The Marketing Journal
  • About
  • Interviews
  • Articles
  • Videos
  • Book Reviews
  • Views
  • Subscribe
“The War for the Soul of Capitalism” – An Interview with Philip Kotler

“The War for the Soul of Capitalism” – An Interview with Philip Kotler

March 27, 2017

You have made a distinction between companies that care about their social obligations and companies that don’t. Why is this such a big deal?  Economists used to say that the only responsibility of business is to make a profit.  Many companies still believe that.  What do you say to that?

The idea of brand activism is not really a new one. In our book, Corporate Social Responsibility, we interviewed 45 companies. We asked each company: “Do you give money to charity?  Have you adopted a favorite cause? Why did you choose that cause? Do you monitor whether the money has helped the cause? Do you know whether your company’s reputation improved as a result?”  Our book shows the findings. Consumers who are interested in buying from caring companies will have a better sense of whether the caring is real or just window-dressing.

But what is now critical is to understand is that the landscape has changed.

Millennials led the way, but now most customers have high expectations for brands. We live in a world filled with constant problems – air pollution, bad drinking water, crimes, income inequality.

The brands that show real concern not just for profits but for the communities they serve, and the world we live in are the ones that are coming to the forefront.

A caring company must make its activities visible to its customers. It needs to show its values and commitments early, and that it cares about its people, cities, communities, and the planet.

If you present the evidence, customers will reward you.

More and more customers are become aware of their voting power in the market place and that they favor buying from caring companies.  And when you add social media to the mix, there is “instant activism.”

What do you think of the recent scuffle between Kraft Heinz and Unilever?

That is exactly the issue. We are fighting a battle, as Bill George says, for the soul of Capitalism.

As George explains, you have Unilever CEO Paul Polman championing sustainable growth in earnings to raise long-term shareholder value.  On the other side, you have KHC’s Bernardo Vieira Hees and its Brazilian owner 3G Capital. They want to maximize short-term earnings to increase near-term valuation.

Of course the outcry was loud, and 3G withdrew its offer just 50 hours after it was made.

I agree with George when he says that the larger issue at stake here is not just the fate of a single company, but the fate of capitalism itself.

Is it really that bleak? What can businesses do to understand their place in society?

We have a disconnect. Businesses that think they exist independent of society are not going to last. Perhaps it is the fault of our MBA education and perhaps it is the fault of our business culture that still emphasizes “maximizing shareholder value.”

Even Jack Welch is now reversing his philosophy. In his now infamous interview with the Financial Times he tells us – “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy… your main constituencies are your employees, your customers and your products. Managers and investors should not set share price increases as their overarching goal. … Short-term profits should be allied with an increase in the long-term value of a company.”

Where did this idea of “maximizing shareholder value” come from?

I think it was Roger Martin who said that this mess begins with Michael Jensen and Dean William Meckling of the Simon School of Business at the University of Rochester. They published “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure” in the Journal of Financial Economics. That was in 1976.

The article was intellectually and philosophically incorrect. It basically said that shareholders are the owner of the business, while the executives are agents who are hired by the principals to work on their behalf. Jensen and Meckling argued that the goal of a company should be to maximize the return to shareholders.

And that was the biggest scam in business.  Now anything goes under the mantra of “maximizing shareholder value.”

What do you mean?

Well, let’s reference Peter Drucker. He tells us that the only valid purpose of a firm is to create a customer I am convinced that the polarization in society, the stark rise in income inequality and the staggering rise in the levels of CEO pay are directly related.

I agree with Bill George when he says that unconstrained capitalism focusing on short-term gains can cause great harm to employees, communities and the greater needs of society.

And it is precisely because of this that we have the rise of populism around the world.

Our titans of industry are shooting themselves in the foot by not comprehending the existential threat populism holds for the future of their businesses.

But isn’t this really about price?  Don’t customers deserve the best and lowest prices?

That is again a misapplication of the philosophy that low prices are the end-all.

Do we really want low-prices that are the result of exploitation, slave labor, or environmental degradation on the other side of the globe?  The true cost of low prices is that the cost is borne by society – to its detriment.

Globalization has brought many changes, and as we are learning now, not all of them were good. The feelings of powerlessness and frustration in a world dominated by wealthy elites has led to the resurgence of nationalism, protectionism, and growing threats of war and violence.

Our business leaders forgot their history.

Screen Shot 2017-03-27 at 11.51.52 PM

Let’s discuss the concept of Demarketing. How does that play into all of this?

We have built this unsustainable worId on the backs of consumer debt.

The question is how do we get people to use a scarce resource more carefully.

We started thinking about this in our 1971 article called Demarketing, Yes, Demarketing.

The 4Ps (product, price, place, promotion) provide solutions:

First, we design products that will use less water, such as by designing more efficient showerheads.  Second, we raise the price of water to discourage consumption.  Third, we make less water available in certain channels.  Fourth, we use promotion to make people more ashamed of wasting water.

The demarketing idea is very generic. We just reverse the direction of the 4 Ps.

Make the product less necessary, more expensive, less available, and more shameful.  Companies like Patagonia will sell you a jacket that lasts a lifetime.  They’ll even repair it for you.  This is good sense.  It should be a best practice for the future of product development.

Does the conflict also arise out of the power structure within organizations? How many CEOs were promoted from sales, where they are responsible for “maximizing revenue”?

If you look at a study done by Harvard Business Review on the Best Performing CEOs, we learn that there are so many reasons for leaders to focus on the short term: slow growth, shareholder activism, political turmoil—to name just a few. Yet the study highlights the CEOs that still manage to focus on the long term and deliver strong performance over many years.

