It is great to be back as we kick off and our inaugural speaker as you mentioned is the professor of Business Administration at the school at uva and today is going to discuss his latest book that is so relevant given the current discourse going on in the nation with the word and, the most powerful word in our language. Lets find out why in the power of and the responsible tradeoff. Because they just opened a philosophy factory by the interstate. You will be fine. I got very lucky and ive always taught in Business Schools but that sends optimism and idealism in the shadows of this awful pandemic and the devastation that has occurred in the world in many communities. Is still remain incredibly optimistic we will find a way out of it. We will find our way to Racial Justice and build a better world with all of us. I want to focus on the debate which exist about ethics and capitalism there is an old story about business that is deeply rooted all over the world not just in the us and you know the old story business is about the money and profits. Last week the 50th anniversary of the very famous Milton Friedman the task of managers is to make as much money as possible for shareholders. That old story may have been useful at some point. I want to know but its not very useful anymore. The idea that making money and profits is all that matters where shareholders are all that matters and real investors try to do each other in and only worried about shortterm economic selfinterest people have to manage not to laugh or make jokes and is an oxymoron or jumbo shrimp theoretical subject if you have a new one it in the chat so i can use them. Ever since the Global Financial crisis we have seen an increase in the clarion call for can we speak about business or capitalism different . I will use those two terms interchangeably. I am a modernday adam smith fan he never use the word capitalism but he did write about ethics that most people dont read. So in the aftermath of the Global Financial crisis with an increase in the call for reform they that again several problems that are there 70 percent problems that comes from the studies that look at engagement. How are people engaged in their work . 70 percent is higher in many places of the world them away like singapore and others 70 percent are unengaged or actively engaged. If you are unengaged you just dont care if you are actively unengaged, i guess you would show up every day. So that is a real practical problem i have asked many ceos were those numbers and organizations . And they will say we have to work on that. There is a standard issue about trust in business and Business Executives is fairly low you seen studies around 20 Percent People trust business less then they trust doctors or lawyers who has us beat is politicians you can decide if thats the victory are not still dealing with the aftermath of the financial crisis along comes the pandemic and the search for Racial Justice but business has a part to play but we will not solve these problems with more of the wrong thing we will not solve these problems trying harder to maximize shareholder value we will not solve these problems to see business as people trying to do each other in out competing always acting shortterm selfinterest. We need a new narrative and a new story. A new way to think about this. The new conceptualization. Now the good news this is happening in the world so think about the incredible interest it started in the sixties by an incredible renewal of corporate resort responsibility and sustainability changing social entrepreneurship for those organizations like just capital one take Richard Branson whose name i always forget or the gri with Impact Investing in Conscious Capitalism and responsible investing in stakeholder capitalism all of these movements are all founded by Real Companies doing business in a different way. I was in a meeting at the white house and the point was to figure out what could government in particular like the department of labor do to encourage this movement . How does this get branded . What if we all pull together under one brand so sitting there i began to think maybe thats the wrong question may be a better question is what are the four or five necessary things that whatever the plan turns out to be the story of capitalism has to deal with. So we decided and my colleagues is that your professor at notre dame, we decided the power of and responsible business without tradeoffs and there are five key areas and principles maybe there are six or seven we focused on these five and they give us a way without thinking of business with the old story but they do require a fair amount so i just briefly want to talk about these five with the q a week and focus on any that you want to. The first said we need to think about the purpose of businesses to make as much money as you ca can. I need red blood cells to live but dont think the purpose of my life is to make red blood cells even i have to focus i had a fun weekend and got my hips replaced. I had to focus on making red blood cells but thats not the purpose of my life business must have profits the idea that profits are bad or evil its like red blood cells are evil. You have to have it to live it doesnt matter if youre forprofit or notforprofit youve got to get paid and invest in the future so profits are necessary. I have students who say i will start something to make a lot of money i say get a job you have a better chance at making money than starting something. Or entrepreneurs start a business they have a vision and a purpose and they want to bring something into being. Purpose activates business ideas. Profits follow from purpose. They are not themselves. They are the outcome. So those who spend a lot of their time focusing on being happy. Thing they do is about being happy. These are the most mystical one mythical people on the planet they dont understand happiness is an outcome of relationships, what you are doing with your life, your purpose, et cetera. Profits are and outcome of how you make your purpose real. What are the ways to create value for your stakeholder . The second point is no surprise since the late seventies i wrote about this idea of stakeholders i thought thats just the way business worked. Even on a dirt farm in georgia we knew you had to and that is just complete common sense to me. Ive never understood why i thought that was a radical idea. I thought there were but that stakeholder idea is the most interesting one. I didnt realize how invented that story was in their mind and were in the great of that old story and any business will always create and sometimes destroy value for customers and suppliers and communities and people with money. It means getting things going in the same direction. Even through the most in the world and only care about shareholder value, how do you do it . And to have employees and communities to do that then maybe you will make some money. Stakeholders versus shareholders is a complete mistake it is interdependent and you cannot look at it. The second thing to notice thinking about stakeholders is a fundamentally different way most people want to think about business. In relational