Can corporate executives of public companies practice conscious capitalism without running afoul of shareholder expectations? The current CEO of the “Container Store” Kip Tindell is currently in the trenches as that question confronts him directly.
According to Bloomberg: “A few years ago, the CEO of the Container Store, Kip Tindell, wanted to expand the chain beyond big metropolitan areas into smaller cities, but he also wanted to offer more employees stock in the company. Financing that with debt, additional private equity, or by selling the company were not acceptable options so he decided the best option was to take the company public.
Tindell’s personal philosophy is crucial to the company’s identity. He adheres to a model for conducting business without any trade-offs: Pay employees well and treat them with respect; consider suppliers and customers as family; have fun. This sort of management model has been called conscious capitalism. Companies that practice conscious capitalism are supposed to have a higher purpose. Costco aspires to this ethic, as do public companies such as Zappos.com, Starbucks, Southwest Airlines, and Whole Foods Market.”
As expected, when profits were sky high, conscious capitalism was fine with shareholders, but as profits have stagnated in recent years, Tindell is facing criticism and scrutiny from them as prizing employee satisfaction and supplier familiarity should not substitute for shareholder gain, at least to some of the shareholders.
Again, as reported by Bloomberg BusinessWeek: “Most executives who practice conscious capitalism confront the tension between those measuring in months and those measuring in years. Tindell has been trimming costs, though not salaries, and looking for other ways to increase productivity in the stores. Growth presents challenges, too. It’s possible that the impulse, and the means, to organize a home isn’t as strong in the less affluent cities and suburbs where the company is expanding. The company’s gross profit margin is still high, but if sales don’t improve Tindell will be in a difficult position. His principles won’t substitute for a better plan.”
Short of organizing as a Benefit Corporation or a L3C, can Tindell practice capitalism consciously and keep shareholders happy?
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