Prior to 2015, the rankings were based purely on financial returns; by that measure Jeff Bezos of Amazon led the pack for three years running.

What’s interesting is that when HBR started including ratings of companies’ environmental, social, and governance (ESG) performance as a variable, there was a big shift in ranking.

There’s a profound discussion led by Adi Ignatius on this – with Novo Nordisk CEO Lars Rebien Sørensen, WPP CEO Martin Sorrell, and Inditex CEO Pablo Isla – the three top ranked CEOs based on paying attention to their ESG performance.

So how should businesses change? How can they become more caring and still balance profit-making with the future?

Perhaps the best explanation of this comes from Ratan Tata who tells us that

Profits are like happiness in that they are a byproduct of other things. Happiness, for example, can stem from having a strong sense of purpose, meaningful work and deep relationships. Those who focus obsessively on their own happiness are usually narcissists — and end up miserable. Similarly, companies need a purpose that transcends making money; they need sustainability strategies that recognize that you can make money by doing good things rather than the other way around.

Marketers need to lead the way, working with their CEOs to nurture the future.  The $64,000 question is: How do we create and nurture markets, communities, and the future of society?

INTERVIEW by Christian Sarkar.

Philip Kotler is the “father of modern marketing.”  He is the S.C. Johnson & Son Distinguished Professor of International Marketing at the Kellogg School of Management at Northwestern University. He was voted the first Leader in Marketing Thought by the American Marketing Association and named The Founder of Modern Marketing Management in the Handbook of Management Thinking. Professor Kotler holds major awards including the American Marketing Association’s (AMA) Distinguished Marketing Educator Award and Distinguished Educator Award from The Academy of Marketing Science. The Sales and Marketing Executives International (SMEI) named him Marketer of the Year and the American Marketing Association described him as “the most influential marketer of all time.” He is in the Thinkers50 Hall of Fame, and is featured as a “guru” in the Economist.  He is the author Confronting Capitalism: Real Solutions for a Troubled Economic System, 2015; and Democracy in Decline: Rebuilding its Future, 2016.

Related Posts

“How the US military used magazines to target ‘vulnerable’ groups with recruiting ads” – Jeremiah Favara

Advertising /

“How the US military used magazines to target ‘vulnerable’ groups with recruiting ads” – Jeremiah Favara

“Climate scientists: concept of net zero is a dangerous trap” – James Dyke, Robert Watson, and Wolfgang Knorr

B2B Marketing /

“Climate scientists: concept of net zero is a dangerous trap” – James Dyke, Robert Watson, and Wolfgang Knorr

“The allure of the ad-lib: New research identifies why people prefer spontaneity in entertainment” – Jacqueline Rifkin and Katherine Du

B2C Marketing /

“The allure of the ad-lib: New research identifies why people prefer spontaneity in entertainment” – Jacqueline Rifkin and Katherine Du

‹ “Can Wall Street Win in Sustainable Investments? The Social Function of Marketing for Good” – Elsie Maio › “The Future of Shopping Malls: What Will Save Brick and Mortar?” – Madison Bloom
A D V E R T I S E M E N T

Recent Posts

  • “Jobs-to-be-Done for Government” – Anthony Ulwick
  • “The Power of Superconsumers” – Christopher Lochhead, Eddie Yoon, & Katrina Kirsch
  • “Zoom Out/Zoom In – Making It Personal” – John Hagel
  • “Regeneration or Extinction?” – a discussion with Philip Kotler, Christian Sarkar, and Enrico Foglia
  • “Climate scientists: concept of net zero is a dangerous trap” – James Dyke, Robert Watson, and Wolfgang Knorr
  • “The allure of the ad-lib: New research identifies why people prefer spontaneity in entertainment” – Jacqueline Rifkin and Katherine Du
  • “What is ‘ethical AI’ and how can companies achieve it?” by Dennis Hirsch and Piers Norris Turner

Categories

  • Advertising
  • AI
  • Analytics
  • B2B Marketing
  • B2C Marketing
  • Big Data
  • Book Reviews
  • Brand Activism
  • Branding
  • Category Design
  • Community
  • Content Marketing
  • COVID-19
  • Creativity
  • Customer Culture
  • Customer Engagement
  • Customer Experience
  • Dark Marketing
  • Decision Making
  • Design
  • Digital Marketing
  • Ecosystems & Platforms
  • Ethics
  • Innovation
  • Internet of Things
  • Jobs-to-be-Done
  • Leadership
  • Manipulation
  • Marketing Technology
  • Markets & Segmentation
  • Meaning
  • Metrics & Outcomes
  • Millennials
  • Mobile Marketing
  • Non Profit Marketing
  • Organizational Alignment
  • Peace Marketing
  • Privacy
  • Product Marketing
  • Regeneration
  • Regenerative Marketing
  • Research
  • Retail
  • Risk & Reputation
  • Sales
  • Services Marketing
  • Social Media
  • Strategy & Business Models
  • Sustainability
  • Uncategorized
  • Videos

Archives

  • September 2023
  • June 2023
  • May 2023
  • April 2023
  • February 2023
  • January 2023
  • October 2022
  • August 2022
  • May 2022
  • January 2022
  • November 2021
  • September 2021
  • July 2021
  • June 2021
  • May 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • October 2020
  • September 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016

Back to Top

© 2016-19 The Marketing Journal and the individual author(s). All Rights Reserved
Produced by: Double Loop Marketing LLC
By using this site, scrolling this page, clicking a link or continuing to browse otherwise, you agree to the use of cookies, our privacy policy, and our terms of use.
This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish.Accept Read More
Privacy & Cookies Policy