John Mackey on Conscious Capitalism and Business Leaders as Heroes

John Mackey is the founder and co-CEO of Whole Foods Market (NYS: WFM) , which has been a remarkable growth story since its start in 1980. Whole Foods started as a small store in Austin, Texas, and is now a $17 billion organic and natural grocery store market leader with more than 300 stores.

Mackey also founded the nonprofit Conscious Capitalism, which seeks to "liberate the entrepreneurial spirit for good."

Last month, The Motley Fool's own founder and CEO, Tom Gardner, ventured to Austin for a conversation with Mackey on business, leadership, company culture, and his legacy. Watch the video below to see why Mackey believes businesspeople are heroes, and why businesses should be out to do more than just make money. (A transcript is provided below; running time: 4:51.)

Tom Gardner: I want to start with just an explanation from you about what the philosophy of conscious capitalism, the core of that philosophy for anyone who's never heard of it before, what it means to you and how you express that in your work at Whole Foods.

John Mackey: Well, the simplest way to explain conscious capitalism is in terms of the four tenets or the four cardinal, core principles of it, which is, one, the business has the potential to have a higher purpose beyond merely making money. Not that that's not a good thing, but that it's not limited to that. It can be more than that.

Secondly, that business should be managed on behalf of wider stakeholder groups, not just investors, so that includes customers, employees, suppliers, larger community, and all done with environmental integrity.

And third, that you manage the business in a different way, you lead it to what we call "conscious leadership," which involves; the leaders are not there primarily to line their own pockets; they are there because they align with the mission. They're trying to fulfill the purpose of the business and they serve the stakeholders, so it's a different attitude towards leadership.

And fourth, you have to create a culture that supports the purpose, the stakeholders, and the leadership. So you have to do that and design that culture in a conscious way, so it's those four principles.

Gardner: What organization or development in history, if you don't want to name one presently, do you think presents a great violation to the principles of conscious capitalism?

Mackey: Do you mean like; well, there are numerous examples. The most famous ones are companies like Enron or WorldCom or when the corruption was there, or Bernie Madoff. Anytime you've got companies where the leadership is basically engaged in some type of fraud, you have the most obvious violations of the principles of conscious capitalism because they're cheating people just to line their own pockets, which isn't really what business is about.

Business, capitalism, is about creating value for other people. And conscious capitalism, in a sense, is becoming very conscious of the principles that lead to creating that value. Creating value not just for investors; you create value for the customers. You create value for the employees. You create value for the suppliers. You create value for the investors. You create value for the large community, and it's all done voluntarily. No one's forced to trade with the business. They do so because it's in their best interest to do so.

So the narrative that conscious capitalism is trying to explain to the world is that business is about value creation. It's not about selfishness or greed. Business people are heroes because we're creating value for other people. We're creating prosperity in this world. We're helping humanity to advance, and that's a narrative that's true, yet seldom told.

Gardner: So you've not studied all 7,000 companies that are listed in the U.S.?

Mackey: No, but you have.

Gardner: I have studied a few hundred of them, but if you were to guess, what percentage of those companies would you say meet the principles of conscious capitalism? Is it half of all companies we should look at and say, They're doing right? They're creating permanent value. They're really thinking through all their stakeholders.

Mackey: I think most companies follow; it's on a continuum. Consciousness is on a continuum. It's not like you one day wake up and you're fully conscious of everything. It's a journey. I'm more conscious today. I'm a more conscious leader today than I was five years ago, and hopefully I'll be even more conscious five years from now than I am today. I look back and say, I didn't know anything back there in 2012. But most businesses are creating value, and they may not be conscious of their purpose and they may not be conscious of stakeholders, but they intuitively understand that if they're going to have a successful enterprise, they need to have happy customers and to have happy customers, the employees generally need to make them happy, which means they need to be somewhat fulfilled as well. You have to trade with a supplier network who's doing so voluntarily, so generally you have to have fair terms of trade. So most businesses are following the principles of conscious capitalism ...

Gardner: To a degree, at least.

Mackey: To a degree, but they're not conscious of it. So once you become conscious of it, you can do it in a way strategically, that accelerates your, I think it's success of your enterprise because these principles do lead to business success.

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