How Can Values-Driven Leadership Transform Global Business History?

What Does Deeply Responsible Business Mean for Modern Capitalism?

Discover how values-driven leadership shapes global business history. Learn from Geoffrey Jones’s Deeply Responsible Business how prioritizing social purpose over profit creates thriving communities and a sustainable economy. Read the full article to explore how historic business leaders successfully merged profit with social responsibility, and discover actionable insights you can apply to build a truly values-driven organization today.

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Global businesses focus ruthlessly on profit, exploiting their wealth and position to manipulate politics and the law. Some commentators argue that capitalism has become so greedy it threatens the social order, democratic governance, and the environment. Instead, Harvard professor Geoffrey Jones contends that business leaders and their companies can reimagine capitalism. If they do, they can prioritize its social purpose, deprioritize maximizing profits, and provide more philanthropy. If companies practiced their stated values instead of pursuing power and profits, Jones believes they could help make the world a better place.

Take-Aways

• During the Industrial Revolution, some business leaders still valued human dignity above all else.
• A number of early business leaders outside the West became ethical capitalists.
• A textile manufacturer helped build a better economy in independent India.
• After World War II, some US business leaders came to value social responsibility.
• In the 1960s, a new generation promoted values-driven businesses.
• Responsible businesses integrate into thriving communities.
• Social responsibility in business requires strong incentives.
• Strong values motivate responsible business leaders.

Summary

During the Industrial Revolution, some business leaders still valued human dignity above all else.

The Industrial Revolution didn’t start in earnest until the late 18th century in Britain. Workers’ wages had stagnated in major urban manufacturing centers, and workers labored in dangerous conditions. Government regulations didn’t exist, and child labor was common. Companies ruthlessly exploited their workers. By the 19th century, Charles Dickens described the harsh conditions of British industrial life in Hard Times, and Karl Marx’s collaborator, Friedrich Engels, called the industrial city of Manchester, England, “Hell on Earth.”

“A handful of business leaders responded to this dire social situation with a belief that new industrial profits should not come entirely at the expense of their impoverished workers.”

Some employers didn’t believe economist Adam Smith’s claim that market forces would benefit everyone. They believed employers should improve employees’ lives. For example, textile manufacturer Robert Owen provided his employees with an entire community that included schools and a cultural center. He recognized that his workers lived in often debilitating conditions, and when he helped improve their lives, his company profited.

In Britain in the 18th and 19th centuries, Quakers were especially prominent as entrepreneurs, perhaps because they were a visible minority with few other options. Quakers were not allowed to attend universities, so they ran their own schools and apprenticeship programs.

George Cadbury, the heir to his father’s then-faltering chocolate manufacturing business, possessed the strong religious and moral convictions common among Quakers. He ate breakfast with his employees, closed his factory on public holidays, and made Saturday a half-day of work. As his business grew and needed larger premises, he built a new factory with a kitchen for preparing food. Cadbury bought 140 acres of land near the factory and built 200 houses, each with its own garden. Workers could buy the houses at cost, and Cadbury provided their mortgages.

A number of early business leaders outside the West became ethical capitalists.

Industrialization spread rapidly across Western Europe, and crossed the Atlantic to North America. While Europe and North America industrialized and manufactured products for export, much of the rest of the world remained agrarian.

By World War I, a massive wealth gap had built up between the industrialized West and the rest of the world. As of 1913, the United States per capita GDP was $10,108 and Britain’s was $8,212. By contrast, in the same year, India’s per capita GDP was $1,073 and China’s was $885.

“Building a successful business is challenging in the best of circumstances, and even more so in a world dominated by foreign forces.”

Members of India’s Parsi community excelled in deeply responsible business and entrepreneurship. The Parsi religion, Zoroastrianism, emphasized the central importance of improving people’s lives. – somewhat akin to British Quakerism on that point.

For instance, Indian industrial pioneer Jamsetji Nusserwanji (J.N.) Tata developed modern cotton textile factories and became enormously wealthy. But Tata didn’t regard generating wealth as his factories’ only purpose. He viewed serving his company’s communities – to his mind, the stakeholders in capitalism – as his business’s ultimate aim. Tata’s company provided money for employee housing, health care, and education.

In another example, in the 19th century, Shibusawa Eiichi helped draft the legislation that founded Japan’s first national bank. He stepped down from his government job and went into what, at the time, was a newly created private sector. Shibusawa founded hundreds of companies in a variety of industries that shaped Japan’s modern economy. Following the core principles of the Chinese philosopher Confucius – including the centrality of “benevolence, righteousness, propriety, wisdom, and trustworthiness” – Shibusawa insisted that a company’s profits must always benefit society.

A textile manufacturer helped build a better economy in independent India.

Prior to India’s independence in 1947, the nation faced serious social and economic challenges. Seminal leaders such as J.N. Tata confronted some of these issues, but the country remained impoverished, economically divided, and largely rural. India needed more business leaders like textile manufacturer Kasturbhai Lalbhai, who supported Indian independence and proved pivotal in developing India after 1947. Coming from an old, affluent Jain merchant family, he retained his parents’ strong religious and ethical convictions.

“[Lalbhai] prioritized ethics in all decisions, business or otherwise. ‘There is no substitute for integrity in business,’ he once observed.”

Following independence, Lalbhai launched India’s first dye manufacturing company with American technical and financial help. He sought to generate jobs in rural parts of the country. His dyestuffs plant came with a residential community, including facilities for education, recreation, and health care. As an independent India evolved, Lalbhai strongly invested in the idea that running a business includes taking on deep social responsibilities. He insisted on the importance of profits, even in the face of socialist-leaning governments. But he also believed that business leaders have a moral and spiritual responsibility to make life better in their constituents’ communities.

