June 20, 2019

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The B Corporation: A Reformation of Human Thought?

B Corps find the right balance between stakeholder engagement and business strategy.

Dirk_sampselle

By Dirk Sampselle

Part of the "Becoming a B" series.

Satisfaction is higher when individuals work for a common good.

Since at least the era of Adam Smith, a central maxim of philosophical and economic reasoning has been that man will pursue his own best interests. But at least since the inception of game theory as a popular heuristic for the analysis of human behavior, social scientists have realized that the narrow pursuit of individual preferences often does not lead to optimal group outcomes.

For example, take the following classic scenario: John and Sally are dating; John likes baseball, Sally likes theatre.

 

 

Sally

 

Activity

MLB

Play

John

MLB

(10, 2)

(4, 4)

Play

(-5, -5)

(2, 10)

Lonely Self-Interest

Pursuing their narrow interests without regard to those of the other, Sally and John will arrive at the “Nash Equilibrium” for this scenario – John will attend the baseball game alone, Sally will attend the play alone. This results in a utility score – or payout – of (4,4).

For John, this is superior to the 2 he would receive if he attended the play with Sally; for Sally, this is superior to the 2 she would receive if she attended the baseball game with John. And it is certainly superior to the travesty that would occur if they each went to the other’s preferred activity alone!

But this scenario presents a central problem in human reasoning and human interaction. If we cannot empathize with one another and appreciate the sugar-spice-yin-yangwellbeing and happiness another receives from our own benevolent actions, we will never be able to produce optimal group outcomes.

Convivial Altruism

Here, the optimal group outcome occurs when John and Sally attend either event together. It makes no matter whether it is the baseball game or the play – both yield a group utility score or payout of 12 – the group payout is 50% higher than the payout when they each attend an event separately.

I would like to believe that most healthy people recognize this disparity and pursue optimal group outcomes both in dating relationships and in larger group social behavior.

Transactional Dissonance

However, this is not how traditional businesses operate. Businesses typically – by function of both practicality and legal duties – maximize their own interests, often to the detriment of their stakeholders and the communities and environment in which they operate.

Because of the central role business plays in our civic environment – through the products we consume, the venues we attend to socialize, the experience of any commercial exchange – the psychology of purely self-interested business thinking trickles down into society by way of transactional osmosis.

Five years ago, a group of businesses came together to support the creation of a new legal and business architecture called the B Corporation, which is chartered to do good, or, literally, “create public benefit.”

Five years ago, the non-profit B Lab was founded to support the creation of a new legal and business architecture called the B Corporation, which is chartered to do good, or, literally, “create public benefit.” By their very nature, B Corporations are both allowed and required to consider the What-is-B-Corpinterests of stakeholders in board-level decision-making. This turns B Corporations' focus away from purely self-interested behavior, toward pursuing group-interested behavior and discovering means of shared value creation.

This behavior may mean taking an individual hit so that the group can perform more optimally; but the fact that the entity acts as part of a more integrated cohort that creates more collective value for society should mean a more stable venture in the long-run. Just as those who treat their friends well and make sacrifices are more likely to have long-lasting friendships, ventures that focus on nurturing stakeholder relationships even when not directly or immediately in their self-interest should have more stable positions in the marketplace because of those supporting relationships.

But because of business's moral impact on society, the implications of the B Corporation's benevolent decision-making model may not be limited to the commercial realm. If this structure can reform business thinking to consider the interests of others in commercial transactions, what are its implications for the rest of society and our philosophy of social interaction?

Talkback Readers: Please contribute your thoughts to this post. How have you seen self-interest vs. altruism resulting in differing group outcomes in your workplace or business?

The opinions, beliefs and viewpoints expressed by CSRwire contributors do not necessarily reflect the opinions, beliefs and viewpoints of CSRwire.

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