The ignominious death of Gordon Gekko

Profit at all costs is a defunct philosophy, and purpose a corporate superpower, argues this founder.

by Rupert Pick
Last Updated: 02 Jul 2020

At the top end of a quaint little street in Hampton is a mid-market Lebanese restaurant called Mezzet. A favourite with the locals, Mezzet was opened in 2011 by self-taught restaurateur Fadi Kesserwany. From the day it opened, Mezzet has been busy. Passionate staff, great service, fabulous food and fair pricing have all contributed to make this business a roaring success. 

Then along came coronavirus. 

On 23 March, the UK government ordered an immediate lockdown. Overnight millions of businesses shuttered their premises. Overnight Kesserwany had lost all his income and, like many business owners, faced the painful possibility of losing his livelihood.

What Kesserwany chose to do next, in the face of escalating costs and potential financial ruin, demonstrates that businesses that act with purpose, prosper.

Within days of the lockdown, supermarket shelves had been stripped bare of the essentials including bread. Kesserwany felt compelled to do something and started baking for his community. 

Driven by a sense of duty and a compassion for the people around him - the people who supported his business in the good times - he called in his chef and, at his own expense, baked hundreds of flatbreads which he’s given away for free, three days a week for the past 12 weeks, without fail. 

This wasn’t some PR stunt. He didn’t publicise it. He didn’t crow about it. He just got on with serving his customers as he had before the pandemic. 

In return, his customers, suppliers and employees have supported him. His takeaway business is up 30 per cent. He’s launching a new street food concept on the river with the council’s backing. And the reputation of the business has never been stronger. When 4 July comes and Mezzet re-opens, I’m willing to bet my house the business thrives.

The pandemic has been horrendous on many levels. It has made life extremely difficult for so many people and, worse of all, people have lost their lives prematurely. But it has also shone a light on the positive impact of business. 

Up and down the country, businesses like Mezzet have thrown their resources, their ingenuity, their entrepreneurial spirit behind the fight-back. 

At an ideological level, “purpose” feels right. Why wouldn’t you want your business operating with more meaning. Why wouldn’t you want a business to have a clear and unique role in society and to positively impact the world? 

But “purpose” also makes commercial sense. In fact, it’s a corporate superpower.

In 1970, Nobel prize winning economist Milton Friedman said: “There is one and only one social responsibility of business, to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.” 

Until the millennium this philosophy - that the primary pursuit of a business is to maximise profits - had very few detractors. Leaders like Jack Welsh of GE championed a highly competitive, dog-eat-dog approach to business that focused on efficiency and driving shareholder returns at the expense of other stakeholders. This was the age of Gordon Gekko and The Wolf of Wall Street. Money, above all else, was the big game in town. 

But, as we’ve all seen, when an unfettered pursuit of profit takes hold the consequences are toxic. VW’s blatant attempt to fix its emission record was a clear case of a business trying to drive growth at the direct expense of the people it was supposedly in business to serve. VW is certainly not alone. There are countless other examples of businesses that, driven by greed and short-term financial desires, have acted against the interests of society and in doing so have eroded trust in business itself.

Thankfully the tide is turning. There’s now a groundswell of conviction for a more compassionate form of capitalism that values people and planet as well as profit. 

In his newly published and excellent book Grow the Pie, Alex Edmans lands an important and fundamental message about the relationship between profit and purpose. He explains that businesses are better off if they look to “grow the pie” by  serving the needs of all stakeholders rather than by pie splitting and focusing simply on shareholders and profit.  

Take Patagonia. Its purpose is unambiguous: “Patagonia is in business to save our planet.” 

Back in 2011, it took out a full page advert in the NY Times. It said “Don’t Buy This Jacket”. Not exactly your standard sales driving manoeuvre. The advert highlighted the firm’s Common Threads initiative encouraging consumers to repair and reuse their clothes. The initiative repaired more than 30,000 items in 18 months. Sales rose 30 per cent. 

The business case for purpose is amassing. When a banker of the stature of Larry Fink says this, you know there’s a shift going on: “Profits are in no way inconsistent with purpose,” he said. “Purpose is not the sole pursuit of profits but the animating force for achieving them.”

Today’s consumers are so much more curious. They don’t just judge you for your products. They judge you for your values. For your founder story. For the issues you support and, of course, the manner in which you run your business. And once they’ve found out a little about you, they will tell the world, good or bad. 

Quite simply, businesses with purpose outperform those without. And research proves it:

-- Purpose brands grow faster: Unilever’s purpose-led brands grew 69 per cent faster than the rest.  

-- Purpose commands a premium: 60 per cent of consumers are willing to pay a premium for socially-responsible products. 

-- Purpose drives loyalty: Consumers are four times more likely to continue to buy from a purpose-led brand.     

-- Purpose drives advocacy: 78 per cent of consumers will tell others to buy a purpose-led brand.

-- Purpose performs: Companies with a strong and clear purpose beat the market by 5.9-7.6 per cent per year.

But purpose isn’t only good for attracting and retaining customers; it’s also vital for attracting and retaining staff. 

-- 82 per cent of employees say it is important to have a purpose. 

-- 76 per cent of millennials want to work for purpose-led companies.

-- 86 per cent of millennials would consider a pay cut to work for a purpose-led business.

Purpose can also improve a company’s balance sheet. As reported in the April edition of Mckinsey Quarterly, Danone materially lowered its cost of capital by meeting a set of ESG (environmental, social and governance) criteria, including the registration of certain brands as B Corps. With $1 in every $4 under professional management now invested in socially responsible investing strategies, access to capital is now a helpful and important bi-product of purpose. 

Returning to Kesserwany at Mezzet, his decision to give away over £3,000 of free bread over a 12-week period was instinctive and human. It was a decision based on purpose but will no doubt, in the long run, create incremental value for Kesserwany and all his stakeholders. Put purpose first and profit will follow.

Rupert Pick is the founder of marketing agency Hot Pickle and creator of Work for Good, a fundraising platform which helps small businesses donate to charity. He was a guest speaker at Management Today’s Leadership Lessons digital conference 

Image credit: Angela Weiss/AFP via Getty Images

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