Innovators World, Overview

Moral Innovator perspectives on the nexus of for-profit and non-profit companies

In the Capital Region Board of Trade discussions on June 11, 2014, the dialogue between for-profit and non-profit companies focused on the metrics and business models that are often not clearly articulated. Moral Innovators can facilitate a framework for productive dialogues.

Companies, as we know them today, can be traced back to Christopher Columbus. After his first return to Spain in 1493, Pope Alexander VI drafted the Treaty of Tordesillas (and 35 years later added the Treaty of Zaragoza) that basically gave the continents of Africa and Asia to Portugal, and North and South America to Spain (and we know the exceptions are Portugal in Brazil, and Spain in Philippines). Countries outside Portugal and Spain were excluded and needed to find ways to participate. Their innovation was the British East India Company and the Dutch East India Company which were incorporated in 1600 and 1602, respectively. Their owners invested in the risks of exploration in exchange for profit. The company by-laws delegated the delivery of profit responsibility to managers who hired additional workers. To help these companies succeed, the countries of incorporation granted monopoly powers, backed by military forces. Over the next 200+ years, companies delivered profit to the owners, albeit with unsustainable corruption and exploitation. The Jakarta, Indonesia based Dutch East India Company became defunct in 1799. The British East India Company became defunct in 1874, a century after Britain established an opium monopoly in 1773 that led to two Opium Wars in China. With this in mind, we have come a long way towards Corporate Social Responsibility and Sustainability (CSR+S).

For-profit companies can not ignore the profit responsibility to owners who, led by some activists and/or institutional investors like pension funds, are driving “optimal return” over “maximum profit” to shareholders. Tobacco companies have openly displayed the health risks of smoking, in compliance with government regulations. Android® has shown that Windows® can not sustain its near monopoly in PC operating systems. What we have is not perfect, but we are rectifying problems by taking actions. CSR+S are moral obligations backed by resources that define each company’s unique “optimal return” in how social activities improve business performance over time. Ford’s Model T was a superior example of “optimal return” based on paying middle class (instead of minimum) wages that sustained both higher company profits and societal prosperity with a narrower wealth gap. For-profit companies that make known their “optimal return” attributes over time can facilitate interactions with non-profit companies.

The Board of Trade discussions mentioned Capital Region’s 6,500+ non-profit companies (or social enterprises) with niche needs that deliver social benefits. It is important to support these niche needs in ways that for-profit companies can both support and take action within their unique “optimal return” business model. For example, increasing workforce with GED can facilitate productivity improvement training, but requires sponsors with longer time horizon. The societal benefit of a more educated workforce is an additional step removed from “optimal return” unless there is government/other private support with incentives. The entire social entrepreneurship landscape has emerged to demonstrate “optimal return” is better than “maximum profit.” Social enterprises that clearly articulate the value of their niche needs over time in the “optimal return” business model can facilitate interactions with for-profit companies.