The clamour for compassionate capitalism
Those calling for compassionate capitalism need to be aware that such statements can come off as nugatory, or worse yet, can rebound. The media is rife with news of Yahoo’s shareholders’ vote on Thursday, 8 June. Electing to approve Yahoo’s sale to Verizon will make them richer by billions of dollars, while also enriching Marissa Mayer, the current chief executive officer of Yahoo, by almost $264 million. One could argue that Mayer’s windfall has very little to do with her work at Yahoo, since the firm failed on many fronts when compared to its arch-rival Google, and is instead due to the investment performance of two bets placed years ago by Jerry Yang, one of Yahoo’s founders, in two Asian internet giants-the Alibaba group in China and Yahoo Japan. Yahoo’s stock has more than trebled in value during Mayer’s tenure, going up from around $16 to about $50 a share on 7 June.
Since most of Mayer’s pay was in stock and stock options, she now stands to benefit handsomely. It is they who provided their capital by buying ownership stakes in Yahoo. Mayer is just one of the many lucky managers who have made fortunes simply by sticking around due to the stock option based compensation structures that are de rigueur in today’s corporations, made possible in part by the seminal work linking stock options and executive compensation done at my alma mater, the University of Rochester, by its professors Michael Jensen, William Meckling and Kevin Murphy. True compassionate capitalism would mean that the shareholders of Yahoo are willing to forgo some of the profits they stand to make from the deal to benefit the axed employees. If they want to be paragons of compassionate capitalism, the natural next step would be for these investors to share their current dividends and future profits from their stock holdings with the lower level workers at these firms, who are now presumably cannon fodder in a relentless world which encourages survival of the fittest.
Capitalism, like loyalty, is a reciprocal arrangement. I would advise caution before we use terms like compassionate capitalism.
Kiran Mazumdar-Shaw: compassionate capitalist
Kiran Mazumdar-Shaw argues that philanthropy too often tries to apply temporary fixes to intractable problems. Kiran graduated from Federation University Australia in 1976, becoming India’s first female brewmaster. She worked as a technical consultant at breweries in India and Australia and was later offered the position of head master brewer at a brewery in Scotland. In 1978, in a makeshift office in a garage in Bangalore, Kiran founded Biocon India, a joint venture in which she had 70 percent ownership. Within a year, Biocon India was manufacturing and exporting enzymes to the United States and Europe, the first Indian company to do so.
It soon grew into India’s largest enzymes company. Under Kiran’s leadership, it has since become India’s largest biopharmaceutical company and Asia’s largest producer of insulins. The second Indian to sign the Giving Pledge, Kiran is motivated by personal experience: the illnesses of her husband, mother, and best friend led to a focus on cancer research and treatment. The state-of-the-art, Mazumdar-Shaw Cancer Center in Bangalore, one of the largest hospitals of its kind in India, was founded on an affordable healthcare model that allows low-income patients to access treatment that is subsidized by those who can pay the full cost of their therapy. Kiran is particularly concerned about the financial burden that debilitating diseases like cancer impose on patients in poor countries.
Through the Biocon Foundation, Kiran has adopted a large number of Primary Health Centres in rural India and worked to transform them into telemedicine- and technology-enabled centres with links to doctors who are based in major cities. Kiran has also used her philanthropy to create the 1,400-bed Mazumdar-Shaw Cancer Centre in partnership with Dr. Devi Shetty, whose commitment to compassionate capitalism is legendary.
Compassionate Capitalism and the Odious Orphanage – Rev. Christopher Marlin-Warfield, CFRE
Lately, I’ve been playing with an idea I call ‘compassionate capitalism’. This is the idea that we can use capitalism – an economic system where private parties own the means of production and operate them to make a profit for themselves – to solve big social problems like poverty. Charity skeptics really like compassionate capitalism, and both Dan Pallotta and Steve Rothschild are advocates. While it’s probably true that capitalism can be used to mitigate big social problems, there no guarantee that it will be used to do that. If you want some absurd dystopianism, here it is: a smart investor – who only wants to make as much money as possible – could invest in the companies that cause social problems and the ones that work to solve them.
It needed money, and it could get that money by charging wealthy westerners for the experience of coming to the orphanage and reading to the orphans. Mission trip volunteers who go to that orphanage to read to orphans aren’t doing anything wrong. It’s the mindset that makes the orphanage be willing to exploit those orphans in order to get money. Now, that’s not exactly capitalism, but it’s capitalism adjacent. The odious orphanage is willing to abandon – or, at least, to downplay – other values in the interest of acquiring money.
It’s a perfect example of why we need to make sure that capitalism is bound by higher values: even ‘compassionate capitalism’ that is trying to solve big social problems can wander into a perverted place. We need to make sure that capitalism is bound by higher values: even ‘compassionate capitalism’ that is trying to solve big social problems can wander into a perverted place.