Ashford University Enlightened Corporate Leadership Paper

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William Paterson University
Cotsakos College of Business
Department of Management, Marketing, and Professional Sales
MGT 3550 Values, Ethics, & Sustainability
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Article 1: O’Toole James. (2019). The prospects for enlightened corporate
leadership. California Management Review, 61(3), 72-92.
1. Explain the main arguments in the article (suggested length: 200 to 250 words)
2. Express your own values addressing the article’s main arguments (suggested
length: 200 to 250 words)
Example: Provide your explanation in your own words without quoting the article.
Include examples from your personal and professional experience. Describe
examples of different companies that may illustrate your points.
Please answer the following questions for the article below:
Article 2: Malone, T. W. (2018). How human-computer ‘superminds’ are redefining the
future of work. MIT Sloan Management Review, 59(4), 34-41.
1. Explain the main arguments in the article (suggested length: 200 to 250 words)
2. Express your own values addressing the article’s main arguments (suggested
length: 200 to 250 words)
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Include examples from your personal and professional experience. Describe
examples of different companies that may illustrate your points.
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Article 3: Ming-Hui, H., Rust, R., & Vojislav, M. (2019). The feeling economy:
Managing in the next generation of artificial intelligence (AI). California Management
Review, 61(4), 43-65.
1. Explain the main arguments in the article (suggested length: 200 to 250 words)
2. Express your own values addressing the article’s main arguments (suggested
length: 200 to 250 words)
Example: Provide your explanation in your own words without quoting the article.
Include examples from your personal and professional experience. Describe
examples of different companies that may illustrate your points.
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Please answer the following questions for the article below:
Article 4: Aldy, J. E., & Gianfrate, G. (2019). Future-proof your climate strategy: Smart
companies are putting their own price on carbon. Harvard Business Review, 97(3),
86-97.
1. Explain the main arguments in the article (suggested length: 200 to 250 words)
2. Express your own values addressing the article’s main arguments (suggested
length: 200 to 250 words)
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Article 5: Aragon-Correa, J. A., Marcus, A., & Vogel, D. (2020). The effects of
mandatory and voluntary regulatory pressures on firms’ environmental strategies: A
review and recommendations for future research. Academy of Management Annals,
14(1), https://doi.org/10.5465/annals.2018.0014.
1. Explain the main arguments in the article (suggested length: 200 to 250 words)
2. Express your own values addressing the article’s main arguments (suggested
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Article 6: Amis, J. M., Mair, J., & Munir, K. (2020). The organizational reproduction of
inequality. Academy of Management Annals, 14(1),
https://doi.org/10.5465/annals.2017.0033.
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2. Express your own values addressing the article’s main arguments (suggested
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1. Select one of the six articles with strongest insights based on discussion with your
team and justify the selection. All team members should refer to the same selected
article in this answer. Once the article is selected by the team, each student should
provide his/her own individual answers to justify the selection of this article (suggested
length: 200 to 250 words)
2. Explain the connections of the team’s selected article to topics in the course. Each
student should provide his/her own individual answers about the connections of this
article to the course topics based on his/her personal viewpoints (suggested length:
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For A-level grade, please review the Assignment Grading Rubric.
The last paragraph of the assignment contains at least 3 sentences with:
(a) 1 SDG number and name *
(b) “How can business practices related to this assignment contribute to this SDG?”
* The 17 Sustainable Development Goals (SDGs) are: 1: No Poverty, 2: Zero Hunger,
3: Good Health and Well-being, 4: Quality Education, 5: Gender Equality, 6: Clean
Water and Sanitation, 7: Affordable and Clean Energy, 8: Decent Work and Economic
Growth, 9: Industry, Innovation and Infrastructure, 10: Reduced Inequality, 11:
Sustainable Cities and Communities, 12: Responsible Consumption and Production,
13: Climate Action, 14: Life Below Water, 15: Life on Land, 16: Peace and Justice
Strong Institutions, 17: Partnerships to achieve the Goal
(https://www.un.org/sustainabledevelopment/sustainable-development-goals/).
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Leadership
The Prospects for
Enlightened Corporate
Leadership
California Management Review
2019, Vol. 61(3) 72­–92
© The Regents of the
University of California 2019
Article reuse guidelines:
sagepub.com/journals-permissions
https://doi.org/10.1177/0008125619839677
DOI: 10.1177/0008125619839677
journals.sagepub.com/home/cmr
James O’Toole1
SUMMARY
In his recent book, The Enlightened Capitalists, James O’Toole explores the
challenges faced by two centuries of business pioneers who tried to do well by doing
good. While many of their firms were financially successful, few of their progressive
business practices turned out to be enduring. In light of this mixed historical record,
this article explores the future of enlightened business leadership. It critically evaluates
six trends that will greatly determine the extent to which corporate executives will
introduce virtuous practices in the coming decade, including a new generation of
enlightened capitalists, several consortia of socially progressive business leaders,
the growth of social entrepreneurship, the emergence of benefit corporations, and
changes in investor attitudes.
Keywords: business and society, corporate culture, business ethics, leadership,
executive compensation, corporate social responsibility
W
hile the historical evidence shows that virtuous business
practices can be, and have been, successfully implemented,
such leadership feats have proved difficult to achieve, particularly in publicly traded corporations. Even when such
practices have been implemented, they have had relatively short half-lives in
most corporations—despite the benefits they have produced and the fact that
they have had only minor, if any, negative effects on profitability. Of the two
dozen companies that I have fully documented, at only four were enlightened
business practices maintained for over two successions of leadership.1 The historical record also reveals that most executives have simply not been interested
in assuming the task of social engagement, while others have believed that their
shareholders opposed such practices. Those are rather discouraging findings for
those, like me, who want to believe that corporate capitalism can, and should,
be conducted virtuously. Nonetheless, many contemporary advocates of social
1University
72
of Southern California, Los Angeles, CA, USA
The Prospects for Enlightened Corporate Leadership
responsibility are not discouraged by the historical record; instead, they optimistically point to what they foresee is a brighter future. In the words of entrepreneur-environmentalist Paul Hawken, “If you meet the people who are working
to restore this earth and the lives of the poor, and you aren’t optimistic, you
haven’t got a pulse.”2
Optimists believe that conditions have changed so radically in the twentyfirst century—particularly with regard to the environment and global warming—
that past experience cannot be taken as indicative of future events. In their view,
a historical inflection point has been reached, and now corporate executives have
no choice but to act to save the planet. Assuming a historical discontinuity, advocates of enlightened management thus argue that even executives in publicly
traded firms are now poised to embrace social responsibility, citing a steady stream
of books published since 2000 profiling companies that are “making doing good
an integral part of doing well,” “delivering value with values,” and deriving “profit
with passion and purpose.”3
Optimists see a major shift in the way some corporate leaders are beginning
to respond to environmental and social challenges they previously viewed as outside their remit:
•• Some corporations are integrating ethical considerations, social responsibility, and environmental sustainability into their corporate strategies, changing
product mixes and production methods to reduce environmental impact, and
addressing social issues and human needs.
•• Some corporations are sourcing fair-traded and certifiably sustainable raw
materials and agricultural commodities, while addressing such issues as land
rights, pollution, and community development wherever in the world they
operate.
•• A handful of corporations are attempting to use social engagement activities to gain a competitive advantage with customers and to attract qualified
employees.
•• A few corporate leaders appear to be abandoning the traditional, unidimensional goal of maximizing profits for shareholders, instead espousing the
belief that there is no necessary trade-off between profitability and social
responsibility.4
Those developments are said to offer encouragement to corporate leaders
waiting on the sidelines, as yet reluctant to take action themselves. To wit, if they
now choose to initiate socially responsible practices, they at least have precedents
to cite as cover when skeptical investors object. Nonetheless, a significant triplebarreled question remains: How many of those uncommitted executives can be
expected to enlist in the nascent movement, to what extent will they participate,
and under what conditions? The idealist in me wants to believe that “things are
different now,” but my realist side has difficulty believing that the expectations of
investors have changed in the last 20 years, when they had not changed over two
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CALIFORNIA MANAGEMENT REVIEW 61(3)
centuries. As in Thomas Jefferson’s famous debate between his head and his
heart, I am torn between what I think will happen and what I want to happen. In
this essay, I try to reconcile that tension as objectively as possible while assessing
the likelihood that six emerging trends will become the norm in publicly traded
corporations over the next two decades. For if these trends were to continue, I
believe there would be a brighter future for enlightened corporate leadership.
Trend 1: An Emerging Generation of Enlightened and
Effective Business Leaders
My heart is drawn to evidence that a new generation of enlightened capitalists has emerged in recent years—a generation of men and women as committed to social engagement as their forbearers, but more sophisticated and
skilled, and thus more likely to be able to create sustainable legacies. Among the
contemporary chief executives often mentioned in this regard are Starbucks’s
Howard Schultz, Salesforce’s Marc Benioff, Apple’s Tim Cook, PepsiCo’s Indra
Nooyi, Campbell Soup’s Denise Morrison, Merck’s Kenneth Frazier, and, especially, Unilever’s Paul Polman and Whole Foods’s John Mackey. Because they all
lead large, publicly traded corporations, optimists posit that those CEOs are on
the verge of finally proving that shareholder capitalism and enlightened business
practices are fully compatible. As sincerely as I hope they succeed, my head is
drawn to some inconvenient facts concerning the recent experiences of Polman
and Mackey.
In 2017, Unilever—widely considered the world’s leader in terms of
socially responsible behavior—was threatened with a hostile take-over by a
corporation manifesting no interest in maintaining CEO Polman’s global efforts
to produce safe and healthy goods in an environmentally sound manner.
