Business, More Than Quartlery Earnings – Part I

Dano Jukanovich

share close

On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy… your main constituencies are your employees, your customers and your products… Short-term profits should be allied with an increase in the long-term value of a company.

Jack Welch , Former CEO, General Electric

A business leader interested in changing the world develops a vision like “organizing the world’s information and making it universally accessible and useful.” She hires people with shared values. Her occupation is story-teller for this business undergirded by its values, helping create habits of behavior, leading self-sacrificially, making and delivering on commitments and supporting others as she asks them to do the same. These values end up infused into all the activities of the business and as a result into the psyche of the stakeholders. This is the gospel of leadership according to gurus of business. What most gurus don’t realize is the outcome isn’t a longer lasting, more successful firm, but character change in stakeholders that outlasts the firm itself.


As owners and managers of the family-business, we prioritized our egos and personal financial gain ahead of the team and the institution. We thought we were making decisions in the best interests of others. We turned down a lucrative offer from another construction company because we wanted to keep our team employed. We took on substantial personal financial risk for what we believed was the good of the institution. We were limited by market and non-market dynamics beyond our control and by our flawed decisions. In reality, our pursuit of rapid growth stemmed from fear of missing an “unprecedented” opportunity or from ego in wanting to “get ours” while others were getting theirs. We were no longer basing decisions on a fixed or rational risk-return equation or on some sense of what was virtuous or in the best interests of those other than ourselves.  

Our team was a community, both in the joys of a leadership retreat in the Canadian Rockies and the sorrow of cuts in pay to stem cash drain the day before Thanksgiving. In its short 12-year history, LIFEstyle Homes and Construction had built an identity around typical business values of efficiency and quality. On top of these it had layered generosity through care for employees and the community. Where the institution lost its way was in building its identity around the owners’ aspirations as opposed to a vision for something beyond itself. 

Fortunately, it’s legacy is not in itself, but in those it influenced. Doug started an architectural design business. Jose ventured out on his own as an independent contractor. David pursued his finance and accounting career. Marko has since been part of the start-up of three other successful entrepreneurial ventures – a low income homebuilding business in Brazil, a global non-profit, and a chain of used car dealerships in the US. Dano has been part of a successful social impact business in Africa for the past seven years. Impact on the character of its stakeholders extended far beyond the life of the business itself. 


As business owners who want to change the world, we want to provide products and services that will encourage something more than self-interest in our customers and clients. Our focus on profits makes us want to be uncritical of customer demands because we know customers will pay for what they want, not for what we think they should want. In spite of the flaw in “if you build it, they will come,” product developers do have substantial influence on customers’ demands. The IBM Simon Personal Communicator launched in 1994 at $1,100 for a touch screen phone with an address book and fax functionality. Over the last twenty years, customers have demanded something more, but without a master product developer like Steve Jobs helping them understand what they might be able to expect, that demand would remain unrealized and unmet. 

The product developer and customer have a symbiotic relationship. The developer will be out of business if he makes products for which customers are unwilling to pay. At the same time, the developer can inspire customers to demand products they had never even imagined. Insofar as he has a role in creating the demand, a product developer can’t shirk responsibility for the virtues of the product or service by claiming to merely be providing what the customers are demanding. He might argue, “If I don’t provide for it, somebody else will,” which sounds eerily similar to the rationalization for just about every other “good-hearted,” illicit business developer. 

Homebuilding hits closer to home (pun intended) than Smartphones. Our company, during the late 1990s and early 2000s, primarily built McMansions ranging from 2,500 to 4,400 square feet on large one acre to five acre lots. They fit within a zoning regulation defined as “rural clusters” where a majority of the development was set aside as open space for the public good. Sites were geographically located 60 minutes from major metropolitan areas and 30 minutes from mid-sized urban areas where most homeowners commuted to work. These communities were socio-economically homogeneous. They facilitated development of dual-income households. They promoted increased vehicle commute times and all associated detrimental impacts to family and environment. Neighbors were segregated from each other and certainly from other communities. Contrast this with other projects we undertook such as high-density planned communities within mid-sized city limits. Those projects counter all the negatives of the rural cluster zoned development in return for sacrificing privacy and space. 

My family lived for nine years on a postage stamp lot on the corner of an inner city street in Seattle where we regularly shared a barbecue and played basketball with the neighborhood gang members. We knew the neighborhood prostitute by name and grieved when she died of AIDs. Friends across the street looked after our kids and shared their tools. When our four-year old daughter went to sit at the picnic table occupied by local gang members (she was well supervised), they sat up a little straighter and changed their tone and language. Our family is better for this experience and so are others in the neighborhood.

