THE CURRENT MOMENT IS RIPE FOR BUSINESS LEADERS AND INVESTORS TO FIX WHAT ISN’T WORKING
BY MARTY NESBITT
This Op-Ed by Vistria Senior Partner, Co-Chairman & Co-CEO, Marty Nesbitt Authors Originally Appeared in Crain’s Chicago Business Special Forum on The Future of Capitalism
Want to get back to business? Save capitalism.
Yes, we hope the light is at the end of the COVID-19 tunnel. But then the hard work really begins. Health care inequities laid bare by COVID, boiling social divisions and the murder of George Floyd, which revealed the severity of injustice and systemic racism in America, all are symptoms of deeper, insidious social ills that threaten our society. For those who are fortunate enough to have had economic success, it has come at a steep cost—leaving so many of our fellow Americans behind that now the very cornerstone upon which our socioeconomic system is built is under assault.
Capitalism and democracy—the quest for profitable growth, fueled by efficiency, continuous improvement, rule of law and innovation—helped America become an economic superpower. Yet while entrepreneurship and private enterprise run deep in the American DNA and are the secret sauce of our economy, too many Americans have been left out in the cold. Capitalism is not perfect, and its natural dynamics have skewed opportunity and created an unsustainable wealth gap.
Here in Chicago, the pandemic has revealed the stark levels of economic fragility and vulnerability. Over 75 percent of Chicago residents who died from COVID-19 have been nonwhite, and a poll of Chicago households found that 60 percent of Black and 72 percent of Latinx households can barely make ends meet. Further, Illinois has yet to recover half of its COVID job losses, extending the length of the recovery. Altogether, it is not at all shocking that we are witnessing broad opposition to the status quo.
Capitalism is an economic system invented to promote a secure society with access to an ever-improving quality of life. The good news is we can tweak the system and make it better. We have the power to target how and where we invest our capital. We can ensure our employees and vendors are diverse. We can partner more effectively to support our communities and customers. Here’s what that means in practice.
First, take stock. Are you leading your firm in a way that promotes the well-being of your core stakeholders and communities? Over the past few years, corporations have been engaged in an important dialogue about their role as the U.S. confronts myriad social crises. After the murder of George Floyd, we asked our portfolio companies to engage with mayors of cities where they operate to support local efforts to address social injustice, while also making clear that we would assess their progress when making future investment decisions.
Second, spread the wealth. This can mean increasing wages, but also being thoughtful and creative about procurement. Think about deploying capital and engaging smaller vendors in ways that might make a community a little stronger. Demand accountability from your larger suppliers, too. Create incentives for your employees to pay it forward in their communities. CareMetx, a Vistria portfolio company, has a commitment to pay equity and a profits interest pool for their employees. Carefully designed incentives can provide economic security and build lasting wealth.
Third, be intentional about tackling inequities. We all know that what gets measured gets done. At Vistria, we always looked to impact and diversity as a key factor in our investment process, but we established new financial incentives for our portfolio companies. Put plainly, management teams that improve on diversity, equity and inclusion have a chance to earn more.
Our investment philosophy is predicated on the reality that if you sell a product, good or service in America, you rely on a functioning and thriving society to do so. A strong and stable society is the golden goose we must protect and invest in. The golden egg is the opportunity for every American to pursue a higher standard of living and quality of life on a level playing field. Business efforts to positively impact society aren’t a “nice to have,” they are a must-have. It is the foundation of value creation. And it also happens to be the right thing to do.
We are at a fork in the road. The country is socially weak and economically fragile—and we know what happens when you try to build on a shaky foundation. None of this is easy. It is a journey without perfect outcomes. But if, as business leaders, we just pick up where we left off without acknowledging the strains revealed during the pandemic, shame on us. We will regret we did not use this moment to reboot and save capitalism.
Marty Nesbitt is Co-CEO of The Vistria Group, a Chicago-based private-equity firm.
The Vistria Group is a sponsor of Crain’s Forum.