What is Compassionate Capitalism?

The philosophy that a companies leadership can make just as much profit while being compassionate towards their hard working employees, instead of treating them as faceless worker bees who can be exterminated at anytime.

Can Compassionate Capitalism Work?

Company leaders with no empathy towards fellow humans, think that treating their employees well, offering them benefits over and above what is mandated by law (which in the US for example is woefully pathetic to start with), and providing a friendly work environment will eat into their profits and lower their companies stock price.

The myth persists in the modern business world that companies must choose between maximizing profits, prioritizing customer satisfaction, and investing in employee welfare. This unsophisticated idea suggests that focusing on one of these areas inevitably compromises the others. A closer look reveals that this dichotomy is flawed and counterproductive. It’s also simply untrue. Read more here.

Economic theory predicts that (in the absence of mispricing) the excess return to socially responsible businesses is negative in equilibrium. In contrast, using the state-of-art empirical models and a sample spanning four decades (1984–2020), an equal-weighted portfolio of companies that treat their employees the best earns an excess return of 2% to 2.7% per year. The estimated alphas are positive in most periods within the sample (with no upward or downward trend) and are particularly large during crisis periods. Overall, the results suggest that the stock market (still) undervalues employee satisfaction. Read more here.

Companies with high levels of employee satisfaction are associated with stock prices that more accurately reflect the value of the company, due to increased positive employee reviews giving more insight to investors on a firms performance, compared to firms with unsatisfied employees unlikely to leave a review. Read more here.