How ‘conscious’ capitalism can be profitable and positive for the community
At first glance, a nonprofit that employs underprivileged women in Uganda to make jewelry and a publicly traded company with over 4,200 employees and 80 stores nationwide might not seem to have much in common.
But the founders of jewelry company Akola and The Container Store (TCS) say their brands have the same fundamental philosophy: conscious capitalism, the idea that a company can make a profit while also leaving a positive impact on the community.
“We’re a traditional retailer, but we choose to behave in a conscious capitalist, servant-leadership type model where we basically don’t just look at the shareholder. We try to optimize all stakeholders like the employee, community, and vendor,” Kip Tindell, co-founder and chairman of The Container Store told Yahoo Finance’s Rick Newman at the Concordia Summit in New York, which is being live-streamed exclusively on Yahoo Finance Monday and Tuesday.
Tindell happened to be a college roommate of Whole Foods Market (WFM) co-founder John Mackey at the University of Texas. Both Tindell and Mackey have made it a top priority to build their companies around the belief that happy employees make for a productive business. Even in the company’s IPO prospectus, Tindell detailed how proud he was of The Container Store’s “yummy” work environment.
“It’s a purpose to improve our customers’ lives through the gracious gift of organization, to help our vendors’ businesses become all they hope and dream they can be, and to make our communities a better place to live,” Tindell said in the prospectus.
Conscious capitalism: Beyond the cool factor?
“Companies aren’t just doing it to be socially mindful. It’s a profit strategy. The most conscious capital companies have outperformed the S&P 500 Index by 14 to 1 over the last 15 years,” Tindell said.
“Business doesn’t have to be a zero-sum game. 25% of productivity is showing up. The rest is how much an employee loves a company and wants to go to work every day. The old top-down militaristic thing isn’t attracting the best talent anymore,” Tindell said.
“You can change the world and the world of business simultaneously. In fact, it’s more effective to do it with business,” he said.
Tindell and Underwood cited Whole Foods, Google (GOOGL), Darden (DRI) and Southwest Airlines (LUV) as a few of the publicly traded companies that are built and led by so-called conscious capitalists.
But, less than three years since the company’s public debut, Tindell stepped down as CEO this summer, after 38 years at the helm of the company he built. He was succeeded by Melissa Reiff, a 21-year veteran of the storage products company. Once a hot IPO — its stock price doubled during its public offering — the retailer has been struggling to stay afloat amid competition from Wal-Mart (WMT) and Amazon (AMZN).
When asked whether this “conscious capitalist” ideology sells with shareholders, Tindell said “that short-termism on Wall Street is a problem.”
“But, as a matter of survival, you must make that quarterly-oriented shareholder happy as well.” he added.
Inevitably, with more and more millennials valuing impact investing and social enterprises, it’s crucial to incorporate this ethos to attract and retain talent. But of course, it’s relatively easy for a nonprofit like Akola to implement this practice. On the other hand, publicly traded, for-profit companies have to answer to the quarterly demands of insatiable shareholders who may not care about their ideals.
Melody Hahm is a writer & reporter at Yahoo Finance, covering entrepreneurship, innovation and technology. Follow her on Twitter.
Read more:
This boss asks an unusual question early in every interview
There’s an $18 trillion asset class that a VC-backed startup wants to unlock
How a 28-year-old realtor used Snapchat to rent out an $80,000/month home sight unseen