terms, relationships. A relationship is very different than a transaction. Transactions are one off that might be repeated. But relationships into overtime you expect them to continue. And we try not to keep score. My wife and i have been married 43 years. She went to grad school. And then now if i went next door and said ive been keeping the score and i thank you owe me three. I am very certain the outcome of that is not going to be good for me. She is a black belt in tae kwon do. You dont keep score. Thats how business works. Its not just a transactional thing. There are some parts of business that are like that. For the most part to build a great company, you build relationships. And shareholders. This doesnt exist but there are only market forces, competitio forces, competition, all information is contained in the price et cetera. Et cetera. Business in the real world is connected with other societal institutions. We our consumer consumers, citizens, parents, p. Its very hard to separate out one institution from another. And then to understand how business can partner with them and to say anything if the business embeddedness in the physical world. And we cant forget about the intangible resources but tangible. So think about what sustainability means and how business can be connected and the problem especially today and other places of the world because of crony capitalism because some are in cahoots with people to make special deals. Here leading the markets work enough and not seeing business but rather we really need people to use their creative imagination. And with that human complexity the idea behind that complexity principle we are not maximizers of the shortterm selfinterest. There are people like that. We call them associate path. For the most part, we elect to them to political office. That is a complete the nonpartisan statement. We can be selfish or anybody who has been in love or has held a child knows the idea focusing on our rational self is a logical mistake. Thats not what human beings are. I have often said what a human being is like this iphone. Think of the vocabularies we have to deliberate the event to get to iphone invent the terms of the problems in the issues invent the vocabulary about class in the physics on the inside. Human being is a and then use that to solve problems and to realize those solutions in the time that we recognize that this this works because we can Work Together. Its not the urge to compete that is so important but the urge to create to be a part of themselves to Work Together in relationships with others and its high time that we recognize that there are lots of examples of companies that are doing this i wish list the way the world was. And im trying to argue this is actually happened but its a grip on the old story that sometimes we dont see it and finally we have to put business and ethics together most people tell the truth and keep their promises we have a crisis in society you can talk about race or gender or religion. And that is the deathknell of a Democratic Society if we cannot figure how to talk critically of that Democratic Society i think is not here for very long. So let me summarize and say purpose and profits stakeholders and shareholders and people with full humanity and economic interests and ethics and business. Freeport those five things together i think we get a very different view of business and of the world. We need moral leadership. We need people who lead critical conversations no lectures on morality. We have to take people where they are this requires incredible Emotional Intelligence and humility. I think it is best done with a dose of humor which we can address our own values and their own authenticity and contribute to others, we will have a really good future. Let me and by saying two things. So one take away people always say the New York Times and Washington Post the never said the center for Daily Progress because if they did they would have at least five factual errors and then you have aague idea you read this two days before so that doesnt workor us in tiny charlottesville and the new test are the names of my three kids i cannot go home at the end ofhe day but let me tell you at i did today i am proud of and we can learn from because if we do not make the organizations were synagogues or mosques are the Community Centers or educational institutions were not trying to make places for children to live in the second thing comes from one of my favorite musicians Warren Haynes is the leader like the allman brothers and im learning to plays slide guitar listening to warren hayes on a video. That sounds like you are killing the cat and doing it because you cause the most pain possible so im struggling and then warren hayes stops and ys when you play the blues, doesnt matter how many notes that you play use have to mean those notes. My challenge to all of you is to figure out where the notes that you mean to play . Because in todays world there is a lot coming at you. There is an awful lot we dont know. And there is more humanity and the one note than the hundreds of others people can play. I think thats a rule. Let me stop there and i will turn it back over. Thank you so much. That was gray. We are raffling off 50 copies of your book. And you give so share with us why you che the companies that you chose. Sure. There are lots of them some get a lot of press like whole foods but a film called fishing with dynamite and on the shareholders stakeholder idea that people comment and we pick out of the Container Store with Startup Company and Eastman Chemical and those are Interesting Companies and those which have been in business a long time and basically embody these principles and that which has revolutionized the used car industry as the used car salesman which is the icon of unethical behavior. It is important to note we are not trying to argue that any of these companies thinking about this like saints and sinners. Most businesses are in it for the money. There might be a few but when they make a mistake that they are in it for the money. That is a hallmark to the old story oscar wilde told us how to do it every saint has passed every sinner has a future i dont know many sinners that are sinners all the time and as human beings if every time we did something wrong i would have to go straight to hell to see if business is interesting. In my on for the next question . Can you hear me . James where like to know to the best of his knowledge all intro finance textbooks except one to maximize shareholder wealt wealth, what can we do to get textbook authors to wake up . I think we will see them and this is for several reasons. And with the share value shareholder needs. The principles of responsible investing 9 trillion that those of german those prayer principles. The blackrock ceo. They tell us the technologies how to do stuff. They are important they just dont help solve problems im often asked students how certain they are that a 20 year prediction with the cash flow and present value. I cant even imagine people do that anymore so i am more optimistic about this. And you are the author of one talk about shareholder wealth and thats a great