Polman called the $143 billion bid from Kraft Heinz “clearly a clash between a
long-term, sustainable business model for multiple stakeholders and a model
that is entirely focused on shareholder primacy.”5 Polman had pledged to make
and sell safe and healthy goods while offering well-paying jobs and decent benefits to the men and women Unilever employs on five continents. When introducing those policies, he had warned that it would take the better part of a
decade for Unilever to fully implement them, cautioning investors that some
short-term profits might be sacrificed before the company became the model
global corporation he envisioned.
Although the attempted takeover of Unilever was averted, investors had
grown impatient with Polman’s long-term plans; thus, he was forced to take
actions to boost quarterly profits—for example, purchasing the highly profitable
cosmetics company Carver Korea for seven times its annual revenue. Unilever
probably would not have made that purchase if it were not under pressure from
investors to immediately increase earnings. In order to further boost profit margins, between 2015 and 2017, Unilever acquired 18 companies for nearly €9 billion, paying a sizable premium for most of them. By making such acquisitions—and
The Prospects for Enlightened Corporate Leadership
buying back €5 billion worth of its stock, increasing its dividend by 12%, and
doubling its planned budget cuts—Unilever has limited its ability to realize the
transformation Polman hopes to achieve.6
In 2018, Polman publicly admitted as much at a conference of institutional
investors: “We had to make some practical compromises . . . which frankly I would
not have done.”7 He then asked those asset managers to stop demanding reductions in corporate social and environmental programs and, instead, to start asking
themselves why they “have the courage to destroy this wonderful planet.” A few
days later, Unilever announced that it would cease its century-long legal structure
as a joint Dutch-British company, and unify its headquarters in Rotterdam.
Polman made it clear that the major reason was to protect the company against
the threat of hostile takeovers that are far more easily achieved under British (and
American) law than in Europe. Alarmingly, British institutional investors then
revolted and blocked the move.
About the time Unilever was under threat of a hostile takeover in Britain,
America’s Whole Foods Corporation faced a similar challenge from activist investors dissatisfied with its rate of financial return. Like Unilever, Whole Foods was
known for its stakeholder-oriented and environmentally sensitive practices.
Again, like Unilever, it was profitable—but not profitable enough for the activist
investment firms holding large blocks of the company’s stock. Citing what they
perceived as Whole Foods’s too rapid expansion and insufficiently profitable mix
of products, in 2017, those investors demanded changes in company management or, failing that, its sale to a traditionally managed grocery chain. The company’s combative founder and CEO, John Mackey, characterized the activist
investors as “a bunch of greedy bastards running around exploiting people, screwing their customers, taking advantage of their employees, dumping their toxic
waste in the environment, acting like sociopaths.” Fearing the effects of a hostile
takeover, he arranged a lightning-fast sale of the company to the mammoth
Amazon corporation, believing that offered the best chance of preserving Whole
Foods’s culture and practices.
After the sale was announced, Mackey tried to make the best of a bad situation by praising the courage of Amazon’s managers to “resist the drumbeat of
short-term, quarterly earnings” which, he said, had pressured Whole Foods to
take steps inimical to the company’s long-term interest (Mackey had been under
near-constant pressure from one or another group of activist investors since
2009). Although he acknowledged that significant changes were likely under
Amazon’s ownership, he failed to mention what everyone knew: unlike Whole
Foods’s employee-centered practices, Amazon had a reputation for mercilessly
driving its employees and managers to increase efficiency and productivity and
cut costs. As pleased as Mackey was about being acquired by Amazon, he nonetheless cautioned his staff, “There are no guarantees in life. Some marriages end
up badly.” The week after the acquisition was made final, Amazon began to
change Whole Foods’s pricing policies and business model to integrate the subsidiary into its larger operations. The historical record shows that most such
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“marriages” result in the eventual loss of the kind of progressive business practices
Mackey sought to preserve by being acquired by Amazon.8 Indeed, even being
acquired by a company noted for its social conscience is no guarantee that a company’s virtuous practices will be maintained. In 2012, Starbucks acquired a bakery
chain La Boulange, makers of healthy organic products. Three years later,
Starbucks closed the bakeries but retained the brand name for use on its own
range of baked goods.
It is hard not to be pessimistic when considering these two examples. I
become even more pessimistic when I recall that the lion’s share of corporate
executives’ compensation comes in the form of stock options, which gives them
an almost irresistible temptation to do whatever it takes to give share prices a
boost, including selling their companies to the highest bidder.9 That is not because
corporate executives oppose virtue. Based on dozens of conversations I have had
with top executives over the years, I believe many would choose to adopt more
enlightened, ethical, and socially responsible practices. Nevertheless, they realistically conclude that the financial community will tolerate only those amounts of
social engagement that directly enhance a company’s reputation and keep protest-prone environmental, consumer, and workers’ rights groups at bay. And
those executives doubtless have drawn sobering lessons from the experiences of
Polman, Mackey, and other idealistic capitalists, understanding full well that
investors welcome no amount of social engagement at companies deemed insufficiently profitable. Hence, while my heart is attracted by the prospects of a new
generation of enlightened business leaders, my head says they are likely to run
into the same buzz saw of investor resistance their predecessors faced. Indeed,
Campbell’s CEO Morrison was recently sacked by her board on the grounds that
the company was insufficiently profitable.
Trend 2: The Emergence of New Forms of Enlightened
Practices in the Tech World
As discouraging as the experience at Unilever and Whole Foods may be, in
some industries it has become increasingly common for corporate executives to
engage in enlightened practices, particularly in high-tech organizations. For example, companies like Google and Apple are hailed as harbingers of a bright future of
employee-friendly work environments. Many high-tech firms provide their workers with all the comforts of home (free and unlimited food and drink, daybeds
where they can catch a quick nap) along with the services found in residential
neighborhoods (laundry and dry cleaning, gymnasiums, and more), all designed
to make it unnecessary to go home, or waste time running neighborhood errands.
Those perks are truly impressive, yet I find something disturbingly unethical about
the ways in which the paternalistic practices of the past have morphed into the
hot-tub cultures found at Google and other high-tech organizations.
The most thoughtful criticism of Silicon Valley’s management practices is
found in Dave Eggers’s dystopian 2014 novel The Circle, eerily set in the very near
The Prospects for Enlightened Corporate Leadership
future.10 The fictitious Circle is a high-tech company that has taken Google’s management practices to the next logical level. If the Circle were a real company, it
would sit atop Fortune’s 100 Best Companies to Work For list, thanks to its platinum-level medical insurance, free gourmet lunches, health club, pet sitting, luxury commuter buses, and the opportunity for employees to spend more time
working productively, and less time managing their personal lives and “wasting
time” with friends and family (and, presumably, reading long novels like The
Circle). But the Circle does not stop with perks currently available in Silicon Valley
firms; it elevates those goodies to the next level, satisfying not only employee
needs but also their wants: first-class live entertainment, boozy parties, on-campus housing (with opportunities for sex), social clubs—even a sense of community and social purpose.
Because almost everything the Circle does is, on its face, positive for
employees, customers, and society, the novel’s protagonist initially finds her job
there exhilarating. The catch is that she becomes locked into the company, eventually giving up her freedom, humanity, and individualism. She is gradually transformed from a loving, idealistic young woman into an unquestioningly loyal “true
believer” willing to betray her friends and lover to advance the Circle’s goal of
taming “the chaos of an orderless world.” The Circle is governed by a founding
troika of Guardians, recognizable variations on the charismatic, visionary, selfconfident, brilliant, and obsessively single-minded leaders found in abundance in
the tech world. As in Plato’s Republic, creating such a well-ordered organization
ultimately requires its members to abandon their freedom to these Guardians,
“who know better than they do” what is good for them because, as Circlers assert,
“We are the future.”
Eggers is not the only writer to have spotted the dangers inherent in the
privacy-invading technology emerging in Silicon Valley, but he was the first to
offer a premonitory tale about the potential consequences of Silicon Valley’s corporate cultures run amok. Alarmingly, in 2017, Google’s parent company,
Alphabet, announced plans to create an entire “city of the future” called Quayside
in a run-down dock area in Toronto to demonstrate the benefits of a technologyenabled city, a “laboratory for innovation on an integrated basis,” a testing ground
for new approaches to infrastructure, transportation, governance, and social policy.11 Thus, the day of Eggers’s dystopia may arrive sooner than he thought: North
American business now stands poised to cross the fine ethical line between the
comparatively benign paternalism that spawned company towns a century or so
ago and the compellingly powerful, potentially manipulative, and societally outof-control twenty-first-century tech-dominated world. I find that prospect greatly
disturbing.
Trend 3: The Advent of Consortia of Enlightened Capitalists
The first time enlightened business leaders teamed together to address
social issues was in the mid-1960s, in the wake of major rioting in several
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American inner cities, notably Los Angeles, Newark, and Detroit. In response,
Ford Motor’s Henry Ford II created the National Alliance of Businessmen to provide job training and placement services for “hard-core” unemployed men and
women. Hundreds of company executives gave time and money to the effort;
however, as ethicist Kirk Hanson concludes, “the track record of the NAB was
mixed, though it limped along until the 2000s” (before quietly dying).12 That
effort was followed by the Social Venture Network, in which the Body Shop’s
Anita Roddick and Ben and Jerry’s Ben Cohen played major roles. It is all but
defunct today. In 1988, the Business Enterprise Trust (BET) was founded
by Norman Lear, James Burke, and a half dozen other prominent men and
women to chronicle, honor, and inspire business social engagement (Springfield
ReManufacturing’s Jack Stack and Ben & Jerry’s Gail Mayville were BET honorees). Ethicist Kirk Hanson was the first executive director of the trust, which
after a few years of notable service, petered out in the 1990s as the result of
the general decline in interest in corporate social responsibility. Then, in 2000,
United Nations (UN) secretary Kofi Annan launched the UN Global Compact in
which some 8,000 firms worldwide pledged to adhere to ten core ethical and
social principles and to report annually on their progress in achieving them. Alas,
over the subsequent decade, some 2,000 of those companies were delisted for
failing to file reports (the Global Compact now rewards “Lead Companies” who
take their social responsibilities seriously).
