Draft manifest to reinvent Capitalism From Shareholder Value to Humanity Value
We are at a turning point in the history of capitalism. Its long-lasting positive impact on the wealth of nations, on the worldwide poverty reduction, on the well being of people is waning. Numerous warning signs have been identified, denounced, analyzed and explained. So far negative externalities have been denied, minimized, accepted or tolerated. Today, even the greatest defendants cannot but plead for a change. In the Financial Times, Lawrence Summers calls for "smart reinvention, not destruction ».
This draft manifest is to contribute to the debate with some radical but non-destructive measures to preserve the goodness of the system and direct it towards benefits for humanity and not just illegitimate profits for a few. It is a draft manifest as it contains only four propositions and needs to be criticized, enhanced and transformed into practical and legal dispositions.
The aim is to continue satisfying humanity present needs without compromising opportunities for future generations.
1) Feeding shareholders is illegitimate when Companies accumulate wealth depleting the planet and harming humanity.
2) Companies should prove they have a positive balance of obligations towards humanity before distributing dividends to shareholders. It is not sufficient to pay taxes because you have harmed the planet. Profits are only legitimate if you do more good than bad!
3) Companies failing to prove their worth will be boycotted by humanity.
The value of a company is currently derived from its capacity (short term or expected in medium to long term) to distribute a remuneration to the capital it has had accessed to. Shareholder value is then the ultimate indicator of capitalism. Under its various names (EBITDA, Earning per share, PER, EVA...etc.) it expresses the successful functioning of any company and drives all activities and decisions of management. Our first proposal says that shareholders should not receive dividends just because the company is producing profits in the way they are accounted for today - forgetting or forgiving all externalities produced on our planet, on humanity.
Along our history we have learned to understand and recognize externalities; we have developed methods to measure them; we have established standards and rules and incentives to respect and preserve these standards; we even have laws that have been designed to enforce these rules and taxes or sanctions for those who do not abide by the laws. The problem is that results have not followed and there is little progress. On the contrary, sanctions have just been integrated as the price to pay to continue damaging the environment and extracting profits to the detriment of humanity and future generations.
From this observation stems our second proposal: sustainability is not just limiting the damage we are doing or paying a price to be forgiven. Sustainability should be repairing whatever damage we are producing, just like in everyday life. When you damage your neighbor's fence, she is entitled to have it repaired by you.
Companies should contribute to repair the damage done. Before being allowed to announce any kind of profit that can be distributed to their constituents (shareholders) companies should prove that negative externalities have been compensated (through de-pollution, tree planting... whatever is good for the planet and humanity) and that the balance is positive or at least even. That opens a whole new field for productive employment, productive for the future, not just the short-term illegitimate enrichment of a few.
Our third proposal is certainly the most radical and controversial. It says that companies will be boycotted by humanity if they fail to prove that they have a positive balance. The verb 'will' is not there by chance. It probably is the only incentive to produce the right decisions as it has a direct and devastating impact on the company's performance and ultimately its value.
To be able to decide whether a boycott is necessary, we need transparency and that is the objective of the last proposal. Just like shareholders require quarterly reports to decide whether they continue to give their confidence to such or such company, humanity should get quarterly reports on the balance of damage and repair to decide whether boycott is or not in order.
We understand that there are numerous aspects of this draft manifest that should be criticized, refined, enhanced, changed and we open it for general discussion in the hope that we indeed find ways to reinvent capitalism without destructing its benefits for humanity today and tomorrow.