idea i think we will see more of that. Thinks. Indeed writing a new booon finance i encourage everybody to take a look i have the question from the school of law and janice is asking wouldnt it be less skepticism regarding Business Practices as part of a menu of corpore governance options to support enterprise risk magement and shareholder value rather than a new model . He is citing a study between the business roundtable. For many years and try to follow Corporate Governance literature and follow it in the law although i am not trained. First of all but then they issued the Statement Last summe summer. It is a little soon to be trashing it it seems to me. If you look at just caps on have our website so if they put their money where their mouth is. Again you have to avoid so the idea that shareholder value is the only objective is not the law. Shareholders dont own companie companies. There is an awful lot of myths around that. So canvassing but im not sure that we understand it is embedded in the idea that shareholders are what count im not sure we know quite yet about stakeholder of governance and it is a whole with the governance of relationships and we need to understand that as well. But im not hopeful of governance. And with those Business Ethics and then give baseline on this and as an academic and from the jesuit universities from the fifties and sixties. Some philosophers started thinkingbout this and then to teach ethics and then began to develop ideas and to be the founding mother the academics. And started the journal of Business Ethics quarterly. And i taught at wharton for a number of years. That is a strategy behind the strategy. I am clearly a member of the stragy discipline. I know what could be clear. That people who cared and at that time we to the first required in 89. We had a module before the and maybe there is something else. And in the nineties for ethics after the scandal of insider trading. Anthen more schools are began to be taught. And then to teach Business Ethics as a standalone and then to say ery business decision has finance. We need to teach a finance course and with that discipline and technology. And that is a dumb idea. Ethics is far older but plato and aristotle had a good view to finish up but for much of the current literature that led to courses that they were doing something that werent. On ethics day, most people cant write. Its tricky how to design a course to avoid disasters. You may not know for pop. 3000 Community Members were killed dont do that to kill people of the community thats not a hard problem. Trying to figure out figure out how to hit and where to swerve. And with the misuse of the machine leading to abortion of female fetuses. There are plenty of those and also problems for the right thing to do its hard to stand up and do them we have seen that played out in our political life but they will have the knowledge and one of my colleagues and we spend a lot of time trying to figure out what to do in situations that you dont know and spend a lot of time trying to figure out how to give them practice in standing up when they know the right thing both are important in todays world. Thats a longer answer than you needed. I am sorry. And with the other questions and if mcgill rates as you know there are no tradeoffs. And he goes on to say for a small number of people during the census better but he is asking what is your intuition about although primarily it seems to be about tradeoffs in a healthy economy. It is not my view we dont have tradeoffs but if that is all you look for that is all you will find. And then to avoid tradeoffs. And then to figure out both sides but then do we need profits . And to figure out to key people as often as possible so as a tradeoff that is what you will find. And then to stop framing it as a tradeoff you dont have to. And then to go back to a human beings are and then to get out of the tray off. Sometimes you just cant figure it out. But that is a failure. How many business will spend time and effort helping their students build their creative imagination . Not just courses and creativity but with the creative arts. You can do a little of that but you do it through music and art. And if i start doing that i think there will be much less for us to do. And was some ceo friends of mine said that once you start out looking for tradeoffs , you get better and how you frame the problem. One of the most genius was enron to be downright illegal or morally questionable. So there is no guarantee that no tradeoffs gives you the best girls but if thats a phrase or than that is what you will find. I am suggesting theres more value to be created. As you priorize stakeholder groups one over the otheor are they important for a new trend . Also day and was speaking some time ago the ceo of paypal with the shareholders customers and employees the other two will be taken care of. Especially when entrepreneurs do. Sometimes the pc is the most important stakeholders sometimes the least. And then to do that very well so its hard to make the call that says and academics want me to tell them once and for all what the priorities are for all cases and businesses and all times. That theoretical point state colder groups you have to be recorded needed. And to keep them in harmony because they sound good together. And to get everybody aligned by the music of the is a disharmonious note and then has opportunities to create more value. In roughly in the same direction over time and just for the long term ive had 40 years people tell me the stakeholder stuff and then to make sense in the long term and here is where it does if we use the short term remove the longterm and it never seems to catch up there comes a point but i make sense in the short term i am an increase seeing the skeptic of the shortterm longterm distinction. We dont mean shortterm and the longterm and a lot of them are. And can only be measured in the short term. And then to keep it up. Has one oriented then you needed and i apologize. Thinking so much. The next question is about and what would you recommend so how where do you know and how to stand you ethical ground . Iould it make a distinctio distinction. I would try to see and do as the romans do in charlottesville and then to respect for the romans to dont respect ourselves. So what we and the romans can agree upon. And how we do business here but people jump in without knowing very much. In my experience and write down the top three values you want to teach her children or if not you wish other people teach their children there is a remarkable similarity over the world for that it is respect and love and compassion and responsibility and working hard. What it means to show someone respect is in jakarta and to show respect in new york city for those cultural differences but those are relatively smaller than we think about so you really have to understand the culture and the cultures to try to come to terms if you to live in that are not. And through your children and closest friends. And the hopes and dreams and those for themselves and others to be engaged in. Much all the time both in schools and businesses. This is a very easy conversation