Although the sustainability of such consortia has been poor, today some
dozen such organizations exist around the world to promote corporate ethics,
social responsibility, and especially environmental sustainability. The Caux Round
Table, for example, is an international network of “principled business leaders
working to create a moral capitalism.” The organization brings businesses and
governments together to design strategies, management tools, and practices that
better serve the global community. More active in Europe and Asia than in
America, Caux hosts international conferences and issues informative reports.
Similarly, the Skoll World Forum assembles social entrepreneurs annually at
Oxford’s Saïd Business School. Such activities lend credence to the belief that the
future of social engagement promises to be brighter than its past.
Executives who have participated in these business consortia have tended
to be from the center-to-progressive end of the ideological spectrum, and therefore representative of only a minority of business leaders. The exception has been
the Conscious Capitalism (CC) movement founded by Whole Foods’s John
Mackey, a libertarian who has recruited corporate executives from the ideological
right to participate in the organization. Mackey calls the CC movement a “new
paradigm” for business designed to “elevate humanity.” Writing a chapter in a
book ambitiously subtitled How Entrepreneurs and Conscious Capitalists Can Solve All
the World’s Problems, Mackey argued that CC can, and must, “save Capitalism”:
It’s as if there were a wall. And on one side of the wall is the belief that notfor-profits and government exist for public service and that they’re fundamentally
altruistic, that they have a deeper purpose, and they’re doing good in their work,
The Prospects for Enlightened Corporate Leadership
and they have pure motives. On the other side of the wall are corporations. And
they’re just selfish and greedy. They have no purpose other than to make money.
They’re a bunch of psychopaths. And I’d like to tear that wall down.13
Mackey’s “wall destruction” plan is to encourage corporate leaders to adopt
CC’s four principles of Conscious Business: higher purpose, stakeholder interdependence, conscious leadership, and conscious culture. Significantly, those principles appeal greatly to advocates of social engagement from the opposite end of
the political spectrum of many, if not most, of CC’s participants—thus offering
hope of bridging the divide between groups on the two sides of Mackey’s ideological wall. However, Mackey goes so far as to claim that if (when?) CC becomes the
norm, there will be little to no need for government regulations, or such social
welfare programs as health benefits for the uninsured, because conscious capitalists understand that it is in their self-interest to be self-regulating and provide for
the needs of their workers.
Regardless of one’s ideological bent, the educational outreach of the CC
movement has made a useful contribution by encouraging fence-sitting executives to adopt enlightened business practices, and Mackey so far is unique among
his generation of CEOs in that he has developed a fully fleshed-out business philosophy. In 2011, my colleague David Vogel and I offered praise for the movement
in an article cheekily titled “Two and a Half Cheers for Conscious Capitalism.”14
We explained why we hesitated to give CC the additional half hurrah, pointing
out that its goal of “elevating humanity” was not easy to meet, that those who had
previously tried to do so had not succeeded, and that a great many executives
were unlikely to buy into CC’s principles. We also doubted that business self-regulation could ever negate the need for government regulation, and questioned
the proposition that all virtuous activities can be made profitable. We noted that
many smaller businesses lack the resources to provide employees with health
insurance, even if their owners would like to provide the benefit, and thus it was
unrealistic to claim that there would be no need for a governmental role in health
care provision if all companies were to embrace CC.
We also suggested that some CC advocates risked ruining the movement’s
credibility with overblown talk about “solving all the world’s problems” (e.g., one
active participant in the CC movement, Gary Hirshberg, CEO of Stonyfield Farms,
offered a standard lecture called “How to Make Money and Save the World”).15
When we called attention to how difficult it is to sustain good practices in publicly
traded companies, citing the examples of what happened when Ben & Jerry’s and
the Body Shop were acquired, CC’s academic leader, Rajendra Sisodia, offered this
rejoinder:
We do not believe that the equity markets are a major constraint on conscious
businesses. We have studied a large number of publicly traded companies that are
conscious businesses and have found that they are able to operate in a conscious
manner despite the short-term pressures that may come from certain analysts on
Wall Street.16
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Sisodia added,
It is indeed the case that conscious businesses must exercise great care when merging with larger companies . . . they must ensure that the Board of Directors of the
acquiring company understands what makes them special, and that they commit
to maintaining those qualities.
He then cited two major CC companies that he claimed had successfully managed that near-impossible feat: Stonyfield Farms (acquired by
Danone), and the Container Store (purchased by a private equity firm, then
publicly listed).
Sadly, since then things have not turned out quite as Sisodia had hoped.
Hirshberg sold organic yogurt maker Stonyfield to the French firm Danone
because it offered three things he was looking for: a generous $35 million payday for himself, sufficient capital to grow the company, and a compatible culture. While he successfully obtained those good things, he also found himself
running a subsidiary of a large, publicly traded company that, in 2017, found
itself under the same pressures to increase short-term profits that Whole Foods’s
Mackey and Unilever’s Polman were painfully attempting to address. After the
publicly traded Danone forecast a slowdown in profit growth, American activist
hedge fund Corvex pressured the firm to cut costs, replace its chairman (who is
the champion of the company’s enlightened practices), and, if the company was
not then sufficiently profitable, consider selling it.
As for the Container Store, its CEO, Kip Tindell, had entered into a
financial partnership with a private equity firm in 2007 under the condition
that its “beloved culture and customer service” be preserved. When the partnership failed to provide enough capital to finance the company’s expansion
into smaller cities—and to increase the number of employees owning company stock—Tindell decided to go public in 2013. When store sales subsequently declined by 3.5%, and the stock price plummeted by 25%, Tindell
expressed dismay at his new obligation to appease shareholders in the short
term.
With Whole Foods recently joining Stonyfield in the acquired status, there
are now more tests of Sisodia’s optimism that acquiring publicly traded corporations will make—and keep—pledges not to interfere in the operations of their
subsidiaries. That Whole Foods and Stonyfield have been the largest companies
(along with the Container Store) actively involved in the CC movement is an
indication that the future of even the most successful enlightened businesses may
be as parts of publicly traded corporations, with all the negatives that entails.
Vogel and I ended up applauding CC’s practices (with two and a half hands), offering the idealistic hope that many businesspeople would join the movement in the
future—while realistically recognizing that a great many would not. We concluded that the movement’s “creation of a common ground for progressives and
libertarians is no mean feat” and its “creative squaring of the circle was why the
The Prospects for Enlightened Corporate Leadership
movement is increasingly seen as so attractive.”17 In sum, CC and other business
consortia are positive omens, but their influence is limited to the like-minded, and
they are unlikely to change the practices of investor capitalism that threaten the
cultures of enlightened companies.
Trend 4: Social Entrepreneurship and Benefit Corporations
CC is closely related to two other positive developments: social entrepreneurship and benefit corporations. Recent years have witnessed the
rapid growth of “social enterprises,” an increasing number of which are forprofit businesses (such as Daniel Lubetzky’s KIND), although many are not.18
The term social entrepreneur appears to have been coined by American Bill
Drayton, founder of Ashoka, an organization that supports more than 3,000
such individuals in 90-some-odd nations. Although the movement is headquartered in America, it is currently in vogue in Britain as well. John Bird—who
now sits in the House of Lords—was raised in an orphanage, yet went on to
become financially successful after outgrowing his youthful Marxist days. In
1991, he funded a magazine that employs street people as vendors, and since
2005 he has invested some £30 million in social enterprises designed to help the
disadvantaged.19
In a great many ways, the social enterprise and CC movements overlap:
leaders of for-profit social enterprises, like conscious capitalists, face the same
issue of if, when, and how to be acquired. While many social entrepreneurs
are making useful contributions to society, I remain ambivalent about the
movement’s for-profit companies. Too many of the social entrepreneurs I
have met have struck me as motivated a bit more by the prospects of getting
the big acquisition payday that Lubetzky dreams of than by creating sustainable organizations. I also sense something a bit too self-congratulatory in the
habit of many social entrepreneurs to crow about their do-goodism and commitment to “make the world a better place.” Unlike enlightened capitalists
who in the past seldom engaged in such public piety and self-promotion, listening to some social entrepreneurs I am at times tempted to agree with the
cynical proposition, “You can trust a business that merely wants to run a
profit in a way you cannot quite trust one that wants to change the world.”20
That said, most of the signs point to a bright future for the movement: social
enterprises are popping up around the world (there is a Social Enterprise
Business Center in Hong Kong, serving locals as well as mainland Chinese
students), and several business schools now offer master’s degrees in social
entrepreneurship, most notably the Skoll Center for Social Entrepreneurship
at Oxford’s Saïd Business School.
The fast-growing “B corporation” movement has also fueled optimism
about the future of business enlightenment. Although all B (for benefit) companies are committed to achieving social as well as economic goals, they come in
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two varieties, the largest of which are the more than 2,600 companies certified by
the nonprofit B Lab as practicing socially responsible levels of workplace wellness,
transparency, environmentalism, community service, and philanthropy. With the
exception of a few companies (Plum Organics and Method), the vast majority of
certified B organizations have 50 or fewer employees, and most significantly
hardly any are publicly traded.