Today we live on three secluded acres where we can barely see our neighbors through distant trees. After two years, we have yet to even meet most of them. This is a place where our kids are free to roam in the woods and we’re not worried about what might be happening on the street in front of our house. Our six-year old helps dad carry logs for firewood. Our twelve-year old practices her archery in the backyard. The girls have a business selling farm-fresh eggs from their five new chickens. It’s a place where they feel safe and free, but where they don’t have to be stretched by welcoming people into their personal space who are much different from them. 

There isn’t usually a black and white to the morality of different products and services, but there are moral implications. Products don’t just respond to buyers’ interests, they also affect customers’ character. 90-proof Everclear alcohol or Schlitz beer; an Escalade or a Prius; a canvas tote made in Thailand or Kenya; Organic fair-trade coffee or not; Oreo cookies or carrot sticks; Whole milk or Skim; male breast reduction plastic surgery versus traumatic hand reconstruction surgery; overseas tax haven creation and immigrant visa facilitation; wedding photography services for gay marriages or heterosexual marriages; high density urban infill residential construction or low density rural residential construction. Some of these are clearly no more or less moral than the other. Some lean toward or away from what is good. Others certainly seem more virtuous.

As a homebuilder and land developer, I create neighborhoods that lead customers to consider others more or less than they consider themselves. Houses with front porches lead us to engage our neighbors. Homes with fewer oversized personal spaces and more family spaces encourage more relationship. There is almost no cost to designating land for a community garden. Homeowners Association By-laws could incent neighborhood clean-up and neighborhood watch activities.


Each year donates $100 million in grants, 80,000 hours and $1 billion in products to make the world a better place. In 2015, Margrethe Vestager, the European Union’s competition commissioner, officially brought antitrust charges against Google for illegally manipulating search results to disadvantage its rivals. If proven accurate, these charges could carry a fine of up to $6 billion Euro. 

Archer Daniels Midland (ADM) is one of the world’s largest agricultural processors and food ingredient providers with more than 33,000 employees. Today ADM helps 700 poor sunflower growers in Maharashtra, India to increase their yields, funds bridge and well construction in 24 villages throughout Cote d’Ivoire, and promotes soybean farming in Alianca da Terra, Brazil to help prevent farming expansion into ecologically sensitive regions. In 1996 ADM paid a $100 million (the largest at that time) fine for manipulating prices that cost farmers, consumers and other agriprocessors untold millions of dollars. 

There are contrasts to the seemingly endless list of corporate altruistic contradictions. George W. Merck, president of Merck Corporation from 1925 to 1950, integrated service into the DNA of his business. He declared that “medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered that, the larger they have been.” Merck leveraged its core business to inspire innovations that would change the world. In 1978, Merck discovered the drug Invermectin while doing research for other purposes. It was clear to the researchers that this drug could be used to treat river blindness, a scourge on millions in the developing world. However, there was no clear benefit to Merck as it was simultaneously obvious the target market would not be able to afford the drug. After successful clinical trials, in October 1987, Merck made the decision to donate Mectizan to all who need it for as long as it takes to eliminate the disease as a public health problem. Merck continues this commitment 28 years later with hundreds of millions already having received treatment, but still hundreds of millions more to go to completely eradicate the disease.

Archer Daniels Midland funding bridges and wells in Cote d’Ivoire is a nice gesture and it has real impact for a small number of direct beneficiaries. Google’s owners giving away $100 million is nothing to shake a stick at. But there’s a reason the European Union could fine Google up to $6 billion and there’s a reason ADM’s fine was the largest at the time. The impacts of the way firms do their business day-to-day are much farther reaching than their philanthropic initiatives. Colluding with agriprocessing competitors to set prices artificially high defrauds consumers of billions of dollars in value. Monopolistic competition by a leading search firm destroys billions of dollars in economic value for search engine users. Changing the world for good is the ADMs and Googles of the world considering others’ interests ahead of their own, not just as limited by the law but as demanded by the whole of virtue.

Foster and Kaplan’s 2001 book, Creative Destruction, showed over the previous 50 years, the life expectancy of firms in the Fortune 500 had declined from 75 to 15 years. Those firms that do remain have only done so by adapting so drastically that they barely resemble the firms they were 15 years prior. General Electric has been around for 123 years. By 2001, the financial arm of GE accounted for 41% of its profits. Under twenty years of Jack Welch’s leadership, the behemoth of industrial manufacturing had become almost as much a financial institution as a manufacturing concern. Because of the 2008 financial crisis and GE’s Lehman Brothers-level of financial risk, Welch’s successor is on a trajectory to reduce financial services to only 10% of GE’s overall business. 

The GE of 123 years ago has changed drastically, but the team members, customers and community still carry the weight of its values, for better or worse. Our family construction company doesn’t exist anymore, but Jose and Doug, hundreds of homeowners and the community in which we worked value each other differently for having interacted with that business. 

Previous episode
Post comments (0)

Leave a reply

Your email address will not be published. Required fields are marked *