Video Two: John Mackey on Stakeholders and Shareholders

What is a conscious business and what is Conscious Capitalism? The conscious business is based on two primary principles. One, the business has a deeper purpose beyond maximizing profits and shareholder value. Second, the business is managed to optimize the value for all of the interdependent stakeholders.

Because of the interdependent nature of the stakeholders, this strategy will also result in creating the highest degree of long-term shareholder value; they are not in contradiction with each other. Conscious Capitalism is simply the interdependent ecosystem of conscious businesses interacting with each other. And when we’ve created enough conscious businesses, we will see the paradigm of 19th-century and 20th-century capitalism tip over to a 21st-century vision of capitalism which will be based on conscious businesses that I’ve outlined.

I fundamentally believe with all my heart that Conscious Capitalism will become the dominant paradigm in the 21st century. It will because it works better. It’s simply a superior way to do business. It is going to win the competition. When traditional businesses go up against conscious businesses, all other things being equal, the conscious business is going to win.

And because business is highly competitive, we’re going to see more entrepreneurs create conscious businesses and we’re going to see more businesses transform themselves over to that. I don’t know how long it’s going to take but I have little doubt that it will triumph in the end. Hopefully before I am dead I’d like to see it.

Third question: Why do I believe stakeholders should control corporations? I don’t. Let’s be very clear. The investors need to own and control the corporation. Why? Because—as I stated previously, they get paid last. And if they don’t have the ultimate control over the corporation, they are going to be exploited by the management and by other stakeholder groups.

I have never argued and never will argue for anything that weakens the property rights of the investors. “John, this is all very good, but what about all the conflicts between the stakeholders? Surely if you’re paying your employees more, there must be less profit. If you lower your prices for the customers that’s going to result in lower profits and you probably can’t pay as well. What about all these conflicts?” And of course there are conflicts in business and of course there are conflicts between stakeholders. Why? Everybody wants more. Everybody wants a better deal.

But the mistake that people make when they ask me that question is, while conflicts exist, they are far the minority in the conscious business. It’s the harmony of interest that dominates because the stakeholders have such incentive to cooperate together, to make a bigger pie so that there is more to share.

And people make this mistake because they use their analytical mind and they break the business down into its parts. And they think that you can understand the business by breaking it down into its parts. You can only partially understand it that way.

It’s just like taking a cadaver and chopping it up and thinking, “well, there’s the liver—now I understand the liver, I’ve cut into it.” You don’t understand the liver by dealing with a dead body because a human, a living body, or a business is alive and you can really only understand it when you understand the relationships that exist between all the different stakeholders in the business.

You have to have a mind that can think in terms of systems...that can see the inter-relationship. And once you see it, you’ll never look at business the same way. It’ll be a totally transformative way of thinking and viewing things.

Holistic business creates more value for all the stakeholders: more value for the customers, more value for the team members, more value for the suppliers, more value for the investors, and more value for the communities...while having environmental integrity.