Prosperity
Better Business Makes the Greater Good
Book Edition Details
Summary
In a world where businesses are taught to chase profit at all costs, Colin Mayer stands as a beacon of change with "Prosperity." This groundbreaking manifesto dismantles the entrenched notion that corporations exist solely to enrich shareholders, revealing the havoc this mindset wreaks on our planet and societies. Mayer, a visionary voice from Oxford's Säid Business School, offers an audacious blueprint for reimagining the corporation as a champion of holistic wellbeing. By weaving together insights from diverse fields, he charts a path for businesses to become engines of community and customer prosperity. "Prosperity" isn't just a book; it's a rallying cry for a future where economic success aligns with societal health, urging policymakers and entrepreneurs alike to rethink, reform, and renew the corporate world for the greater good.
Introduction
The modern corporation stands at a critical juncture where its fundamental purpose has become obscured by decades of shareholder primacy doctrine. This narrow focus on maximizing financial returns has created a false dichotomy between profit generation and societal benefit, leading to widespread environmental degradation, social inequality, and erosion of public trust in business institutions. The prevailing assumption that corporations exist solely to enrich shareholders represents a historical aberration rather than an inevitable economic truth, one that threatens both long-term business viability and collective human prosperity. The transformation of corporate entities from their original conception as public-serving institutions to profit-maximizing machines reveals how legal frameworks, governance structures, and measurement systems can fundamentally reshape organizational behavior. Through careful examination of historical precedents, international comparisons, and contemporary case studies, a compelling argument emerges that purpose-driven corporations consistently outperform their purely profit-focused counterparts across multiple dimensions of value creation. The evidence suggests that companies capable of making credible commitments to diverse stakeholders develop stronger competitive advantages, greater resilience, and more sustainable growth trajectories. The path toward reinventing capitalism requires systematic reform across four interconnected domains: redefining corporate purpose to encompass stakeholder value creation, restructuring governance mechanisms to enable long-term commitment capacity, expanding performance measurement beyond financial metrics to capture comprehensive capital stewardship, and reforming legal and policy frameworks to support purpose-driven business models. This comprehensive approach challenges readers to reconsider fundamental assumptions about the role of business in society while providing practical frameworks for implementing transformative change.
The False Dichotomy: Why Purpose and Profit Are Complementary Objectives
The conventional wisdom that corporations must choose between doing good and doing well rests on a fundamental misunderstanding of value creation dynamics. Purpose represents the reason for a company's existence beyond mere profit generation, while profits should emerge as the natural consequence of successfully solving meaningful problems for customers, employees, communities, and the environment. This distinction matters because organizations with clearly articulated purposes consistently demonstrate superior financial performance over extended time horizons, not despite their broader commitments but because of them. Historical analysis reveals that the most enduring and profitable enterprises have been those that maintained strong connections to societal needs while generating returns for investors. Medieval guilds, early chartered companies, and successful family businesses all understood that sustainable competitive advantage emerges from creating value for multiple stakeholders simultaneously. The shift toward shareholder primacy represents a relatively recent phenomenon that coincided with the rise of liquid capital markets and dispersed ownership structures, gradually eroding the institutional mechanisms that previously aligned private enterprise with public benefit. Contemporary evidence from purpose-driven organizations demonstrates how addressing social and environmental challenges often creates new market opportunities, reduces operational risks, and builds lasting customer loyalty. Companies that invest in employee development, community relationships, and environmental stewardship frequently discover innovative solutions to business challenges while developing competitive advantages that are difficult for purely profit-focused competitors to replicate. The key insight is that stakeholder value and shareholder value converge when viewed through a long-term lens, as healthy communities, motivated employees, and preserved natural resources form the foundation for enduring business success. The transition from shareholder primacy to stakeholder capitalism requires recognizing that trust serves as the fundamental currency of successful business relationships. Purpose-driven organizations build trust by demonstrating consistent commitment to their stated values through concrete actions, creating virtuous cycles where stakeholder support enables further value creation. This approach transforms potential conflicts between private profit and public benefit into mutually reinforcing objectives that strengthen both business performance and societal wellbeing.
Governance Revolution: How Ownership Structure Determines Corporate Commitment Capacity
Corporate governance systems fundamentally shape organizational behavior by determining who has voice in strategic decisions, how conflicts are resolved, and what obligations directors owe to different stakeholder groups. Current governance frameworks primarily emphasize shareholder rights and director duties to maximize financial returns, creating structural barriers to long-term value creation and stakeholder commitment. The concentration of decision-making power among short-term oriented investors systematically undermines corporate capacity to make credible promises to employees, customers, communities, and future generations. Ownership structure profoundly influences corporate commitment capacity through its impact on time horizons, risk tolerance, and stakeholder relationships. Concentrated ownership by engaged long-term investors enables companies to pursue strategies that may sacrifice immediate returns for sustainable value creation, while dispersed ownership among transient shareholders creates pressure for quarterly earnings optimization at the expense of research, employee development, and environmental stewardship. The most successful governance models combine elements of concentrated and dispersed ownership, with committed block holders providing stability and long-term orientation while liquid public markets offer price discovery and capital access. International comparisons reveal significant variation in governance approaches and their associated outcomes. Countries like Germany and Japan preserved substantial family and institutional ownership even as their capital markets developed, enabling companies to maintain longer investment horizons and stronger stakeholder relationships. Industrial foundations represent an extreme example of this approach, where founding families transfer control to philanthropic entities that maintain corporate mission while accessing capital markets for growth funding. These organizations consistently demonstrate superior performance across financial, social, and environmental metrics compared to their purely shareholder-focused counterparts. Effective governance reform requires expanding beyond ownership structure to encompass board composition, executive compensation, and stakeholder representation mechanisms. Companies can enhance their credibility by granting meaningful voice to employees, customers, and communities in governance processes, creating accountability systems that ensure corporate behavior aligns with stated purposes. This transformation demands legal frameworks that recognize stakeholder rights and provide enforcement mechanisms when companies fail to honor their commitments to broader constituencies.
