The New Story of Business: Towards a More Responsible Capitalism

Published date01 September 2017
AuthorR. Edward Freeman
Date01 September 2017
The New Story of Business:
Towards a More Responsible
Business is undergoing a conceptual revolution. Since the
Global Financial Crisis there are many new ideas and pro-
posals to make capitalism more responsible. The purpose
of this paper is to identify key flaws in the “old story” of
capitalism. Six principles are explained that taken
together form the basis for a new story of business, one of
responsible capitalism.
The last 40 years have seen great changes in our understand-
ing of business. In our lifetime, we have seen a remarkable
pace of globalization. We have seen revolutionary informa-
tion technology. We have seen nothing less than a fundamental
shift in the story of business. In this talk I will try to explicate what
I believe is a conceptual revolution in business, and in particular, I
R. Edward Freeman is University Professor and Olsson Professor of Business Administration,
the Darden School, University of Virginia, Charlottesville, VA. E-mail: freemane@darden.vir-;
Editor’s Note: A public lecture by R. Edward Freeman, Verizon Visiting Professor of Business
Ethics, Bentley University.
C2017 W. Michael Hoffman Center for Business Ethics at Bentley University. Published by
Wiley Periodicals, Inc., 350 Main Street, Malden, MA 02148, USA, and 9600 Garsington
Road, Oxford OX4 2DQ, UK.
Business and Society Review 122:3 449–465
will try to explain this “new story of business” in terms of a few fun-
damental principles or ideas.
While the roots of this revolution are easily traceable back to the
1980s or even earlier, they are most clearly seen in the responses
to the Global Financial Crisis (GFC) of 2008. Since that time, we
have seen an explosion of ideas of how to make businesses more
responsible for the consequences of their actions.
For instance, many companies have taken a renewed interest in
corporate social responsibility and sustainability. In addition, we
have seen a renewed emphasis on the idea of Conscious Capitalism
as John Mackey and Raj Sisodia have argued that companies that
follow the tenets of conscious capitalism will outperform those that
do not. Michael Porter and a colleague have suggested that compa-
nies focus on “shared value” where economic value and social value
are seen as going hand in hand. Nestle has been the show pony for
this idea. Just Capital is an NGO that is committed to rating com-
panies on widely accepted standards of justice. Bill Gates has sug-
gested Creative Capitalism, whereby companies forego profits for
the sake of public welfare. Senator Mark Warner of Virginia has
suggested that it is time for new metrics, especially around the wel-
fare of workers and has hailed a move to Capitalism 2.0.
Meanwhile, the idea of social entrepreneurship has taken off
with many millennials beginning to start businesses that address
social problems. NGOs such as the Acumen Fund, Kiva, Kickstar-
ter, and countless others have been started to provide capital for
small and very small businesses and entrepreneurs who are socie-
tal change agents. Even on Wall Street, we see an increase in the
movement toward what is variously called, “patient capital,”
“impact investing,” “responsible investing,” and other terms.
Business pundits have gotten into the act, decrying a lack of
ethics that they claim brought about the GFC. Robert Reich has
argued that ethics and profits have to go together. Agency Theorist
pioneer Michael Jensen has suggested that integrity is an important
element in a successful business. The Aspen Program in Business
and Society has led various conversations about new business mod-
els, new governance models, and a variety of other related ideas.
At two recent meetings at the White House in 2016 sponsored by
the Obama Administration’s Department of Labor, 75 people from
these organizations and movements gathered to discuss common-
alities and whether or not there needed to be one brand that

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