Several things about the B movement are appealing. It has proved to be a
particularly congenial home for women entrepreneurs like Sheryl O’Loughlin,
former CEO of Clif Bar & Company, cofounder and CEO of Plum Organics, and
now CEO of healthy beverage company REBBL, and the increasingly large number of certified companies—including cooperatives and employee-owned firms—
indicates that a spirit of practical idealism is alive and well, even if not residing in
publicly traded corporations. Moreover, B-certification has become for enlightened management what LEED certification stands for in buildings, and Fair Trade
signifies with regard to coffee.21
While B-certification is not a legal designation, 27 American states grant
“benefit corporation” charters that allow companies, such as Patagonia, to be
structured in such a way that their officers and directors are permitted to make
decisions benefiting society even when those actions are not in the immediate interest of
shareholders. Indeed, such chartered companies have a positive duty to provide
benefits to society, including protecting the environment, bringing goods and services to poor communities, and promoting the arts and science. What that means,
legally, is that their managers and boards could be sued by shareholders if they
failed to act in a socially responsible manner—but shareholders cannot sue when
companies engage in such activities, even if the wherewithal comes out of their
pockets.
While the late Lynn Stout and other legal scholars argue that such protection is unnecessary, some 7,000 companies had filed for such benefit status by
2014, apparently believing that they needed an extra layer of protection in the
event of an acquisition or change in leadership.22 Ryan Honeyman, the author of
The B Corp Handbook, explains that
in a time of crisis, such as the recent financial collapse, or under a leadership
change, social and environmental values can get pushed aside if they are not
embedded in the company’s legal structure. The benefit corporation legal structure
provides entrepreneurs, owners, and investors with the assurance that the company’s social and environmental values will remain equally important to making a
profit—no matter what.23
Nonetheless, the emergence of benefit corporations cannot be taken as an
indicator of a positive future for enlightened corporate leadership; after all, this
designation was precisely created to shield virtuous businesses from the grasp of
publicly traded acquirers.
The Prospects for Enlightened Corporate Leadership
Trend 5: A Change in Investor Attitudes
One positive harbinger of a rosier future is the growing market for the
eco-friendly “green bonds” floated by utilities and other companies to finance
projects benefiting the environment—such as the construction of energy-efficient buildings and wind farms. In 2017, investors bought more than $120 billion of such securities, 20% more than in the previous year.24 As good news
as those bonds are to optimists, there is an even more potent and promising
financial trend: namely, the growth of ethical investing, particularly by university endowments, union and public-employee pension funds, and national
sovereign funds. For example, in 2017, the Ford Foundation announced its
intention to invest its $12 billion endowment in stocks of companies promising social as well as financial returns. The first so-called social investment fund
was launched as early as 1971; by 2017, there were over 200 such funds active
in the United States, with collective assets of $77 billion (a large number, but
one that pales to insignificance when taken as a percentage of the $41 trillion
in assets held by pension funds worldwide). The future of those funds, now
called “impact” or ESG (environmental, social, governance) investors, depends
on finding answers to two fundamental questions. The first is, How to define
corporate virtue? That sounds like a simple question, but, it turns out, ethical investing presents challenges every bit as difficult as enlightened company
leadership. Unable to find an acceptable measure of overall corporate social
responsibility, an increasing number of funds are specializing: one invests only
in companies where women are in leadership positions, another avoids investing in companies “that do not align with Biblical values,” including “the LGBT
lifestyle,” yet another only invests in companies dedicated to boardroom diversity and favors Exxon-Mobil stock, while yet another will not invest in oil and
gas companies.25
Another version of social investing, such as a fund offered by Goldman
Sachs, does not exclude companies on any moral criterion other than selling
tobacco. Hence, coal companies can be included if they have good governance
and treat their employees well.26 And the highly activist Norwegian national sovereignty fund, which does not invest in coal, is now considering divesting its holdings in oil and gas companies—a rather controversial subject, given that the source
of the fund’s $1 trillion in assets is North Sea oil and gas!27 Clearly, managers of
ESG funds lack agreement on the guidelines to use when choosing which corporate stocks to buy and which to divest: Is clean-car-maker Tesla a virtuous company even though it has a terrible employee-safety record? Are the baddies the
makers of cigarettes, whiskey, and firearms? What about fossil fuel companies and
gambling casinos? Does one draw the line at diamond mines, or bottles of sugary
drinks?
The second question is every bit as difficult, and one almost every investor
asks, “Are the returns for investments in ESG funds higher, lower, or the same as
those for more broadly based funds?” The findings of researchers who have
attempted to answer that question have been mixed—although there is some
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rather unsettling evidence that “sin investing” (in the stock of gambling, alcohol,
and tobacco firms) pays rather handsomely.28 Until those questions are answered
definitively, it is unlikely there will be a great rush among the majority of investors to risk their money on virtue.
Nonetheless, in 2015, CalPERS (the California Public Employees’ Retirement
System) announced that it would actively press companies whose stocks it held to
emphasize environmental issues, workplace diversity, and good corporate governance. The fund’s board deleted a sentence in its charter that had stated it should
focus its investment strategy on companies that optimized “performance, profitability, and returns to share owners,” replacing it with a section acknowledging
the need to invest in companies engaged in “responsible conduct” with regard to
the environment, climate change, and “social” factors such as fair labor practices
and board diversity. After the directors had pledged to pay greater attention to
social and environmental issues—perhaps even at the expense of profitability—
CalPERS’s senior portfolio manager explained that the fund now had a fiduciary
duty to “optimize” its returns over multiple generations, and not an obligation to
“maximize corporate profits.”29 However, it is far from certain that CalPERS will,
or can, follow through and implement the new policy. To do so would require
clear definitions of what constitutes “responsible conduct,” and hard-to-quantify
trade-offs between profits and environmental protection. But if CalPERS and
other funds find a path through those thickets, the pressure on corporate executives to adopt virtuous practices would greatly increase.
There are also signs that some private investment firms may be ready to
follow the example of the Ford Foundation and CalPERS. In 2018, Laurence D.
Fink, founder and chief executive of BlackRock, a firm that manages $6 trillion in
savings and retirement funds, announced that his firm would use its clout to
encourage corporate boards to “not only deliver financial performance, but also
show how [their companies make] a positive contribution to society” with regard
to such issues as the environment, automation, and worker retraining.30 Weeks
later, Fink’s comments were echoed at the annual World Economic Forum at
Davos by Bill McNabb, chairman of Vanguard asset managers. A few months later,
both Fink’s and McNabb’s pledges were put to the test in the wake of the horrific
school shooting in Parkland, Florida, when it was revealed that both Vanguard
and BlackRock held stock in gun manufacturers. In fact, BlackRock turned out to
be the largest index investor in gun company stock. BlackRock subsequently
announced that it had “reached out to the major publicly traded civilian firearms
manufacturers to engage in a discussion of their business practices,” but to date
BlackRock had not divested from its gunmaker stock.
As noble as the intentions of Fink and McNabb may be, they raise a serious question: Is it in the public interest for a few managers controlling trillions
in assets to be deciding what corporate actions are virtuous, and which are not?
Equally critically, how will the investors in private investment firms respond if
the funds have below market returns as the price of investing “responsibly”?
There is little evidence that the beneficiaries of public investment funds or the
The Prospects for Enlightened Corporate Leadership
investors in private ones are willing to accept lower returns. More virtuous
investment strategies are only likely to prove viable if they are at least equally
profitable.
Trend 6: Public Concerns
The odds favoring increased corporate social engagement also would be
greatly improved if there were strong public demand for it, strong public support (and praise) for executives who behave virtuously, and resolute condemnation of those who behave unethically and irresponsibly. Recent polls
indicate that Americans—younger ones in particular—want corporate executives to speak out publicly on important social and political issues. In 2018, the
Global Strategy Group released the results of a poll indicating that two-thirds
of Americans believe corporations have a responsibility to address major political and social issues.31 And more executives are doing just that. In recent years,
Howard Schultz has called on his fellow CEOs to hire more military veterans,
Paul Polman has spoken eloquently on the issue of climate change, and Kenneth
Frazier has called attention to the lingering problem of racism. Such “executive
activism” has thus far been tolerated by investors because it is relatively costfree. Yet, there is the risk that customers might become so put off by such public pronouncements that they boycott the offending company’s products. (When
executives at coffee-machine maker Keurig Green Mountain stopped advertising on a television network that had defended a politician accused of sexually
assaulting teenagers, irate consumers posted online videos of themselves smashing Keurig machines.)
While I join the chorus in praise of executives who want to hire veterans,
fight global warming, and stamp out racism, such advocacy can be a mixed blessing. Mounting evidence that influential CEOs like Apple’s Tim Cook have the
power to sway public opinion raises alarms because big company executives
already wield disproportionate political power through their personal wealth, the
financial clout of the corporations they lead, and the influence of lobbyists in their
employ. Is it then good for society if they also exercise the considerable power of
the bully pulpit that comes with their position? Moreover, when such power is
used with regard to sensitive political or religious issues, it is unlikely to be universally appreciated. For example, when Tim Cook spoke in favor of gay marriage,
his pronouncement was greeted positively by those on the left, but negatively by
those on the right; similarly, when Chick-fil-A CEO Dan Cathy took the opposite
stand, the right cheered, and the left jeered.32
The issue is where to draw the line between legitimate and illegitimate use
of executive bully pulpits.33 I believe that it is acceptable for CEOs to speak out
when a social or political issue directly affects their companies, or when their
companies’ actions directly affect an issue. And it makes sense for executives to
speak out when they have special knowledge, or unique expertise, that adds value
to public discourse. Failing those tests, executive activism is generally unwise and
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unwarranted. For example, when Starbucks’s Howard Schultz instructed his tens
of thousands of employees to engage their customers in conversations about race,
as well intentioned as that was, the campaign backfired; such dialogues were
unrelated to the making or drinking of coffee, and the company’s baristas had no
special competence in the thorny patch of race relations. The most desirable future
would be one in which executives left politics to citizens and politicians and concentrated on making things better for their employees, customers, owners, and
society through enlightened business practices. If CEOs focused their efforts on
that task, I suspect they collectively would make a greater contribution to the
general welfare than if they became voices of political morality. In short, I believe
Theodore Roosevelt was correct in concluding that Andrew Carnegie would have
made a greater social contribution by treating his workers fairly than he did with
his public antiwar pronouncements.
