest via the works and wisdom of the experts quoted. It is hoped that the book will not only further the reader’s own knowledge but also contribute to the transformation of the business world.

We begin with a short history lesson of how company structures came into being, the essential motivation of business and the way business evolved to focus on the short term.

We will see that this environment, characterised by ever- increasing demand for quarterly profits and shareholder returns, often drove poor and unethical decision-making. Short-termism is the curse of the capitalist system.

Nigel Lake, co-founder of global corporate advisory firm Pottinger, provides us with an alternative paradigm in his book, The Long Term Starts Tomorrow, when he states, ‘long-term thinking + action = lasting impact.’

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Today, the impact of companies extends well beyond the simple model of a seller and a buyer engaged in a financial transaction. The responsibilities of companies start with the treatment of the people who work there and extends to their greater societal and environmental impacts. This presents challenges for boards and senior executives in balancing short-term shareholder interests, with environmental and human rights responsibilities affecting the lives of future generations.

The community is looking for large corporations to demonstrate that they are doing business in a way that is honest and transparent, and that this is embedded from the board down. The public are sick of scandals involving deceptive business practices, poor executive behaviour and corporate corruption.

While quoting case studies of poor business practice Kind Business highlights the positives as regards constructive leadership behaviour, and corporate cultures that enrich the lives of those who work within them, and builds a case for ‘business done differently’ becoming ‘the new normal’ with superior outcomes for all stakeholders.

Revolutions tend to polarise and create ‘us and them’ environments. Hence this book is not about inciting a revolution; rather it advocates for logical, pragmatic reform. A process which may take longer, but if executed well, is guaranteed of greater lasting success, as we are likely to take more people on the journey.

This book is not a compilation of financial numbers, however, at times numbers do have a role to play. Quantitative and qualitative data are both important in building a case for change as different audiences respond more positively to the methodology that they are most aligned with.

For example, measuring turnover rates in a company will tell you how many people are leaving, but we need the stories of those people in order for us to understand why they are leaving. When measuring what’s important we also need to respect the subjective, and often personal, nature of people’s stories, as not everything of value can be measured, and not everything that can be measured is of value.

To help make this book as accessible as possible to those with different learning styles, much of the content comprises stories. This is deliberate as analysis of people’s learning styles tells us that:

… roughly 40 percent will be predominantly visual learners, who learn best from videos, diagrams, or illustrations. Another 40 percent will be auditory, learning best through lectures and discussions. The remaining 20 percent are kinaesthetic learners, who learn best by doing, experiencing, or feeling. Storytelling has aspects that work for all three types.

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This book is a compilation of many people’s ideas, and every effort has been made to attribute all quotes and ideas to the original authors. These are all people who are seeking a better world. There are also many more people doing extraordinary work than it has been possible to include.

Placing good values at the heart of all cultures is not a radical idea, but nevertheless a powerful one. The corporate sector has enormous resources, brilliant people and vast reserves of capital. If even a small percentage are channelled into caring more deeply for our people and our planet, and into tackling some of society’s most intractable problems, the world will be a better place for all of us.

I hope I have captured philosophies, perspectives and stories that will inspire the reader to adopt a different approach as to how they manage people and how they conduct business; or embolden them to keep up their existing efforts.

It all starts with embracing the philosophy of being kind and finding the courage within ourselves to put this philosophy into action. To quote Nelson Mandela:

What counts in life is not the mere fact that we have lived. It is what difference we have made to the lives of others that will determine the significance of the life we had.

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Books Referenced

•Boris, Vanessa, What Makes Storytelling So Effective for Learning . Harvard Business Learning, December 20th, (2017)

•Ferrucci, Piero, The Power of Kindness: The Unexpected Benefits of Leading a Compassionate Life (2006)

•Lake, Nigel, The Long Term Starts Tomorrow (2014)

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Ferrucci, P. (2006) The Power of Kindness: The Unexpected Benefits of Leading a Compassionate Life. Penguin Random House, London.

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Lake, N. (2014) The Long Term Starts Tomorrow. Frog Publishing, Sydney.

