Business as a community (Handy)

Charles Handy has spent much of his career questioning what a company is for. Decades before stakeholder governance became mainstream, he described business as a community of people joined by a purpose rather than property owned solely for financial extraction.

When to use it

Use Handy’s perspective when defining corporate purpose, governance, employee voice and the organisation’s responsibilities to society and the environment.

Origins

Charles Handy developed his thinking through a career spanning business, education and management writing, including The Age of Unreason (nineteen eighty-nine), The Empty Raincoat (nineteen ninety-four) and “What’s a Business For?” in Harvard Business Review (two thousand and two). His argument belongs to a longer stakeholder tradition and draws on founders such as Hewlett-Packard’s David Packard, who described profit as an important result rather than the deepest reason for a company’s existence.

What it is

Handy’s method is to pose questions and expose trade-offs—especially between efficiency and equity—so that managers must take responsibility for their own answers.

He challenges the Anglo-Saxon shareholder model. When owners, directors and investors were often the same people, their financial interest, responsibility and pride in the enterprise were more closely aligned.

In widely traded corporations, shareholders may instead be distant, short-term investors. Handy argues that governance and legal assumptions have not fully adapted to that separation.

David Packard, who founded Hewlett-Packard with Bill Hewlett in a garage, expressed the alternative clearly:

A company enables people to accomplish collectively what they could not achieve separately and thereby make a contribution to society. Profit sustains that institution, but is not its only purpose.

Handy extends the point to corporate law and accounting.

Employees appear in accounts as costs even though their knowledge and commitment create much of the organisation’s value. Calling the enterprise a community changes the implication: communities have members rather than owners, and members deserve voice in consequential decisions.

He admires German co-determination, under which employees participate in corporate governance, while recognising that not every feature transfers directly to Anglo-Saxon systems. Every firm can nevertheless cultivate stronger membership and voice.