Corporate leaders are also becoming more engaged in addressing pressing
social issues via personal philanthropy. Indeed, in the eyes of many executives—
and the general public—“social responsibility” in business is becoming synonymous more with philanthropy than with virtuous corporate practices. Many
executives are following the example of Bill Gates by making as much money as
possible while in office and then engaging in philanthropy after they retire. If
horse racing was once the sport of kings, philanthropy is now the preferred pastime of retired chief executives—in particular, among retired financiers and hightech entrepreneurs who often displayed little hint of virtue in their business
dealings. Many Goldman Sachs partners, for example, put their social consciences
on hold while they amass personal fortunes at work, then turn to a second career
in philanthropy when they retire—often as young as in their 40s.
Who can blame them? Enlightened corporate leadership, as they well
know, is a demanding endeavor involving constant trade-offs between the needs
of various stakeholders, each applying pressures of one form or another to achieve
their diverse, often incompatible, ends. Virtuous corporate executives must therefore constantly ask themselves challenging questions: Am I paternalistically
imposing my values on others? When is it right to compromise the economic mission of my enterprise? How far should I go in pursuing a social objective? How
much time and effort should I demand of my staff to achieve those objectives? Am
I seen as behaving consistently? How do I determine what is the ethically right
thing to do? In the end, the majority of wealthy executives seem to conclude that
philanthropy is easier.
I believe philanthropy is noble and virtuous—particularly when it is done
anonymously and not to gain tax advantages. However, in some quarters the
charitable activities of billionaires are viewed negatively because the wealth such
individuals command is so great that they can wield personal power to rival that
of many governments, and thus make decisions greatly affecting society without
the checks and balances of democratic processes. In addition, there is the related
issue of inconsistency, if not hypocrisy, when executives give money to worthy
causes to compensate for the social costs their companies created—for example,
The Prospects for Enlightened Corporate Leadership
when retired executives from fossil fuel industries donate to environmentalist
organizations, or when former Walmart executives give to hospitals whose emergency rooms are crowded with uninsured Walmart clerks.
Similarly, when executives at Pfizer boast publicly about “embracing our
responsibility to society,” loftily claiming that the pharma giant works proudly
with NGOs and “other global stakeholders” to improve health care in the developing world, it is gobsmacking to watch that same company engage in a “tax inversion” to avoid paying its fair share of domestic taxes. Some of that tax money, not
incidentally, would have gone to support health care in America and contribute to
the millions of dollars in federal grants that subsidize Pfizer’s drug research.34
Corporate philanthropy is particularly prone to acts of self-serving and hypocrisy.
A recent study found that many “Firms deploy their charitable foundations as a
form of tax-exempt influence seeking,” for example, by donating to the favorite
charities of powerful members of Congress. And one cannot help but lapse into
cynicism when one remembers that all the time that Enron’s top management
was cooking the company books, they were making a show of donating large
sums to a variety of charitable causes.
Here, once again, the realist in me comes to the fore. All the issues I have
just raised are primarily concerns of social activists, professors, and some members
of the media. The public, in general, appears uninterested, apathetic, and unfazed
by these, and almost all, issues relating to corporate virtue and social responsibility. That is not to say that the public is in favor of acts of corporate misbehavior, or
opposed to socially beneficial business programs and policies. But the harsh fact is
that there is not now, nor has there ever been, deep and wide public demand for
greater corporate enlightenment. Author Richard Conniff bemoans the fact that
“we don’t vote with our wallets.” He pleads guilty himself, admitting he buys
books online from Amazon even though he dislikes the e-giant for putting bookstores out of business and driving down the income of publishers and writers. But
as long as Amazon delivers the book we want that very day, or the next—and at
a 40% discount—the natural tendency for us all is to think like consumers, and
worry later (but not too hard or too much) about the social and moral consequences of our actions. Significantly, consumerist behavior overrides social conscience among those on the right, as well as those on the left. Business professor
Brayden King studied the purchasing behavior of conservatives who pledged to
boycott Starbucks when, after President Trump’s immigration plan, the company
committed to hiring 10,000 refugees, and found no correlation between what
they said and what they did.35
There are, however, some business issues about which the general public
feels strongly. In Britain and America, most people disapprove of the low ethical
standards and greed-driven misbehavior found in finance and banking; public
opinion polls indicate wide-scale support for corporate efforts to reduce global
warming and improve air and water standards; and, perhaps to a lesser degree,
most people believe that executive compensation is excessive. Because executives
see public opinion as important, those three areas are likely to become foci of their
attention in the future.
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Finance Ethics
It is evident why the public is concerned about finance industry ethics:
In 2007, the excesses of “Wall Street” put the mortgages of millions of homeowners at risk, and led to foreclosures for tens of thousands. Understandably,
the public is deeply worried that it could happen again. But financial shenanigans are not limited to risky mortgages, credit default swaps, and derivatives,
or even to such blatantly unethical actions as the millions of false customer
accounts fabricated at Wells Fargo. The Enron scandal, followed by Bernie
Madoff’s Ponzi scheme, has highlighted the fact that more ethical misbehavior occurs in finance than in any other industry or in any other aspect of
corporate management. Significantly, because financial ethics is one arena
where the public interest and the interests of investors are often in sync—
and because nothing is more important than money—it is safe to predict continuing public demand for greater accountability and transparency from bank
executives and corporate financial officers.
Environmental Issues
As complex as they are, environmental issues are among the least controversial arenas of corporate social responsibility: no one favors pollution. They are
also among the easiest aspect of social engagement to address and to measure. For
example, to spruce up its corporate image, and perhaps deflect criticism of its
employment policies, Walmart has introduced a high-profile company-wide effort
to reduce its energy use. By doing such simple things as swapping out incandescent and fluorescent light bulbs for LEDs, and more efficiently routing delivery
trucks to reduce fuel consumption, Walmart has been able to document in hard
numbers the positive impact those actions have had on the environment. As a fillip, the efforts more than paid for themselves in lower utility and petroleum bills.
The bottom line is that it has been relatively easy for Walmart to buff up its reputation—and basically for free. And “cheap and easy” are two reasons why there is
less resistance from Walmart’s investors, directors, and executives to capturing
low-hanging energy savings than there is to, say, the far more costly effort of providing employee health insurance (an activity that does not yield as much in the
way of image enhancement), and easier than ending its environmentally damaging practice of using hard-plastic packing shells to limit product theft. On the positive side, it is worth noting that executives are not just businesspeople: in their
private lives, they want clean air and water for themselves and their families, so
many see it in their self-interest to embrace environmentally sound policies.
Moreover, in contrast to many other responsible business practices, improving
environmental performance has often proven to be both cost-effective and image
enhancing, This explains why many firms have devoted considerable resources to
reducing their negative environmental impact as well as marketing green products and investing in greener technologies. This is an encouraging development
and these firms should be applauded, though it is unlikely that these voluntary
initiatives will prove adequate to address the magnitude of global environmental
challenges that we face.
The Prospects for Enlightened Corporate Leadership
Another positive sign is the growing corporate practice of encouraging
employees to volunteer in their communities, a relatively cost-free and easy-todo form of social engagement offering high image-enhancement returns.
Significantly, some of the strongest pressure on executives to adopt socially
responsible programs comes from employees who desire to work for companies
that do good and want to be seen by their friends and families as working for ethical and community-spirited organizations—especially ones that have demonstrated a commitment to environmental sustainability. That is why Salesforce and
other technology companies are increasingly using community outreach programs as recruiting tools.36 In all, the odds are good that corporations will continue to make environmental programs and employee volunteering main thrusts
of their social engagement in the future.
Executive Pay
As the gap between the richest members of society and the average citizen has widened in most Western economies, the spread between CEO compensation and the median pay of employees has expanded to an even greater
degree. In the United Kingdom during the 1990s, chief executive salaries were
about 20 times those of the average worker; in 2015, the multiple had grown to
150 times, leading to demands in Parliament for publicly traded firms to annually release their compensation ratios. It was argued that such public disclosure
of obscenely generous executive compensation would shame corporate boards
into reining in excessive pay packages. That is a noble idea, but not one likely to
change behavior—although such shaming appears to have been more successful
when reporting the differences between men’s and women’s pay became obligatory in 2018 in Britain.
In America, the Securities and Exchange Commission has for years required
public disclosure of top executive compensation, and such publications as Fortune
and the Wall Street Journal regularly publish tables listing CEO pay. But far from
shaming those ranked at the top, those lists serve as scorecards in a race to the top
among CEOs! The numbers keep escalating: in 2018, the CEO of Aptiv took home
$13.8 million, some 2,500 times the median earnings of his 130,000 employees,
and the head of Del Monte pocketed 1,465 times the median earnings of his workforce of 39,000. Both those companies have many low-paid workers in the developing world, so the ratios are magnified compared with Jamie Dimon’s $30 million
compensation which was 364 times the median salary ($78,000) of his highly
paid, largely domestic staff at JPMorgan.37 Indeed, Wall Street is the capital of
excessive compensation: in 2017, securities professionals were paid average
bonuses of $184,000. Despite public outcries, boards of directors (and the investors they are said to represent) have shown little interest in curbing unconscionable executive compensation—even in instances where the ratio of pay between
a CEO and the median worker is as large as 1,188 to 1, as it is at Walmart.38
Investment firm BlackRock seldom, if ever, votes against excessive executive pay
packages. Perhaps that is because its “reformer” chief, Larry Fink, was ranked
26th on a recent list of most overpaid bosses.39
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As long as companies are making money, shareholders care not a whit how
much executives pocket for themselves. In one respect that attitude is understandable: if a CEO is delivering billions in returns to them, investors view rewarding executives with a mere few million or so more in compensation as well worth
the expense. Rather shockingly, investors show far greater concern about the cost
of providing low-level employees with health insurance than they do when executives treat themselves to such expensive perks as country club memberships,
private jets, and opera boxes A few recent exceptions to this rule include the State
Street Global Advisors, a Boston-based $2.8 trillion assets management firm, and
Norway’s sovereign wealth fund, both of which announced in 2018 that they
planned to vote against excessive proposed pay increases in a few companies in
which they are major investors. And in 2018, 52% of Disney shareholders voted
to nix a $100 million bonus the company’s board had voted to pay the CEO
because, reportedly, he was not happy having to show up at the office.
