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Why ‘Capitalism Has to Evolve’

At @FastCompany’s Innovation Festival, @Nasdaq’s @AdenaTFriedman explains why capitalism must evolve to be more inclusive. #FCFestival

Speaking at Fast Company’s Innovation Festival, Nasdaq President and Chief Executive Officer Adena Friedman explained why capitalism must evolve and become more inclusive to ensure that everyone has an equal opportunity to succeed.

“Capitalism has to evolve because when we looked at what it means to be a successful company, it doesn’t just mean to create value just for the shareholders. It means creating value for your employees, for your clients, for the community, and, therefore, shareholders will benefit,” Friedman said. “[Inclusive capitalism] is meant to be something where all people have equal opportunity to succeed.”

Inclusive capitalism builds upon the Business Roundtable’s recently redefined purpose of a corporation, a shift from shareholder primacy to serving all stakeholders in a symbiotic manner. Friedman also noted as the ESG movement accelerates, it has changed the “balance of investor power toward longer-term returns based on a sustainable business model.”

However, she said that a fundamental issue is equal access to the capital markets, which is paramount to advancing inclusive growth and prosperity, especially amid a pandemic that has disrupted global economies and left thousands of people unemployed.

“The biggest challenge that we face in this country is making sure that everyone in all communities feels like they have ready access to capital to launch a business, get a loan, buy a house, send their children to school, get themselves an education, and take their savings and apply it. Maybe start a business,” Friedman said.

This challenge, however, presents an opportunity for the public and private sectors to work together, a notion that Friedman coined as “cooperative capitalism.” She suggested finding a way for the public sector to provide incentives for banks to make long-term commercial investments in under-served communities, potentially with support from the public sector so that banks can bear the short-term costs.

Creating equal access to capital also falls in line with Nasdaq’s “job to bring ideas and capital together.” Under Friedman’s leadership, Nasdaq recently launched the Purpose Initiative, which strives to equip under-represented communities with the financial knowledge to better empower them to build a prosperous future and participate in an ecosystem that supports and sustains their growth. Along with this initiative, Nasdaq debuted its Smart Investing educational hub, which provides people from all different backgrounds with the tools and information they need to bring their money into the markets.

“This purpose statement really focuses on inclusive capitalism, making sure that we look at under-served communities—how can we bring our capabilities to help entrepreneurs learn how to be successful entrepreneurs through our Entrepreneurial Center and then making sure that they have better access to capital.”

While the new initiative broadens Nasdaq’s purpose, Friedman said that the cornerstone of the business remains the same: “To bring all economies forward with advanced markets and to make it so that all investors have access to great ideas around the world.”

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