What Does Responsible Capitalism Mean?

Business Leader Post, December 27, 2011

Thomas D. Davidow, Ed.D.

Capitalism has gotten a bad name. The latest downturn with all its scandals; Madoff and his greed; Goldman Sachs taking irresponsibly huge risks with other people’s money; Corzine; unemployment; a struggling economy; and the polarization in our government makes us all wonder: What has happened to ethics, to the days when a handshake meant something and your word was your bond?

Doing business is difficult enough. Doing business without trust is risky and unsettling.

There is, however, a significantly different sector of our economy where the abusers of capitalism do not reside; where business relationships conform to the highest ethical standards; where businesses contribute to their communities and are not run solely by the bottom line; where the bottom line includes the welfare of their communities. These businesses value their employees and understand that sustainability over time is more important than the next quarter’s profits. They measure shareholder value not just by dollars and cents, but also by the reputation of the owners who identify with the reputations of their businesses.

Family businesses have thrived better in this downturn than non-family businesses. To coin a term from a Camden Media publication, they practice “responsible capitalism.” Fortunately for our economy, family businesses make up 80% of all businesses, 1/3 of the Fortune 500 (the Ford Motor Company was the only car manufacturer that did not take Government subsidy money) and 60% of the Gross National Product.

Unfortunately, we do not hear enough about responsible capitalism. It is not as exciting or as news worthy as train wrecks. Nevertheless, we can take some consolation in knowing that a significant portion of our society not only does business the right way but is interested in doing the right thing as well.