The problem is not strictly one of responsible corporate governance; it is foremost a social problem. As the gap between the rich and everyone else in society grows,
so too do radical, populist political movements that threaten democracy and social
cohesion. Almost all the enlightened capitalists in the past saw a clear link between
how employers compensated workers and the degree to which the public viewed the
capitalist system as fair. That is why they drew reasonable salaries for themselves—seldom more than 20 times that of their average employees. Equally, they tried not to
create the invidious social distinctions between managers and workers that destroy the
sense of community in organizations and in society. Too few of the current generation
of corporate owners and managers appear willing to emulate them.
Conclusion
In conclusion, both the historical and contemporary evidence reveals that
it is hard for businesspeople to do good. Alas, it is especially hard for the leaders of
publicly traded companies. When I think objectively about the emerging trends
just reviewed, I find reason to be hopeful about the prospects of a few of them.
Yet it would require a prodigious degree of optimism that I am incapable of mustering to conclude that the behavior of corporate leaders will change appreciably
in the near future. In particular, my head will not allow my heart to disregard,
or discount, the historical behavior of investors. That said, I also find it ethically
unacceptable to discourage corporate executives from attempting to buck the
odds by adopting enlightened practices. Thus, no matter what the pessimist in
me says, I am unwilling to argue that businesspeople should not do the right
thing simply because virtue is hard to put into practice.
Acknowledgment
Adaptation of Chapter 18 with author’s approval of edits from THE
ENLIGHTENED CAPITALISTS by JAMES O’TOOLE. © 2019 by James O’Toole.
Reprinted by permission of HarperCollins Publishers.
The Prospects for Enlightened Corporate Leadership
Author Biography
James O’Toole is Professor Emeritus at the University of Southern California’s
Marshall School of Business and Founding Director of the Neely Center for
Ethical Leadership (email: jim@jamesotoole.com).
Notes
1. James O’Toole, The Enlightened Capitalists: Cautionary Tales of Business Pioneers Who Tried to Do
Well by Doing Good (New York, NY: HarperCollins, 2019).
2. Paul Hawken, “Commencement: Healing or Stealing,” Commencement address, University
of Portland, 2009, http://www.up.edu/commencement/default.aspx?cid+9456.
3. See especially Marc Benioff and Karen Southwick, Compassionate Capitalism: How Corporations
Can Make Good an Integral Part of Doing Well (Franklin Lakes, NJ: Career Press, 2004); Ira Jackson
and Jane Nelson, Profits with Principles: Seven Strategies for Delivering Value with Values (New
York, NY: Doubleday, 2004); Fred Kofman, Conscious Business: How to Build Value Through Values
(Boulder, CO: Sounds True, 2006); Rajendra Sisodia, David Wolfe, and Jagdish Seth, Firms of
Endearment: How World-Class Companies Profit from Passion and Purpose (Philadelphia, PA: Wharton
School, 2006). A 2007 Businessweek special report, “Beyond the Green Corporation,” was
subtitled “Imagine a World in Which Eco-Friendly and Socially Responsible Practices Actually
Help the Company’s Bottom Line. It’s Closer Than You Think.” Pete Engardio, “Beyond the
Green Corporation,” Bloomberg Businessweek, January 29, 2007, pp. 51-64.
4. Countless books and articles published in recent years have advocated greater corporate
social engagement and documented exemplary practices—particularly with regard to climate
change, pollution, and working conditions in the developing world. See especially C. K.
Prahalad and S. L. Hart, “The Fortune at the Bottom of the Pyramid,” Strategy + Business 26
(2002): 54-67; Andrew W. Savitz, The Triple Bottom Line: How Today’s Best-Run Companies Are
Achieving Economic, Social and Environmental Success—and How You Can, Too (San Francisco, CA:
Jossey-Bass, 2006); E. Freya Williams, Green Giants: How Smart Companies Turn Sustainability
into Billion-Dollar Businesses (New York, NY: AMACOM, 2015); John Mackey and Raj Sisodia,
Conscious Capitalism (Cambridge, MA: Harvard Business School Press, 2013). Also see chapters by Sandra Waddock, Chris Laszlo, Philip Mirvis, Stuart Hart, Jette Steen-Knudsen,
Bruce Hutton and Tricia Olson, and Andrew Hoffman and John Ehrenfeld in Susan Albers
Mohrman, James O’Toole, and Edward E. Lawler III, eds., Corporate Stewardship: Achieving
Sustainable Effectiveness (Sheffield, UK: Greenleaf, 2015).
5. Scheherazade Daneshkhu and Lionel Barber, “Foiling a Hostile Takeover,” Financial Times,
December 4, 2017.
6. Scheherazade Daneshkhu, “Unilever Uses Deals Strategy to Enter Niche Markets,” Financial
Times, December 1, 2017.
7. Andrew Edgecliffe-Johnson, “Unilever Chief Regrets Wooing Investors,” Financial Times,
February 28, 2018.
8. Andrew Hill, “Complacency Will Eat the Heart Out of Whole Foods,” Financial Times, May 1,
2017.
9. Eduardo Porter, “Motivating Corporations to Do Good,” New York Times, July 16, 2014.
10. Dave Eggers, The Circle (New York, NY: Knopf, 2013).
11. Leslie Hook, “Alphabet Draws Up Plans to Build City of the Future,” Financial Times,
September 15, 2017.
12. Kirk O. Hanson, “The Long History of Conscious Capitalism,” California Management Review,
53/3 (Spring 2011): 77-82.
13. John Mackey, “Creating a New Paradigm for Business,” in Be the Solution: How Entrepreneurs
and Conscious Capitalists Can Solve All the World’s Problems, ed. Michael Strong (Hoboken, NJ:
John Wiley & Sons, 2009), pp. 73-114.
14. James O’Toole and David Vogel, “Two and a Half Cheers for Conscious Capitalism,” California
Management Review, 53/3 (Spring 2011): 60-76.
15. Gary Hirshberg, “How to Make Money and Save the World,” address given at
“Conceptualizing Conscious Capitalism” (conference, Bentley College, Waltham, MA, May
24, 2010).
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16. Rajendra Sisodia, “Conscious Capitalism: A Better Way to Win,” California Management Review,
53/3 (Spring 2011): 98-108, at p. 105.
17. O’Toole and Vogel, op. cit., p. 73.
18. Daniel Lubetzky, Do the KIND Thing (New York, NY: Ballentine, 2015).
19. Alice Troy-Donovan, “The Homeless and the Upper House,” Financial Times, House and
Home section, January 12, 2018, pp. 13-14.
20. Eduardo Porter, “Motivating Corporations to Do Good,” New York Times, July 16, 2014.
21. James Surowiecki, “Companies with Benefits,” New Yorker, August 4, 2014,
22. Lynn Stout, The Shareholder Value Myth (San Francisco, CA: Berrett-Koehler, 2012).
23. Ryan Honeyman, The B Corp Handbook (San Francisco, CA: Berrett-Koehler, 2014), p. 174.
24. Andrew Ward, “Green Bonds Boom Brings Growing Pains,” Financial Times, 2017.
25. Paul Sullivan, “How to Invest with a Conscience (and Still Make Money),” New York Times,
March 17, 2018; Ron Lieber, “Why It’s So Hard to Invest with a Social Conscience,” New York
Times, March 3, 2018.
26. Andrew Ross Sorkin, “A Feel-Good Index Now Has a Fund,” New York Times, June 12, 2018,
p. B2.
27. “More Ethical Dilemmas for Norway’s Oil Fund,” Financial Times, March 8, 2018.
28. “Not Its Own Reward,” Economist, September 23, 2017, p. 67.
29. Stephen Davidoff Solomon, “The Thorny Task of Advocating Good Corporate Behavior,” New
York Times, March 24, 2015.
30. Andrew Ross Sorkin, “Big Investors Could Sway Gunmakers,” New York Times, March 6, 2018.
31. Rana Foroohar, “The Backlash against Shareholder Value,” Financial Times, March 5, 2018.
32. Aaron Chatterji, “The Power of C.E.O. Activism,” New York Times, April 3, 2016; Jena
McGregor, “Millennials Want CEOs Talking on Social Issues,” Los Angeles Times, July 30, 2017.
33. Aaron K. Chatterji and Michael W. Toffel, “The New CEO Activists,” Harvard Business Review,
98/1 (January/February 2018): 78-89.
34. Schumpeter, “Social Saints, Fiscal Fiends,” Economist, January 2, 2016, p. 52.
35. Richard Conniff, “Why We Don’t Vote with Our Wallets,” New York Times, October 22, 2017,
Sunday Review.
36. Philip H. Mirvis, “Stewardship and Human Resources Management: From Me to We to All of
Us,” in Mohrman, O’Toole, and Lawler, op. cit., pp. 134-155.
