Scott MacStravic, Ph.D.
The basic definition of “firms of endearment” (FoE) is that they endear themselves to all their stakeholders, not merely one or two categories thereof, such as shareholders. While the owners of the firm will always be one important stakeholder group, employees, customers, suppliers and society as a whole are equally important. Endearing the firm to each of them means addressing their needs and desires in recognition of their importance and value to the firm.
David Wolfe, the author of the book on Firms of Endearment (coming out in April from Wharton Business School) has written extensively about such firms in his blog. And he makes a strong business case for becoming one, noting that the examples he feels qualify for the designation significantly outperform their less endearing peers in terms of growth and profitability, not just service to the community.
He builds his case in contravention to the common maxim that the sole purpose of a corporation is to serve the interests of its owners by making profits. On the other hand, since FoEs tend to be more profitable, it can be argued that they do better in that regard as well by deliberately choosing to make doing so only one of their goals. By addressing the needs and desires of all stakeholders, FoEs enlist all as enthusiastic partners in promoting the success of the firm, rather then making their relationship with non-shareholders one of the “caveat emptor” variety.
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