McDonough School of Business
Illustration designed by Davide Bonazzi includes people watering other people's plants to represent the concept of shared value.
News Story

Buying and Selling: Moving Away From Capitalism for Capitalism’s Sake

What’s In It For Us? 

New generations of business students are after more than money these days, so Professor Ricardo Ernst suggests we do away with making money for money’s sake. The idea of ownership, accountability, and shared value in business means we all win.

Ricardo Ernst has been on the faculty at Georgetown McDonough for 35 years. During most of that career, making money was the foundation of business concepts. “Making money was at the foundation of everything we do in business,” he says. But something has shifted in recent years. New generations of business students are not satisfied with money-making as the only objective and are expecting more.“They started to tell me that they wanted to give back to society and expected the same from companies,” says Ernst. “That was an interesting perspective.” Ernst also developed a MOOC course titled “Global Business in Practice.” Of all seven sections in the course, the one that received the most interest was the section on shared value. These realizations prompted Ernst to co-write a new book with colleague Jerry Haar, professor and executive director, The Americas, Florida International University’s College of Business. In the book, From Me to We: How Shared Value Can Turn Companies into Engines of Change, they argue that the pure capitalistic model of money-making is old hat and requires new perspectives. Businesses need to incorporate a new way of thinking. Here Ernst shares his thoughts on trading old ideas for new ones.

BUYING: Shared Value—Through Ownership and Accountability. Harvard faculty members first introduced the idea of shared value. Their argument incorporates stakeholders as active participants and recipients of the benefits provided by companies. However, for it to be sustainable, shared value should follow a comprehensive business plan. They are all part of the business ecosystem, and should all grow together. Jerry and I argue that the original idea of shared value is lacking two very important elements—accountability and ownership. Involving stakeholders should be more than a paternalistic view, and recipients should have their fair share of responsibility, which can only be captured by making them accountable and providing them with some sense of ownership. Think of Uber. The ownership element is explicit because the cars are owned by the drivers. The accountability comes through the star ratings. The higher the ratings, the larger their share of revenue. The responsibility is not only from the top down, but for every member of the business ecosystem to make the company successful. With ownership and accountability, everybody wins. 

SELLING: Capitalism for Capitalism’s Sake. Famous economist Milton Friedman argued that businesses needed to concentrate on shareholders. In other words, the first fiduciary responsibility of a company was to make money for its investors. Today, people recognize that just making money is a myopic approach, and it has evolved into corporate social responsibility, in which companies would give back through philanthropy and other means as a result of their success. This next generation of business people has evolved even further. In fact, younger generations relate to this shift and are willing to dematerialize their lives. This generation not only wants to help others through philanthropy, but wants the entire group of stakeholders involved in companies to benefit from the success. Money for shareholders alone isn’t enough anymore.

This story was originally featured in the Georgetown Business Fall 2022 Magazine.

Georgetown Business Magazine