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Boris, V. (2017) ‘What Makes Storytelling So Effective for Learning’. Harvard Business Learning, December 20th.

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https://www.nelsonmandela.org

PART 1

Traditional Business

Kindness is more than behaviour. The art of kindness means harbouring a spirit of helpfulness, as well as being generous and considerate, and doing so without expecting anything in return. Kindness is a quality of being. The act of giving kindness often is simple, free, positive and healthy.

S. Siegle

Art of Kindness – Mayo Clinic Health Systems

CHAPTER 1

The Nature of the Corporation

History of the Corporation

Companies in various forms have existed for thousands of years and have evolved through a variety of systems. They stretch from the simple structures of Mesopotamia in 3000 BCE, and the early loose trading arrangements that came into being around 2000 BCE, to modern-day complex shareholder structures and the growing trend toward ownership by private equity firms practising their leveraged buy-out strategies.

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The ancient Romans had their ‘societates’ or partnerships involving share holdings. Trading through company structures was also widespread throughout the East. The Chinese were particularly advanced in business, involving elaborate partnerships, the use of currency and generation of tax levies to benefit the Great Khan.

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By the 12th century the ‘compagnia’ of Florence had evolved in Italy. This word was formed from the Latin words cum and panis, meaning to break bread. This coming together and eating together signified the trust that each partner had in each other as an underlying basis for joint ownership. Company structures proliferated through the ages, appearing in almost every culture. The guilds of the Middle Ages were dominant in the commercial life of Europe.

Chartered companies, which were combined private and government entities, then came into being, in an attempt by commercial speculators to capitalise on the riches of newly discovered lands.

The voyages of merchants were often funded by royal charters, with the monarch becoming a principal investor and even taking an equity position themselves. Situations where the venture was so high in risk and required such large investments, gave birth to limited liability structures created to entice potential shareholders otherwise reluctant to risk their capital.

The most famous model of the chartered firm was the Dutch East India Company, created in 1602. Unlike its predecessor, the English East India Company, in which individuals invested for one voyage at a time, investors in this new structure were part of a 21-year limited-liability company. A desire to share risk and reward was the primary motivation for moving beyond the single owner structure.

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What Drives the Corporation?

Today the directors of profit-making corporations, owned by shareholders, have the same underlying motive – to produce a return for those shareholders who have risked their funds in purchasing an interest in that company, and therefore provided the necessary capital for its operation and growth. Hence the modern corporation is primarily driven by the pursuit of profit, or the creation of shareholder value.

Company structures have come in for criticism around the lack of agency, or sense of control, felt by workers.

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This has long been the focus of the union movement. It has been argued within the context of organisational theory that it is the hierarchical nature of organisational structure, and its search for order and control, that works against more egalitarian outcomes for workers.

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More recently there have been other concerns with the emergence of technology. The internet empowers us in many ways, facilitates participation and creativity while enabling us to connect with each other at high speed; yet does it also undermine true connectedness facilitated by human-to-human contact? Despite its indisputable power to rapidly allow access to information, it is difficult to see recent trends in technology increasing true human connectedness.

The historical motivations of large companies are a complex field embracing religion, politics and individual calling. These fields in turn each held subsets of differing opinions. This formed the basis of Max Weber’s classic work The Protestant Ethic and the Spirit of Capitalism.

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Here we see views regarding the purpose of work, attitudes towards consumption, and the profit motive advanced by the European churches of the Calvinists, Lutherans, Protestants and Catholics.

He further expanded on this in his later work Churches and Sects in North America, which included discussions of Protestant sects such as the Baptists and Quakers.

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These books enabled us to gain insight into the link between the church and early capitalism.

Deeply religious men often populated the upper echelons of the commercial world. The Protestant asceticism which manifested in frugal and disciplined habits was motivated by a kind of self-denial, to ensure one was not distracted from God. In many cases this was linked to prosperity through the pursuit of commerce in a manner that was designed to accumulate wealth as a means of fulfilling one’s duty to God.