After World War II, some US business leaders came to value social responsibility.

World War II made the United States powerful and affluent. American businesses played a crucial part in the war effort and profited from it. Ford and General Motors burnished their reputations, showing that big corporations could be “forces of good.”

“A much smaller number of business leaders pursued deep responsibility by seeking to achieve a more sustainable, equitable, and ethical future.”

While some US corporations fueled the postwar era’s problematic excess consumerism, other companies countered that consumerism with philanthropy. For instance, when George Romney was the chief executive of American Motor Corporation (AMC) in the 1950s, he found American consumerism troubling. He believed businesses should make sustainable, enduring products – and should not exploit consumers. In the late 1950s, with this idea in mind, Romney promoted a compact car, the Rambler, as an alternative to the much larger cars popular at the time. He thought the Rambler could save families money on gas, giving them more to spend on educating their children.

Romney’s efforts on behalf of the Rambler worked for a while. Profits soared in 1959 and 1960, and he told his dealers they were changing the image of US corporations into one of “industrial honesty and integrity.” But in the early 1960s, cheaper compact cars like the Volkswagen Beetle took much of the compact market away from the Rambler and from AMC.

In the 1960s, a new generation promoted values-driven businesses.

A new generation of businesspeople emerged in the 1960s, bringing fresh social and cultural norms and rejecting the gray “establishment” of the 1950s. The new generation included hippies, rock music acolytes, Vietnam War protesters, environmentalists, feminists, and many others. However, this colorful cohort also included business leaders who were committed to using their companies to change the world.

“The new generation of countercultural business leaders that emerged in the late 1960s and the 1970s, many of them based in the United States although with counterparts elsewhere, were often critical of capitalism and of the existing relationship between business and society.”

Values-driven businesses emerged in fields that could facilitate social or environmental change. For example, as energy use became an environmental concern, values-driven entrepreneurs used technological innovation to advance the solar and wind energy industries.

This change affected retailing as well. John Mackey turned a small health food store into Whole Foods Market in the late 1970s. By 2000, it enjoyed annual sales of $2 billion.

Entrepreneur Anita Roddick opened The Body Shop in Britain in 1976, and was earning revenues of more than $100 million by the early 1990s. She sought to transform the way the beauty industry treated women and the way society perceived them. A values-driven business leader, Roddick became an advocate for social issues outside her industry.

Responsible businesses integrate into thriving communities.

Egyptian Ibrahim Abouleish’s organic farming business, Sekem, and Indian Sanjay Bansal’s Ambootia organic tea business function under the belief that businesses should integrate themselves into thriving communities. Both owners adhered to the global principles proposed by eccentric early 20th-century Austrian visionary Rudolf Steiner. His followers were concerned about environmental damage, increasing wealth inequality, and the weakening of local communities.

“Against this reality of disintegration and injustice, followers of Steiner saw in his ideas an alternative, holistic vision of the future, which started with renewing individual lives, and then local communities, and up through ever-larger communities until one reaches the planet.”

A chemist and Steiner follower, Abouleish founded Sekem in the late 1970s. The company transformed stretches of the Egyptian desert into farmland, and when Sekem became profitable, Abouleish reinvested its profits in the community, education, and cultural life. By 2022, Sekem had cultivated more than 4,000 acres of land, and it employed around 2,000 people, with revenues reaching $33 million.

Sanjay Bansal, another follower of Steiner, took over his family’s Ambootia tea plantation in 1993. He quickly turned it into an organic plantation. Bansal embraced Steiner’s ideas in part because they reflected his Hindu beliefs about aligning with the energies of the cosmos, rather than resisting them. Bansal invested his profits in supporting education, and in making his community more viable and sustainable.

Social responsibility in business requires strong incentives.

The availability of capital is the principal enabler of social responsibility in business. When investors care only about maximizing revenues and not about ethical or environmental issues, their corporations have scant hope of getting beyond economist Milton Friedman’s shareholder value maximization model. Responsible business leaders who turn to social and environmentally beneficial practices to shape the availability of capital and create incentives to invest can make all the difference.

“If flows of capital could be made to favor and reward companies that embraced socially and environmentally beneficial policies, the incentive structure could tip toward responsibility and sustainability.”

Environmental, Social, and Governance (ESG) investing is enjoying a growing presence in global markets. Even though environmental degradation and social and economic inequality continue to deepen, ESG’s practical relevance relies on information voluntarily provided – but also easily distorted.

Strong values motivate responsible business leaders.

Deeply responsible business leaders create products or services with authentic social value. They treat their stakeholders with dignity and respect. They recognize business organizations as human social institutions and accept their responsibility for their employees, customers, and the natural and social world.

“The business leaders featured in this book shared common characteristics despite the different contexts in which they worked. They were guided by strongly held values that shaped how they viewed the world and their careers, companies, and public lives.”

Deeply responsible business leaders value their communities and recognize that providing jobs is just one way to support them. Leaders also can provide dignified housing, educational opportunities, and a cultural life. Good business leaders improve people’s well-being by improving life in their communities. They live by strong values. While they know businesses must be profitable to survive, grow, and thrive, their values position profit as only one aspect of commerce, life, and society.

About the Author

Geoffrey Jones is Isidor Straus Professor of Business History at Harvard Business School. He also wrote Profits and Sustainability: A History of Green Entrepreneurship.