Beyond Financial Metrics: Measuring True Performance Across All Capital Forms
Traditional accounting systems systematically misrepresent corporate performance by recognizing only financial and physical assets while ignoring human, social, and natural capital contributions to value creation. This measurement failure creates perverse incentives that reward activities generating short-term profits through depletion of other capital forms, ultimately undermining long-term business viability and societal wellbeing. Comprehensive performance measurement must account for the full spectrum of value creation and destruction across all capital types to provide accurate signals for investment decisions and corporate strategy. The concept of capital maintenance provides a robust framework for correcting these measurement distortions. Just as companies depreciate physical assets and set aside reserves for equipment replacement, they should account for the costs of maintaining human capabilities, social relationships, and environmental resources. True profits should only be recognized after ensuring all capital forms remain intact or enhanced, requiring companies to internalize previously externalized costs and invest in regenerating the resources they consume. Natural capital presents the clearest example of current measurement failures, as companies routinely report profits from activities that degrade ecosystems, deplete resources, or contribute to climate change without accounting for restoration costs. Proper accounting would require setting aside funds to offset environmental damage, potentially rendering many apparently profitable activities economically unviable when true costs are considered. Similar principles apply to human and social capital, where companies should recognize investments in employee training, community development, and stakeholder relationships as assets when they contribute to long-term value creation. Implementation of comprehensive capital accounting requires extending traditional accounting principles rather than creating entirely new frameworks. Companies can begin by tracking their impacts on different capital forms, developing metrics that capture both positive and negative effects, and gradually incorporating these measures into formal reporting systems. This approach maintains familiar accounting logic while capturing the full scope of corporate impact on society and environment, enabling investors and other stakeholders to make more informed decisions about corporate performance and potential.
Legal and Policy Framework: Enabling Corporate Purpose Through Institutional Reform
Corporate law creates the corporation and therefore bears ultimate responsibility for shaping its character and capabilities. Current legal frameworks primarily emphasize shareholder rights and director duties to maximize financial returns, but they could equally well support more diverse corporate forms that balance multiple stakeholder interests. The law's power to enable different organizational structures represents one of the most underutilized tools for promoting beneficial corporate behavior and aligning private enterprise with public good. The fundamental insight is that corporations function as commitment devices rather than mere contracting mechanisms. While contracts can specify particular obligations and incentives can align interests, commitment involves deeper forms of trust and mutual dependence that transcend formal agreements. Legal structures can either facilitate or hinder these commitment relationships by determining governance rights, conflict resolution mechanisms, and fiduciary duties. Enabling legislation should permit corporations to adopt diverse ownership and governance structures suited to their particular purposes and circumstances. Recent innovations like benefit corporations demonstrate how legal reform can create new organizational forms that explicitly balance profit with purpose. These entities must articulate their social or environmental objectives, measure their performance against these goals, and provide transparency about their impact. Directors of benefit corporations have fiduciary duties to pursue both financial returns and social benefits, creating legal accountability for purpose-driven behavior while protecting management from shareholder litigation focused solely on profit maximization. Regulatory frameworks must evolve from their current focus on constraining corporate behavior toward actively promoting beneficial outcomes. Rather than simply setting minimum standards and punishing violations, regulation should create incentives for companies to exceed baseline requirements and contribute positively to social and environmental goals. This might involve tax advantages for companies that demonstrate measurable improvements in human, social, or natural capital, or preferential treatment in government procurement for organizations with strong purpose-driven track records. The goal is to align private incentives with public benefits, making good corporate citizenship not just morally desirable but economically advantageous.
Summary
The reinvention of capitalism requires recognizing that corporations possess the potential to serve as humanity's most powerful problem-solving institutions, but only if we abandon the narrow focus on shareholder value maximization that has dominated business thinking for the past half-century. The evidence from historical analysis, international comparisons, and contemporary practice demonstrates that purpose-driven organizations with diverse governance structures and comprehensive performance measurement consistently outperform their purely profit-focused counterparts across financial, social, and environmental dimensions. The transformation demands coordinated reform across governance systems that enable long-term stakeholder commitment, measurement frameworks that capture true value creation beyond financial metrics, and legal structures that support corporate purpose while maintaining accountability and performance standards. This represents not the abandonment of market capitalism but its evolution toward a more sophisticated understanding of value creation that encompasses human flourishing, environmental sustainability, and economic prosperity as complementary rather than competing objectives, ultimately creating the foundation for shared prosperity in an interconnected global economy.
Related Books
Download PDF & EPUB
To save this Black List summary for later, download the free PDF and EPUB. You can print it out, or read offline at your convenience.
By Colin Mayer
