Encouraging “purposeful” business

REINVENTING CAPITALISM is all the rage. The British Academy, a scholarly body, issued a provocative report in 2018 arguing for the replacement of profit-focused shareholder capitalism with a system in which corporations embrace social purpose. A follow-up manifesto published on November 27th tries to explain how to do this. But fixing capitalism is easier said than done.

The report lays out eight principles to guide implementation of corporate purpose. These range from changing laws and regulations to improving metrics and governance. Some are sensible. Establishing common standards for measuring social impact would be a vast improvement over the current hotch-potch of competing (and often misleading) measures of how firms fare on environmental, social and governance matters. Ideas for reforming corporate governance, including improving board accountability, are useful.

Some ideas are problematic or downright barmy. The report makes the extraordinary claim that “ownership does not relate to the assets of a firm but to its purposes”. The experts insist that every company must by law have a purpose “that is not solely about profit”. So would strategies that maximised profits become illegal, unless they also solved poverty or climate change? And which of those goals would the purpose police deem more worthwhile? There is...