Investing in the Holiday Spirit
"How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points?"
Capitalism has gained a bad reputation. Pope Francis, Time magazine's Person of the Year, recently made this criticism, which is particularly pointed during the holiday season, which is defined by love, giving, and hope for big changes in the year to come.
Here's an idea for a resolution: As investors, let's work to repair capitalism's reputation by investing in companies that seek to make the world a better place -- not a more inequitable one.
Hungry for empathy
Increasing numbers of entrepreneurs and business managements are rejecting decades of dog-eat-dog business and investing theory. These enlightened managements embrace furthering the good of all stakeholders, as opposed to neglecting all but one (shareholders). After all, employees, communities, customers, and the environment are also stakeholders in some way or another.
To run businesses in this way, leaders have to possess a sort of empathy that's too often lacking in modern leadership. Putting ourselves in other people's shoes reminds us of the hardships of others and helps us learn how we can help.
In September, Panera founder and CEO Ron Shaich did just that. He gave himself a $4.50 per-day food allowance for one week -- the amount of money allotted under the Supplemental Nutrition Assistance Program. According to Shaich:
I was hungry last week -- laser-focused on how much food was left in the fridge and how many dollars were left in my wallet. I was scared about eating portions that were too big, and wasn't sure what to do if my food ran out. I canceled two scheduled dinners, knowing they were way beyond my budget.
Shaich's experiment wasn't a short-term impulse. Hunger awareness has always been part of Panera's business, and its history includes initiatives like donating daily unsold bread to local food banks.
A corporation with a conscience
There's a new kid in town among positive business leaders. Its SEC prospectus discusses its "commitment to Conscious Capitalism."
The Container Store's share price doubled on its first day of trading on Nov. 1. Although highflying IPOs are often dangerous for investors, The Container Store has some attributes that make it far more compelling than your average IPO.
Chairman and CEO Kip Tindell's shareholder letter in The Container Store's IPO prospectus outlines the company's philosophy:
One of our greatest hopes is that the practice of simultaneously taking care of everyone connected to a business, operating from a purpose beyond profits and leading with consciousness -- what we along with other companies, thought leaders and academics call Conscious Capitalism -- becomes the preferred and most accepted way of doing business. It will prove that the economic imperatives of corporate success aren't incompatible with doing the right things. It's not a zero-sum game. No one has to lose for the other person to win. You can make decisions based on love and succeed.
In just one example of the kind of competitive advantage that makes such companies different, The Container Store's employee turnover rate is about 10% annually, compared to an average of more than 100% across the retail industry.
Does this mean investors should jump into The Container Store right now? Not necessarily. It's a hot IPO, and as of now, the business isn't profitable. Still, it deserves to be on the watch list, given its foundation -- a positive one that likely has a great future that many of us will invest in, even after today's fair-weather-friend IPO traders are long gone.
The positive paradigm
Anyone who's interested in this business philosophy can read Conscious Capitalism: Liberating the Heroic Spirit of Business, written by Raj Sisodia and Whole Foods Market founder and CEO John Mackey. Sisodia also wrote Firms of Endearment: How World-Class Companies Profit from Passion and Purpose, which relates to similarly positive and well-positioned companies.
Mackey has long been a proponent of "Conscious Capitalism." This stakeholder-friendly approach highlights how capitalism can be good -- incredibly so.
Corporate managements that adhere to this philosophy operate with empathy and understanding. They recognize the web of positive interrelationships between all stakeholders, boosting prosperity for all.
For investors who think investing like this isn't a winning strategy, take the "Firms of Endearment" list that Sisodia compiled. Says Sisodia: "We put [the companies] through a stringent set of screening criteria to arrive at a final set of 28 Firms of Endearment: companies truly loved by all who come in contact with them -- customers, employees, suppliers, environmentalists, the community, even governments!"
From 1996 through 2011, these "Firms of Endearment" provided a 21% cumulative return, outperforming the S&P 500 10.5-to-1. Obviously, corporate managements and strategies don't have to be brutal to make successful companies and deliver excellent investing returns.
The holiday spirit
The market's day-to-day ups and downs really shouldn't be considered all that newsworthy. For those of us who are holding stocks of the greatest companies for the long term, it's simply noise.
When holding stocks whose managements take a conscious approach, shareholders enjoy an added benefit. Investing in companies that do good by all their stakeholders exemplifies the holiday spirit. That's the kind of spirit that should last all year long, in investing and in life.
Check back at Fool.com for more of Alyce Lomax's columns on environmental, social, and governance issues.
The article Investing in the Holiday Spirit originally appeared on Fool.com.John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Alyce Lomax owns shares of Whole Foods Market. The Motley Fool recommends Panera Bread, The Container Store Group, and Whole Foods Market. The Motley Fool owns shares of Panera Bread and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.