It takes a village to redefine the corporation

Procreation is just the first step when it comes to growing new business opportunities. While some investors think money should simply make more money, others take the stance that it should create more opportunities—for future generations as well as for future business owners.

Consider the origins of the modern-day corporation. Corporations started during the period when guilds were common in England. Guilds faced challenges such as finding a way to gather enough capital to automate the manufacturing process, and determining what would happen to the wealth generated by one family when the eldest in that family died. Guilds also faced issues around the succession of leadership in an organization and the development of tools needed to support other businesses in the village.

All of the above-mentioned challenges led to the development of the corporation. The corporation would serve as an entity that could accumulate capital and support the guild in perpetuity. But the objective was not just to help individual guilds. The objective, in large part, was to support the community; because by supporting the businesses in the community, the wealth of the village improved.
The corporation not only provided services and care for guild members, it also created a power base to fend off the government and help ensure that the guild generated profits so it could reinvest in its own products and workers in order to grow over time—in other words, so it could sustain itself. Ultimately, the corporation allowed guilds to grow and remain stable over time.

Fast forward
Business schools have historically focused all of their attention on making money and ignored the other objectives of the corporation—sustain individual and community wealth. While there is considerable conversation about reintroducing these objectives into business, there are also many reasons why they are not widely incorporated into traditional business education programs or shareholder reports.
For one, profit is easily measured and dividends are tangible assets that can be easily seen. Business students can easily measure and compare one company’s profits against another’s. Analysts can compare one company to another with the simple assessment of the financial performance without having to deal with the other positive and negative impacts the corporation might have on the communities in which it operates.

Other side of the coin
The business school approach is just one way to change the way businesses view financial returns. There is a growing group of investors who recognize that their investments have impacts beyond financial return.

Unlike the traditional profit-focused investors, “socially responsible investors” place value on benefits other than just financial returns. They expect to see wealth generated across the productive employees of the company; community wealth enhanced by the company’s activities; and opportunities created for other entrepreneurs outside the company they have invested in. More importantly, they expect to realize a return on investment over a long period of time rather than in the short term, as the quarter-to-quarter model provides.