The Freemasons, credited with being the oldest fraternal organisation in the world, is a secular membership-based group that goes back to the Middle Ages and whose membership often consisted of powerful business leaders. This may well still be the case; however, a high degree of privacy surrounds the organisation.

Business has transformed over time, and yet growth and the attainment of market dominance against competitors has always been fundamental to what drives strategy. Increased efficiency has been an evolving process and key to achieving growth ambitions through which business owners sought higher levels of productivity and higher returns.

German economist Werner Sombart is credited with coining the terms ‘capitalism’ and ‘economic rationalism’.

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He talks of the productivity of labour being enhanced through production methods that eliminated the inherent limitations of the human being.

It seems ironic that while the roots of business today were planted in historical religious philosophies, we would see mechanistic approaches take over where people were turned into units of labour and many of the finer aspects of humanity abandoned.

However, exploitative behaviours were always a part of the landscape of commerce and have been questioned for centuries, with the Christian Bible referring to the proceeds of business extracted in such a way as being ‘mammon of unrighteousness’.

The desire for greater profits has always been a driving force in business, irrespective of negative impacts on workers. Perhaps it is too much to expect that business owners down through the ages would act in a moral manner given their desire for personal gain, irrespective of their religious convictions. This became particularly evident over the years as businesses grew in size and their owners’ standing and influence in society increased.

Shareholder Primacy

The term shareholder primacy denotes the concept that the interests of the shareholders, as the owners of a company, must always be paramount, and that the payment of a dividend to them must be the primary consideration as regards the allocation of company resources. This was the view proffered by Nobel Prize winning economist Milton Friedman and became known as the Friedmanite doctrine.

Friedman is often quoted as saying, ‘the one and only business of business is maximizing profit, while playing within the rules of the game.’

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As to corporate social responsibility, he stated, ‘There is one and only one social responsibility of business, to use its resources and engage in activities designed to increase its profits.’

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In this scenario doing good in society and generating maximum profit are seen as competing considerations, yet we will investigate the fact that this view is being rapidly overtaken by a more progressive one.

One view often put forward is that the directors of companies are appointed by shareholders to make money for shareholders, not to donate it to charitable organisations. Companies should not decide what to do with shareholders’ money. The argument is that these funds should be distributed to shareholders as increased dividends, and that in particular for a publicly listed company to engage in philanthropic activities is nothing more than shareholder theft.

However, it is questionable whether company funds do, in fact, belong to shareholders prior to the distribution of dividends. Dr Simon Longstaff, Founder and Executive Director of The Ethics Centre in Sydney, expressed strong views on this situation, taking exception to any notion that company funds belong to shareholders at all. He links this to the privileged structure of limited liability, claiming, ‘Firstly, it’s not clear to me that the money does in fact belong to the shareholders.’ He further states that:

A lot of this goes back to the origins of the limited liability company and the creation of the corporation as a separate legal person. Now limited liability and legal personhood of corporations both operate to provide to investors, to shareholders, an unnatural and extra-ordinary privilege. In that you can invest a dollar in a company and your upside is unlimited, but it doesn’t matter what goes wrong or what damage is done to the world at large, all you are liable for is the investment you made.

Now the only way a democratic society could possibly infer such an extraordinary privilege is if in fact it believes that in doing so it will lead to an increase in the stock of common good.

The money that a company has, is its money, and it may be under an obligation to distribute it back in the form of dividends or in the event of winding up, following creditors being satisfied, to ensure there is a distribution to shareholders. So, it is arguable that it is not the shareholders’ money that is being spent in any case.

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In essence, shareholders can only claim ownership of company funds once they are turned into a dividend and land in their bank account, not during the day-to-day operation of the company. When making the decision to buy shares, they ceded their rights to those funds to those who manage the company.

There is an argument that can be made to counter shareholder concerns that money they have invested is being used to support societal causes. Prior to electing to buy shares, an informed investor should already know that the company he or she is contemplating buying shares in is currently engaging in activities that support the community.

Jack Welch, the CEO of General Electric between 1981 and 2001, was considered to have turned shareholder primacy into an art form. He introduced extensive layoffs of workers, moved manufacturing offshore and championed outsourcing to reduce company headcount. For those wealthy enough to own shares in GE this was good news. Yet for workers, many of whom had been loyal to the company for years, this was devastating and led more broadly to massive socio-economic inequality.

