Prosperity: Better Business Makes the Greater Good

Summary of Prosperity

1. 1

   The Corporation's Crisis of Purpose

   

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   Imagine a world where businesses exist not just to make money, but to solve meaningful problems for society. This isn't some utopian fantasy - it's actually the original purpose of corporations before we lost our way. Today, trust in corporations has plummeted to historic lows, and for good reason. The shareholder-primacy model that has dominated business thinking for half a century has created a system where profit trumps all other considerations. Yet the modern corporation has undergone a dramatic transformation that few fully appreciate. Intangible assets now comprise 85% of US corporate market value, compared to just 20% forty years ago. This seismic shift is exemplified by WhatsApp's $19 billion acquisition despite having minimal physical assets and operating at a loss. We're in a new era - what Colin Mayer calls "the Age of the Mindful Corporation" - but we haven't updated our thinking about what corporations are for. The corporation wasn't born as a profit-maximizing machine. It began as something far more noble. Corporate origins trace to Roman times through institutions that were fundamentally public in nature. The societas publicanorum could continue indefinitely, own property, and raise finance through tradable shares - creating "popular capitalism" two millennia before Margaret Thatcher. Medieval corporations administered towns, established universities, and managed charitable institutions. Even the Catholic Church advanced corporate law during the 11th-13th centuries by granting corporate rights to alms-houses and hospitals. Only in recent history did corporations lose their public purpose, with the profit motive completely overshadowing their public dimension.

2. 2

   The Corporation as a Living, Purposeful Organism

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   To understand corporations properly, we must view them as evolving biological entities rather than mechanical systems. Like living organisms, corporations are born, grow, reproduce, mutate, and die - revealing three critical aspects: relationships, consciousness, and integrity. Consider the symbiosis between foraminifera cells and algae, whose mutual relationship led to limestone used in the Egyptian pyramids. Similarly, corporations thrive through symbiotic relationships where parties contribute permanent capital that cannot be withdrawn until dissolution. While economics emphasizes competition, cooperation's importance is often overlooked. The corporate legal structure promotes cooperation through deliberate irreversibility. Companies exist not simply to make money for shareholders, but to fulfill their purpose - their reason for being. This distinction matters because it establishes purpose as an ultimate goal, not merely a means to profit. The notion that philanthropy is only valuable when profitable misses the point. A company's purpose should determine its structure and conduct, which then drives performance. Innovation stems not from pursuing money alone but from creating meaningful legacies. As Victor Frankl noted, purpose comes from what life expects of us - the contribution that becomes our legacy. Companies pursuing authentic purposes often achieve greater financial success than those fixating on shareholder returns. Mars Wrigley's Maua program in Nairobi demonstrates this, expanding distribution through micro-entrepreneurs called "uplifters." The program now engages 450 individuals, generating $4.5 million - 15% of Wrigley's national business.

3. 3

   Measuring What Truly Matters

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   Our accounting systems, while precise, often miss what's truly valuable. As Einstein noted, "many of the things that you can count don't count; many of the things that you can't count really count." Traditional accounting considers physical capital maintenance but overlooks natural, human, and social capital costs. This creates two key problems: Companies pursue seemingly profitable activities that aren't when all costs are counted, and they distribute overstated profits to shareholders. Thomas Midgley's General Motors inventions - lead in petrol and CFCs - exemplify this, generating profits while causing environmental damage that exceeded their economic benefits. A firm's survival depends on maintaining all forms of capital, not just physical and financial. Natural capital stands unique in its self-regenerating capacity - a rare form of capital that, when properly maintained, has infinite life without depreciation.

4. Chapter 4

   Law as a Creative Force for Purpose

   Law doesn't merely regulate corporations - it creates them. The corporation is a legal fiction that would not exist without corporate law, making this area uniquely powerful in its creative capacity. Unlike natural persons, corporations are artificial constructs entirely dependent on legal frameworks for their existence, rights, and responsibilities. Corporate law should be understood as enabling parties to commit to common purposes. True commitment is an obligation to abide by statements or principles that aren't legally enforceable. Commitments can be self-regarding (benefiting the corporation itself), communal (benefiting connected communities), or social (extending to society generally). Industrial foundations like Bertelsmann, Bosch, Carlsberg, Ikea, and Tata demonstrate effective commitment. Despite being essentially ownerless with self-appointing boards, their performance has been remarkably good, likely because employees value contributing to organizations with public purposes alongside private ones. These foundations combine commercial success with social responsibility, often outperforming conventional corporations in both financial and social metrics.

   Chapter 5

   Reimagining Finance for the 21st Century

   The financial crisis revealed fundamental problems in corporate financing. Evidence contradicts conventional wisdom about bank governance - institutions with the "best" corporate governance arrangements by traditional measures actually failed most during the crisis. In highly leveraged institutions, fundamental conflicts exist between shareholders and creditors, with shareholders benefiting from upside gains while creditors bear downside losses. Corporate tax systems universally distort financing decisions by allowing interest deductions on debt but not dividend payments on equity. This debt preference originated as a temporary measure during WWI but became permanent, creating debt addiction in both corporate and financial sectors. Financial capital, once the major constraint on corporate investment, now exists in abundance. The true scarcities of the twenty-first century are human, social, and natural capital - skilled labor, community trust, and clean environments. Shareholders' historical position as the dominant controllers of companies has become an anachronism.

   Chapter 6

   Restoring Corporate Consciousness and Integrity

   With the emergence of artificial intelligence, corporate consciousness becomes an urgent consideration, as AI may soon become the mind of the corporation, determining corporate purpose and values. Corporate investors become "trapped in an embrace" where their interests become joint rather than merely mutual. This corporate consciousness guides their evolution beyond mere market processes. The greatest challenge to purpose-driven business is internal resistance from middle management who see these approaches as contrary to their financial goals. This resistance stems from a misunderstanding of what truly drives corporate success - not short-term profit maximization but long-term value creation through purpose.

   Chapter 7

   Reclaiming the Corporation's Public Purpose

   Trust in corporations has eroded across all fronts - from compensation and taxation to environmental and labor practices. The modern corporation has become "inhumane" by prioritizing anonymous markets and shareholders over people. We must free corporations from shareholder supremacy and embrace diverse corporate forms serving collective interests. This shift requires new educational approaches that question corporate purpose beyond shareholder value maximization. We face a choice between profit-maximizing entities constrained by regulation or purpose-driven companies partnering with government for public good. Reimagining corporations as purpose-driven problem solvers isn't just morally sound - it's commercially viable. In today's world of social and environmental challenges, our economic future depends on restoring the corporation's original purpose: creating prosperity that benefits society as a whole.

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