The first thing that students often learn in an intro. to  finance or economics class is that capitalism is based solely on profit; “profit drives dreams” my intro economics professor told me.
 

This is not a fact I would dispute, but I feel profit in the last decade has lost its way. Companies are increasingly more focused on short-term results, and usually it is at the detriment of long-term stability and gains.
 

Take the year 2008 as a case in point. Managers are focused on short-term performance for their performance bonuses, and shareholders of the company demand performance and profit now.  I think there is a common sense side to capitalism that is nearly absent in today’s present economy, and the companies (and investors) that figure it out can reap the benefits.
 

There is an important aspect of business that major companies are leaving out of the equation these days: stakeholders. Stakeholders are the individuals that rely on the company that don’t have a direct financial investment in the company; people like customers and employees. In my opinion, you can have as many short-term profits as you want, but if you do not take care of your customers and employees, those profits will be short lived. It is unbelievable how many major companies ignore these groups.
 

The Economist, a bi-weekly highbrow economic British publication, recently highlighted this exact trend gaining slight momentum known as “stakeholder capitalism.” The views of many shareholders seemed to be that the business’s job is to focus on profits and nothing else, but the connection between stakeholders and long-term profits should be obvious.
 

There are recent examples of companies that ignored stakeholder value and the consequences they paid.
 

Blockbuster: Back in the day when Blockbuster was king of media distribution, the movie rental company was more than happy to rake in a large chunk of revenues from late fees imposed on customers. Blockbuster’s lack of caring for customers’ happiness began a resentment movement, and they jumped ship as soon a fresh new face hit the market that focused on customers as well as profits­—like Netflix.
 

Circuit City: An electronics retailer that has since been eliminated from contention, but back in its prime Circuit City chose cheap labor and fired quality experienced sales people to beef up the bottom line. This played right into the strategy of customer-friendly Best Buy and before you knew it, Circuit City was an afterthought.
 

Airline industry sans Southwest airlines: The airline industry is one that has been filled with labor strikes, very poor customer service, charging for bags and, as a result, numerous bankruptcies. Southwest airlines is the shining beacon of hope that seems to understand. The intense screening process for employees ensures that Southwest offers only the best possible friendly customer service. Along with a simple seating system and not charging for bags, Southwest has figured out stakeholder capitalism and is quickly rising through the pack as a result.
 

To me it only makes sense that a company that maximizes stakeholder value over the long-term will be the company that maximizes shareholder value as well. It doesn’t take a lot of brains to figure out that happy customers and employees can make a profitable empire that can grow into the future.
 

Shareholders need to turn their demands and expectations from the short term to demand ethical, responsible, stakeholder friendly management that can lead to a brighter and happier tomorrow for the company and your portfolio.
 

This is exactly what the U.S. economy needs to stop the boom and bust cycle of the last decade. If more companies take a common sense approach, the economy can thrive again. But focus on the short-term as we have in the recent past and you will see this boom and bust cycle continue with a stagnating economy. All of the financial nitty-gritty details aside, what the economy needs is some common sense.
 

For those of you graduating and beginning the path toward planning for your retirement, take heed of the companies you invest in. Companies that are profitable now, but that are destroying their customer base as an expense might not be the best investments. Find companies that have figured out the common sense approach of stakeholder friendliness, and ride them to riches in your retirement.