37. Patrick Jenkins, “Gaping Pay Divide between Head Honchos and the Hired Help,” Financial
Times, March 27, 2018.
38. David Gelles, “Want to Make Money Like a C.E.O.? Work for 275 Years. A Telling Look at
Income Inequality,” New York Times, Sunday Business, May 27, 2018, p. 1.
39. Attracta Mooney, “Managers ‘Asleep at the Wheel’ over Executive Pay,” Financial Times,
March 5, 2018.
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Special Issue on AI
The Feeling Economy:
Managing in the Next
Generation of Artificial
Intelligence (AI)
California Management Review
2019, Vol. 61(4) 43­–65
© The Regents of the
University of California 2019
Article reuse guidelines:
sagepub.com/journals-permissions
https://doi.org/10.1177/0008125619863436
DOI: 10.1177/0008125619863436
journals.sagepub.com/home/cmr
Ming-Hui Huang1, Roland Rust2, and Vojislav Maksimovic2
SUMMARY
The capability of AI is currently expanding beyond mechanical and repetitive to
analytical and thinking. A “Feeling Economy” is emerging, in which AI performs
many of the analytical and thinking tasks, and human workers gravitate more toward
interpersonal and empathetic tasks. Although these people-focused tasks have always
been important to jobs, they are now becoming more important to an unprecedented
degree. To manage more effectively in the Feeling Economy, managers must adapt
the nature of jobs to compensate for the fact that many of the analytical and thinking
tasks are increasingly being performed by AI, and, thus, human workers must place
increased emphasis on the empathetic and emotional dimensions of their work.
Keywords: artificial intelligence, management, human resources, feeling
intelligence, human-machine collaboration, job design, hiring
A
utomation, and now AI, have transformed the economy as
mechanical/routine tasks (such as inspecting equipment, documenting/recording information, and scheduling work and activities) have largely been taken over by machines. Already, human
work has moved more toward thinking tasks, such as processing, analyzing, and
evaluating data or information.
As machines perform more of the tasks formerly performed by human
workers, the human workers tend to focus on the tasks that AI cannot do better.
In the last decade, AI has advanced rapidly to develop increased thinking capability. However, conventional wisdom still assumes that thinking jobs and employment will be immune from job displacement.1 We contend that this conventional
wisdom may not be correct, and that we are entering a new economy in which
1National
Taiwan University, Taipei
of Maryland, College Park, MD, USA
2University
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the feeling tasks of jobs, such as communicating/coordinating with others and
establishing/maintaining interpersonal relationship, are becoming more important for human workers than the thinking tasks of jobs. We call this the Feeling
Economy. Our projection, based on U.S. government data, predicts that within
the next 20 years, the Feeling Economy will become dominant.
The main reason for this shift is that AI—technologies that mimic (or even
surpass) human intelligence—has advanced rapidly from being mechanically
capable to increasingly being thinking capable. As AI has become capable of doing
mechanical tasks, this has resulted in what we call the Thinking Economy, in
which the thinking tasks of jobs are more important than the mechanical tasks of
jobs to human workers. As AI has become more capable of doing thinking tasks,
feeling tasks have similarly gained importance for human workers. Human jobs
are increasingly emphasizing feeling tasks, and the importance of feeling tasks is
growing, while the importance of thinking tasks is staying roughly the same.
There are both optimistic and pessimistic views about the impact of AI on
tasks and work in an economy. The optimistic view considers that AI will augment human workers and create new jobs,2 because AI (as a form of capital) augments human capabilities (i.e., labor). Labor, thus, is upgraded, from unskilled to
skilled, or from mechanical to thinking.3 In contrast, the pessimistic view holds
that AI will replace human workers and take over jobs,4 because the more AI (i.e.,
capital) is used, the less labor input is required.5 Our position, based on empirical
evidence, is in the middle: AI both replaces and augments, and because feeling is
more difficult for AI to emulate, the feeling tasks of jobs are becoming more
important for human workers. Our analysis concludes that in the Feeling
Economy, jobs will emphasize feeling tasks more, and workers will need to get
more people-oriented, rather than more data-oriented, if they wish to leverage
the benefits of thinking AI. Even for managerial jobs that have always had both
people-focused tasks (i.e., communicating and coordinating with people), as well
as thinking-focused tasks (i.e., analyzing data or information), our empirical evidence shows that the “soft” aspects of managerial jobs are becoming even more
important and will need to be prioritized, compared with thinking and analytical
skills, in opposition to what many people might generally assume or take for
granted in this big data age.
To prepare managers, employees, consumers, businesses, researchers, and
educators for the upcoming Feeling Economy, this article addresses the effects of
AI on tasks and work, and what this implies for management.
What Is the Feeling Economy?
The Feeling Economy is an economy in which the total employment
and wages attributable to feeling tasks exceed the total employment and wages
attributable to thinking or mechanical tasks.
In the emerging Feeling Economy, the interpersonal, empathetic, feeling
tasks of a job, such as communicating with people inside and outside the
The Feeling Economy: Managing in the Next Generation of AI
organization, establishing and maintaining interpersonal relationships, and selling
to or influencing others, tend to be more important than thinking tasks and
mechanical tasks, for both employees and consumers. Thus, employment and
wages become more dependent on such tasks. The transformation to the Feeling
Economy is already underway.
In the current Thinking Economy, employment and wages are more attributable to thinking tasks, such as processing, analyzing, and interpreting information; planning and prioritizing work; making decisions; and solving problems. In
the Thinking Economy, most of the work time is spent dealing with information
(i.e., information intensive).6 The Thinking Economy is still here today, but is
increasingly being overtaken by the Feeling Economy.
In the past Mechanical Economy, employment and wages were more
attributable to mechanical/physical/repetitive tasks, such as inspecting equipment
or material, performing general physical activities, and repairing and maintaining
equipment. The Mechanical Economy was overtaken by the Thinking Economy
decades ago.
AI Intelligences: Mechanical, Thinking, and Feeling
We posit that the main reason for the emergence of the Feeling Economy
is the advance of AI—technologies that mimic (or even surpass) human intelligence. AI is distinct from previous generations of information technology in that
it can learn and update using data. The input for the learning is data (which
can include text, audio, and video) and can be contextual or noncontextual. The
methods by which AI learns from data are various computational methods, with
machine learning and deep learning neural networks being especially important
methods of learning today.7 The output of the learning is AI performance.8 AI
converts data into performance in three qualitatively different ways, which we
refer to as AI intelligences.
The ability to learn from various types of data and learn from a massive
amount of data (i.e., big data) and update thoughts or actions is what makes
us consider a machine to be intelligent. A machine that does not learn and
update from data, for example, a computer or a cellphone that continues to
provide the same functions as designed in the factory throughout its product
life, is not AI.
There are multiple AI intelligences. Some AI systems are mechanically
intelligent, designed to perform repetitive tasks for consistent and reliable performance; some AI systems are thinking-intelligent, designed to learn and adapt
from data autonomously; and some future AI systems may become feelingintelligent, designed to interact empathetically with people. The development of
AI research and practical implementation of AI are (roughly speaking) mechanical AI first, followed by thinking AI, followed by feeling AI. Mechanical AI is
already well-established, thinking AI is currently advancing rapidly, and feeling
AI may be several decades away for most practical applications.9 The important
insight is that application of AI finds mechanical intelligence to be “easiest,”
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followed by thinking intelligence, with feeling intelligence being the most difficult for AI to emulate.
Research in AI is currently extending into both thinking intelligence and
feeling intelligence, which were once thought to be the exclusive domain of
human abilities.10 For example, computational creativity exists whenever AI is
capable of being creative on its own, such as composing music or art, and such
capability has been used by the fashion clothing company Gap to predict fashion
trends and design clothing.11 Artificial emotional intelligence that uses neural
networks to learn is getting better at recognizing and responding to human
emotions.12 Widespread application of feeling AI is still quite a few years away,
however.
To elaborate:
•• Mechanical intelligence is the capability to do mechanical and repetitive tasks
with relatively limited amounts of learning or adaptation. Today, when the
current development level of AI is higher than just mechanical, the fact that
mechanical AI only learns and adapts to a minimum degree is often deliberate, rather than because AI cannot learn and adapt. Designing AI to be
mechanical is often for output consistency, standardization, reliability, and
precision. Factory automation is one example in which learning algorithms
are set to update only periodically, when there is a need to improve output
performance.
•• Thinking intelligence is the capability to analyze and make decisions rationally
(or boundedly rationally) and involves learning and adapting systematically
from data autonomously. One example is autonomous cars, which automatically adjust to the road and driving conditions based on various sensor data
input. Economically rational thinking characterizes the lower end of this
intelligence (i.e., analytical). A more advanced (from the standpoint of AI)
version of thinking intelligence is bounded rationality, mimicking human
intuition for decision-making.13 In the Thinking Economy, bounded rationality is often considered to be a cognitive bias. From the AI standpoint, however, cognitive bias and intuition are harder for computers to emulate than
straightforward logical thought. In that sense, they may be thought of as a
“higher” form of intelligence. Today, intuitive thinking is an area of rapid
development in AI.14
•• Feeling intelligence is the capability to recognize, emulate, and respond appropriately to human emotions.15 Such AI learns and adapts from understanding
and experience. Experience is characterized by contextual data, in contrast
with the noncontextual data for thinking intelligence. AI that is capable of
feeling intelligence is not as far along, but is also progressing.16 Conversational
AI, such as chatbots (e.g., Alexa and Siri) that use natural language processing to process and analyze natural language data, is booming. Nevertheless,
despite the progress in natural language processing, natural language simulation is more difficult to achieve, given current technology. True emotional
The Feeling Economy: Managing in the Next Generation of AI
machines must have the ability to recognize human emotions and respond in
an emotionally appropriate way. In terms of the theory of mind,17 such feeling AI may even be considered by some as being able to actually experience
emotions, just as the Turing test considers AI to have human thinking ability if an observer cannot differentiate its responses from human responses.18
However, the development of such emotional AI is currently a work in progress, and it is likely to be at least decades more before AI catches up to what
humans can do.