Welch himself benefitted from this approach – he was listed on the Forbes list of 400 richest Americans despite being an employee himself, who didn’t own the company and hadn’t invented anything.

In David Gelles’ 2022 book, The Man Who Broke Capitalism: How Jack Welch Gutted the Heartland and Crushed the Soul of Corporate America – and How to Undo His Legacy, he describes that Welch’s relentless focus on the GE share price came at the expense of most other considerations.

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Welch was revered, much like many of our captains of industry are today, and as such his playbook was copied by many who worked under him. Three successive CEOs at Boeing served their ‘apprenticeships’ under Welch and seemed determined to turn Boeing into another GE.

Gelles, who is a New York Times journalist, sees this as leading to the lowering of quality and safety standards, with potential links to the 737 Max crashes. He highlights this with the statement that Boeing moved from a 100-year company venerated for its outstanding ‘aeronautical engineering’ to one focused on ‘financial engineering’.

During congressional inquiries into the Boeing crashes, company memos were submitted into evidence that demonstrated the culture of ‘stock price first, safety and quality second’ had filtered down well into middle management ranks forming a part of the company’s culture.

Welch’s shareholder primacy philosophy has seen entire cities in the US, often in the mid-west, devastated and communities torn apart. Even the government’s tax base suffered at the expense of corporate profits, thereby impacting the government’s ability to provide essential health care and educational services to those who needed them.

Interestingly in 2009, eight years after leaving GE, and following the Global Financial Crisis, Welch said, ‘… maximizing shareholder value is the dumbest idea in the world.’

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Opinion is divided as to whether Welch really had a moment of ‘conversion on the road to Damascus’ in making a statement completely antithetical to the behaviour he exhibited throughout his entire career or whether he was simply a master of reading the room, and knowing when public opinion had turned against him.

Business as War

Since the development of large national corporations, particularly in the US in the early 20th century, a more complex ownership structure brought with it a heightened desire for profits in order to enrich the shareholders who had invested, often with little consideration as to any negative effects on people or planet.

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We have often seen a sort of corporate machismo operating, and even lauded, with the captains of industry, usually men, being placed on pedestals and adored for their toughness, even ruthlessness, never for their compassion.

‘Greed is good’ virtually became an acceptable mantra for business in the 1980s following the 1987 film Wall Street, in which merchant banker, Gordon Gekko, talks in positive terms of greed, ‘it clarifies, cuts through and captures the essence of the evolutionary spirit.’

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‘Take-no-prisoners’ was another attitude admired in our business leaders. This is the mindset of a flawed personality type, obsessed with growth, even if it causes harm which may ultimately bring about the destruction of the entity itself.

As the US is the seat of capitalism, and home to many of the most revered corporate demi-gods, some have posited that they are a kind of substitute for the royal families of the UK and Europe. Who better to put up on pedestals than the wealthiest corporate class?

Growth at the expense of anyone else is all that’s important in such a world. It is best typified by Ray Kroc, the former CEO of McDonald’s, when he said, ‘Business is war, it’s dog eats dog, rat eats rat. If my competitor were drowning, I’d walk over and put a hose in his mouth.’

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Great warriors were often the role models for these captains of industry. General Electric’s Jack Welch based his core strategy on the principles of Prussian General Helmuth von Moltke.

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The Japanese General Sun Tzu became another mentor within corporate circles. The attainment of outcomes by the dominant individual, or coalition within a company, has been described in military terms as ‘the art of the general’.

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How did we equate leading troops into war with the role of managing a business, and are we in danger of transposing the rules of one into the world of the other? Fostering an attitude of kill or be killed will not create kinder companies or a better world.

Invariably in civil and corporate warfare there are innocent casualties. Milton Friedman discussed what he called ‘externalities’ and defined these as the effect of a transaction on a third party who has not consented or played any role in the conducting of that transaction.

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Externalities in the pursuit of profit are responsible