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December 22, 2005
Book Review--Megatrends 2010: The Rise of Conscious Capitalism
    by William Baue

The newest in the Megatrends series advances a framework for conscious capitalism that highlights socially responsible investing.


The chapter on socially responsible investing in Megatrends 2010 (Hampton Roads), which seeks to harness the popularity of best-sellers Megatrends (Warner Books 1982) and Megatrends 2000 (William Morrow 1990), will likely drive greater interest in SRI. The Megatrends books have become a kind of self-fulfilling prophecy: they not only identify significant trends, but also spur them. Author Patricia Aburdene frames SRI as one of seven "megatrends" ushering in "conscious capitalism," which fuses free market economics with social responsibility and spiritualism.

"SRI is becoming a megatrend for two reasons, one 'top-down,' the other 'bottom-up," writes Ms. Aburdene. "At the grass roots level, people insist on 'investing with their values,' as [GreenMoney Journal founder] Cliff Feigenbaum and the Brills [Investing with Your Values (Bloomberg Press 1999) authors Hal and Jack] would put it."

"At the macro level, after Enron et al., even Wall Street's institutional investors got the message: Corporate ethics--or, rather, their lack--can nuke your portfolio," she continues.

Ms. Aburdene acknowledges her limitations, admitting that she is a relative neophyte to SRI.

"Socially responsible investing is a huge topic . . . I can't possibly hope to do the subject justice," she writes. "As a trend tracker, however, I can offer is an overview that might start you on the road to exploring SRI."

Actually, she starts readers down that road much earlier in the book--SRI is the last megatrend examined (in part because Ms. Aburdene discovered later in her research that "SRI is the advance team of conscious capitalism" as it "drives corporate social responsibility.") In the chapter on the second megatrend, "The Rise of Conscious Capitalism," she details how Shelley Alpern of SRI firm Trillium Asset Management engages in shareholder activism.

The book chronicles how, on April 24, 2004, Ms. Alpern presented a shareholder resolution at Chevron (ticker: CVX--then known as ChevronTexaco) asking the company to report on the health and environmental impacts of its oil exploitation in the Ecuadorian Amazon. Ms. Aburdene does a great service to the SRI community by explaining to her broad audience how a nine percent vote for a first-year resolution (which requires only three percent for re-filing the next year) is a victory, setting a solid foundation for a long-term campaign.

Elsewhere, Ms. Aburdene suggests a causal link between spiritualism and profits, which treads into dangerous terrain--the notion of steering ethical decisions based on their money-making prospects steps down a slippery slope. As well, audiences receiving this message typically set a higher ethical bar in their evaluation of issues surrounding ethics. Ms. Aburdene's admittedly limited knowledge of the SRI field, combined with less-than-comprehensive research (her footnotes are far from extensive), create a vulnerability in this regard.

Ms. Aburdene praises John Montgomery founder Bridgeway Funds, which has "phenomenal" financial performance and "whose governance practices are simply exemplary," focusing on Bridgeway's performance-based fees. However, in a September 2004 letter posted clearly on the company's website, Mr. Montgomery announced that Bridgeway had arrived at a $250,000 settlement with the Securities and Exchange Commission (SEC) for "breaking the rule" on performance-based fees. It is ironic that Ms. Aburdene exalts as ethically exemplary the very practice that earned Mr. Montgomery and Bridgeway official censure.

Elsewhere, Ms. Aburdene quotes the cover article in the Winter 2004 issue of Business Ethics by Editor Marjorie Kelly: "There is absolute, positive, definitive proof that CSR pays" (referring to the Moskowitz Prize-winning "study of studies" by Marc Orlitzky and colleagues.) However, Ms. Kelly immediately contextualizes this pronouncement in the magazine, pointing out that "researchers don't speak this way . . . theirs is the language of positive correlations [and] statistical significance."

In other words, Ms. Kelly tempered her hyperbole, but Ms. Aburdene elides this contextualization. This creates the potential for misreading Ms. Kelly's pronouncement, and seems suspect in a book extolling ethics and spiritualism.

The final chapter, "The Spiritual Transformation of Capitalism," advances some very convincing lines of reasoning. Seeing as business and spiritualism are both human expressions, it makes more sense to fuse them, as Ms. Aburdene does, than to insist on an artificial separation between them, as conventional wisdom does. Ms. Aburdene skillfully deconstructs this either/or equation, pointing out that spiritualism and capitalism can be a both/and equation.

However, Ms. Aburdene may be crossing the line when she suggests a cause-and-effect relationship between spiritualism and capitalism. She cites a Global Environmental Management Initiative (GEMI) report entitled Clear Advantage: Building Shareholder Value, which presents "compelling evidence" that intangibles such as environmental, health, and safety (EHS) performance boosts financial performance.

"As GEMI puts it, intangibles become tangible," Ms Aburdene writes. "As I see it, consciousness becomes profit."

Many readers will accept this translation of terminology, while others will balk that she is pushing past linguistic limits. For the former set of readers, the book confirms and advances a helpful framework for thinking about "conscious capitalism"; the latter set of readers will find value in many of the book's tenets while remaining skeptical of the foundational underpinnings of the framework.

 

 
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