Types of Job Tasks
A job is composed of tasks. Tasks that are required for a job vary in the
extent to which they require mechanical, thinking, and feeling intelligences.
It is useful to sort tasks into these three groups—one group for tasks that are
primarily mechanical, a second group for tasks that primarily involve thinking,
and a third group for tasks that primarily involve feeling. We can use information-related jobs—which may sometimes be mistakenly thought to involve only
thinking tasks—to illustrate the distinction. Obtaining information is often more
mechanical, because it is largely simple, standardized, repetitive, and routine,
such as typing keywords on Google to search information or asking Alexa for
weather information. Processing, evaluating, and analyzing information are
mostly thinking, because they are more complex, systematic, rule-based, and
well-defined. Using the processed information to communicate with supervisors,
peers, or subordinates will typically involve more empathy and feeling, because
such tasks are social, communicative, and interactive.
Most jobs are composed of both thinking and feeling tasks (and often
mechanical tasks as well). For example, a customer service manager’s job may
include mechanical tasks such as administrating daily routines, thinking tasks
such as analyzing customer preferences, and feeling tasks such as communicating,
interacting, and empathizing with customers.
The Theory: When AI Does the Thinking, Humans Emphasize
Feeling
We assert that as AI advances to a higher intelligence level, and assumes
more tasks related to that intelligence level, human jobs will tend to be
“upgraded” to focus on tasks related to higher intelligence levels (those more
difficult for AI to assume). For example, the expansion of mechanical AI deemphasized mechanical human labor while giving more emphasis to thinking labor.
Similarly, the expansion of thinking AI is currently deemphasizing thinking
labor, especially the more straightforward analytical labor, while increasing the
emphasis on feeling labor.
It has been argued that the rise of a new economy not only impacts human
jobs, but also human shapes (e.g., the muscular factory worker gives way to the
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skinny “geek”), activities, and minds.19 When the industrial revolution freed
human physical energy from mechanical jobs, people placed greater emphasis on
thinking. Jobs, education, and wages reflected this new emphasis. For example,
historian Harold James concludes from his qualitative analysis that AI is going to
make the economy “stupid,” because the human mind, not just physical energy,
will no longer be needed as economic input, and, thus, humans will become collectively duller.20
This implies that at the economy level, when one human intelligence is
deemphasized in the economy, the nature of tasks, jobs, and industries will transform and give rise to new tasks, jobs, and industries. At the job level, for example,
in the industrial revolution, when mechanical tasks were no longer needed as
much for jobs, people gravitated toward jobs that emphasized cognitive and analytical tasks, and analytical industries (such as computer, mathematical, and engineering) grew. At the task level, when AI is capable of cognitive thinking, people
who are doing thinking tasks may find that those tasks can now be done by AI.
The thinking workers must then transform the nature of their jobs to emphasize
feeling tasks more or find new jobs that have a greater feeling or interpersonal
component.
Altogether, we observe that the Mechanical Economy has already given
way to the Thinking Economy, and we posit that the advance of thinking AI is
now ushering in the Feeling Economy.
Empirical Evidence
We use the U.S. government’s O*NET occupational data in 2006 and 2016
to validate our assertion that the Feeling Economy is emerging. Year 2006 signifies a milestone of modern AI, the year in which IBM introduced Watson, a cognitive machine that defeated a Jeopardy! Champion,21 and 2016 was the most
recent data year when the analysis was performed. Based on our theory, we
expected the data to show that the importance of feeling tasks (relative to thinking or mechanical tasks) is becoming more important, and the total employment
and average wages are becoming more attributable to feeling tasks from 2006 to
2016.
Data
The O*NET is sponsored by the U.S. Department of Labor/Employment
and Training Administration, and its database is the primary source of occupational data covering the entire U.S. economy. The O*NET dataset and its
precursors have been used extensively in high-visibility papers in economics, particularly labor economics, and the coding and its properties have been
extensively discussed in the technical literature. Those contributions deal with
issues such as foreign trade and outsourcing—for example, whether workers in
jobs relying in routine manual skills are being displaced by foreign workers and
offshoring, whereas workers in jobs relying on nonroutine cognitive skills are
The Feeling Economy: Managing in the Next Generation of AI
prospering.22 Publications using the O*NET data have been published in such
prestigious outlets as the American Economic Review, Journal of Labor Economics, and
multiple recent National Bureau of Economics Research Working Papers.
The data capture two sides of occupational information: the job side contains data about work activities, characteristics, and tasks; and the worker side
contains data about ability, skills, and training. The choice of which side of the
data to use depends on whether researchers focus on analyzing job tasks or worker
skills. The task data used for the analyses in this article are from the job side,
detailing various tasks’ importance to jobs, and total annual employment and
average annual wages for jobs.23
The O*NET database contains almost 1,000 jobs that cover the entire U.S.
economy. The database is collected and updated regularly using standardized
questionnaires to survey a broad range of workers in each job. There is a standard
list of 41 tasks, which vary in their importance to each of the jobs, rated by the
surveyed workers using a 1-5 importance scale. The importance rating is transformed into a range between 0 and 1 for the purposes of our analysis, as shown
in Table 2. The same task data source has been used by previous researchers to
rank jobs according to their susceptibility to computerization.24
There are 812 jobs that are available in the data for both 2006 and 2016.
Two of the authors, who are experts in AI and service, rated the 41 tasks first. A
panel of international informants then similarly rated the tasks.25 The experts
were given the instruction that mechanical tasks are simple, standardized, repetitive, and routine; thinking tasks are complex, systematic, rule-based, and welldefined; and feeling tasks are social, emotional, communicative, and interactive.
The tasks were rated based on a 100% split, meaning that a given task is neither
necessarily nor typically purely mechanical, thinking, or feeling, but is a weighted
combination of all three intelligences. As examples, the task of analyzing data or
information might be rated as 15% mechanical, 85% thinking, and 0% feeling;
the task of making decisions and solving problems might be 80% thinking and
20% feeling; and the task of selling or influencing others might be 40% thinking
and 60% feeling. Each task was then assigned to whichever of the three intelligences had the highest percentage, since it was the most important intelligence
for that task. The weighted Kappa statistic between ratings of the two distinct
groups of experts is satisfactory at .848, indicating a high level of agreement. This
rating resulted in 26.8% mechanical tasks (11 tasks), 41.5% thinking tasks (17
tasks), and 31.7% feeling tasks (13 tasks). Table 1 shows the list of the 41 tasks, as
sorted into the three intelligences.
Measures
Table 2 summarizes the operational definitions of variables. Based on
these measures, we present the following analyses to show the emergence of the
Feeling Economy.
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Table 1. Mechanical, Thinking, and Feeling Tasks.
Mechanical
Thinking
Feeling
1. Getting information
1. Monitor processes, materials,
or surroundings
1. Communicating with
supervisors, peers, or
subordinates
2. Inspecting equipment,
structures, or material
2. Identifying objects, actions,
and events
2. Communicating with persons
outside organization
3. Scheduling work and
activities
3. Estimating the quantifiable
characteristics of products,
events, or information
3. Establishing and maintaining
interpersonal relationships
4. Processing information
4. Assisting and caring for others
5. Handling and moving
objects
5. Evaluating information to
determine compliance with
standards
5. Selling or influencing others
6. Controlling machines and
processes
6. Analyzing data or
information
6. Resolving conflicts and
negotiating with others
7. Operating vehicles,
mechanized devices, or
equipment
7. Organizing, planning, and
prioritizing work
7. Performing for or working
directly with the public
8. Repairing and maintaining
mechanical equipment
8. Interacting with computers
8. Coordinating the work and
activities of others
9. Repairing and maintaining
electronic equipment
9. Drafting, laying out, and
specifying technical devices,
parts, and equipment
9. Developing and building
teams
4. Performing general physical
activities
10. Documenting/recording
information
10. Monitoring and controlling
resources
10. Training and teaching others
11. Performing administrative
activities
11. Judging the qualities of things,
services, or people
11. Guiding, directing, and
motivating subordinates
12. Making decisions and solving
problems
12. Coaching and developing
others
13. Thinking creatively
13. Staffing organizational units
14. Updating and using relevant
knowledge
15. Developing objectives and
strategies
16. Interpreting the meaning of
information for others
17. Provide consultation and
advice to others
The Feeling Economy: Managing in the Next Generation of AI
51
Table 2. Operational Definitions of   Variables.
Variable
Operational definition
j
= Jobs, equal to 812 for tasks and jobs for the two data years, 753 for employment and 748
for wages in 2006, and 770 for employment and 767 for wages in 2016. The number of
jobs for employment and wages varies, due to some jobs not having such data reported.
i
= Tasks, ranging from 1 to 41, as shown in Table 1.
t
= Data year, 2006 or 2016.
m
= Intelligence level of task i, rated by experts, ranging from 1 to 3.
Iijt
= The importance of task i for job j at year t, which is transformed from the 1-5 scale in the
raw data into the (0, 1) scale by I = (I − 1) / 4.
Aijt
= Relative importance of task i to job j at year t, as compared with the other 40 tasks for
job j at year t. ∑jtAijt adds to 1 across all tasks for job j at year t.
Jjmt
= The no. of workers for job j due to intelligence m at year t.
Rim
= Relative importance of the three intelligences. For task i, Rim ∈ {0, 1},
Bjmt
= Relative i…
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