September 27, 2019
September 27, 2019
According to research conducted and presented at the 2019 Global Board Leaders’ Summit (GBLS) by a representative from Pew Research Center, 63 percent of millennials think corporations make too much profit. In addition, Pew’s research found that the average level of trust among US citizens that their government will do what is right just about always or most of the time—across millennials, Generation X, baby boomers, and the silent generation—has hovered at a paltry 17 percent for nearly a decade. Given these statistics, is it any wonder why some might think that capitalism is in crisis?
Subject-matter experts at GBLS enlisted a battery of statistics and evidence supporting just why capitalism as it has been known in previous decades stands to change as millennials and subsequent generations ascend to economic power. For instance, according to former Dell Technologies’ chief responsibility officer Trisa Thompson, 70 percent of millennials say they will spend more money at companies supporting causes that matter to them than they will at other companies that have not expressed values that they agree with. She also noted that 92 percent of consumers feel more positively toward companies that support environmental, social, and governance (ESG) issues.
While these are not the sort of expectations that businesses have seen from prior generations of American consumers, a series of speakers made the case for revising institutional norms in capitalism to better align with the values and purchasing power of up-and-coming generations. Speakers urged attendees to remember that as the silent generation and baby boomers retire in greater numbers, millennials and Generation Z will primarily comprise our nation’s consumer and employee base.
A recap of some of Monday’s sessions follows:
Businesses will need to learn how to navigate generational differences in values. During a presentation by Pew Research Center’s associate director of research Jocelyn Kiley, attendees heard that younger generations generally have more values that align with the political left than do older generations. For example, 64 percent of millennials generally think that the government should be doing more to help solve social problems, while less than 50 percent of both baby boomers and the silent generation feel the same. The silent generation and baby boomers are far more likely to say that the government is doing things for society that would be much better left to individuals and companies, for instance.
This correlates with how different generations view our economic system, though most living generations now distrust concentrated economic power: more than 60 percent of millennials, Generation X, and baby boomers alike said that they are more likely to believe that our system “unfairly favors powerful interests,” while only 47 percent of the silent generation are likely to believe the same. In addition, millennials are at least 29 percent more likely than the silent generation to say that immigration, interracial marriage, and same-sex marriage have positive effects on society. Directors hoping to reach their consumer bases in the most effective ways should take note of what’s important to the younger generations, who are coming into greater and greater buying power. Ignoring these social, cultural, and economic shifts could cost companies dearly, and could lead to a further erosion of confidence in capitalism.
ESG issues should matter to boards because they matter to the public. Given the claim made that 9 out of 10 customers expect companies to do more than make a profit, Thompson assured attendees that a strong corporate social responsibility (CSR) program would help companies to attract and retain customers. This could even help them to attract and retain an employee base; applicants consistently say that a company’s support of causes they care about is a top-three consideration to them when deciding whether or not to join the company.
Thompson pointed to ESG initiatives at Dell Technologies, Nike, and H&M as examples of how ESG efforts have driven customers to feel a closer attachment to these brands, giving these companies a competitive advantage. For instance, she noted that almost all of Nike’s shoes now are made of some portion of recycled Nike products, which helps close the loop on their production while appealing to consumers who desire a more environmentally-conscious approach to manufacturing.
Corporate activism is on the rise. Jerry Davis, associate dean of business and impact at the University of Michigan, pointed out that getting involved in politics is unavoidable for businesses. As stated above, consumers overall seem to want the companies they support and work for to take a stand on issues that matter to them. This has, in part, led to a moment of strong corporate political activism. Here are three reasons why:
Davis concluded by warning that companies can’t avoid these issues: “In an age saturated in social media and political polarization, politics will be inescapable for the corporate sector.”
Companies will need to focus on restoring trust. A panel discussion with JUST Capital CEO Martin Whittaker, CNN global business columnist Rana Foroohar, Trust Edge Leadership Institute CEO David Horsager, and Economic Policy Institute president Thea Lee explored the growing lack of confidence in the capitalist system.
Inequality and wealth disparity have increased dramatically since the 1980s, and social media and a 24/7 news cycle have helped lead to a lack of institutional trust. Indeed, according to Gallup research conducted in 2017, only 21 percent of Americans had trust in big business, while 70 percent expressed confidence in purchasing from small businesses.
If capitalism is in crisis because of trust issues, where can boards go from here? According to Horsager, directors and executive management can work to ensure that they are trustworthy and compassionate, and able to