The Economics of Mutuality – Part I

March 19, 2014 – Today, I attended a fascinating presentation by Jay Jakub of the . The team at Mars is proposing to push beyond the simple concept of triple bottom line – the accounting framework that tracks impact on people, planet, profit – in assessing business performance. Instead, they argue a new formula is needed that assesses the value that is created for all stakeholders of a business, not just shareholders.

The Brewery Journal, published in January 2014, in several articles explores this new concept, summarized as the economics of mutuality, which basically distills rising expectations on the role of business in society. Access the full journal edition here.

Traditionally, the argument goes, business was only accountable to shareholders and its role was one: to maximize profit. However, the authors posit, this approach has led to a myriad of woes, from a depleted environment to exploited workers and financial scandals. Instead, argue Stephen Badger, Chairman of Mars Incorporated, and others, the company should produce and distribute profits in such as a way as to “promote a mutuality of services and benefits” among consumers, distributors, competitors, suppliers, governmental bodies, employees and shareholders.
In principle, this concept of increasing economic value and positive impact (however defined) at each node along the value chain is uncontroversial. After all, ethically, we are all called upon to minimize harm and promote good as we go about our daily lives. Further, where business does not rise to the occasion on its own, an intricate web of regulation has evolved in most countries to rein in its detrimental excesses and redistribute its benefits.

My concern is that the mutuality rhetoric rests on several often unspoken assumptions that need to be probed, about how the world – and business – does and should work. More nuance is especially needed on whether the principles espoused under mutuality are relevant and practical as a global ethos on the future of capitalism.

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