Let’s reflect on the structural power dynamics embedded within our current investment and business system.
- The Problem: Capital Supremacy (“Finance-First” Investing)
- In our current economic paradigm, Capital’s interests are often structured (through ownership & governance) as above all other interests. In other words, while customers, producers, workers, communities, the environment, future generations matter to an extent in traditional firms, Capital’s interests reign supreme. All other stakeholder interests are subordinate to Capital; that is, paying out returns to shareholders.
- While most of our impact investing approaches try to treat this around the edges, when you look squarely at this problem (and the problems it creates) — it’s one of power. Who has the power? Who benefits? Capital does. So, how do you change that power imbalance? You have to place other stakeholders in a position of power at the table with Capital to be able to hold Capital’s interest accountable to other goods we seek; namely, the Common Good. To do that, one might recognize that firms could be re-structured with different power-sharing in governance, ownership and management.
- Our Solution: Capital Reciprocity (“Faith-First” Investing)
- Reciprocity = a dynamic of “right relationship” that enables justice and solidarity, the structured commitment to neighbor love
- Reciprocity is an answer to the problem of Capital Supremacy. It exists when any business/fund/investment vehicle structures some level of mutuality between stakeholders. In other words, reciprocity balances capital’s interests in right relation with at least one other stakeholder (i.e. customers (or producers or workers) have governance power in a cooperative, or employees are majority owners with an ESOP, the business is held in a perpetual purpose trust to represent the interests of future generations, or a fund’s investment committee provides votes or some other form of power to community members). We believe these shared ownership structures are leading us towards a greater reciprocity between capital and other stakeholders (workers, communities, future generations, our common home).
We name Capital Reciprocity as the “faith-first” approach to investing. A “faith-first” approach is one that puts faith principles at the center of our investment decision making; it is the driver of our strategy rather than a constraint on it.