Firms of Endearment

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By Raj Sisodia, Jag Sheth, David B. Wolfe (Wharton School Publishing, 2007)

The strategies that make a business successful are undergoing an abrupt about-face, according to these authors — two business-school marketing professors and one renowned trends expert. Companies that prize profits over people are faltering, they assert, while socially responsible companies that respect all their stakeholders are on the rise. The authors identify several publicly traded “firms of endearment” (FoEs) — successful companies that have endeared themselves to employees, suppliers, customers and investors by deploying certain responsible purpose-centered business practices. Those practices include compensating employees at above-average rates and executives at below-average ones, working in partnership with suppliers rather than angling for competitive price advantages, and investing profits in socially responsible ventures rather than marketing schemes. As a result, FoEs (which include IKEA, Costco, Toyota and Whole Foods) have not only reliably outperformed their competitors, they’ve also significantly outperformed the 11 companies profiled in Jim Collins’s classic book, Good to Great. In addition to making a quantitative, research-based case for the stakeholder model of business, this book explains why companies making a positive difference in the world are the ones most likely to succeed over time.

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