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Round and Round goes the Business Roundtable

16 November 2019

Recently, with much fanfare, the Business Roundtable—the association of CEOs of major American companies—discovered stakeholders beyond shareholders. Or, at least, rediscovered them, again. For this roundtable, what goes around really does come around. Here is an excerpt from each of its four proclamations over the years. Together, they are telling.

This year, The Purpose of a Corporation avowed that “While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders.”  

In 2012, the Principles of Corporate Governance avowed that “it is the responsibility of the corporation to deal with its employees, customers, suppliers, and other constituencies in a fair and equitable manner…”1

Recently, with much fanfare, the Business Roundtable—the association of CEOs of major American companies—discovered stakeholders beyond shareholders. Or, at least, rediscovered them, again. For this roundtable, what goes around really does come around. Here is an excerpt from each of its four proclamations over the years. Together, they are telling.

This year, The Purpose of a Corporation avowed that “While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders.”  

In 2012, the Principles of Corporate Governance avowed that “it is the responsibility of the corporation to deal with its employees, customers, suppliers, and other constituencies in a fair and equitable manner…”1

In contrast, the 1997 Statement of Corporate Governance declared: “The notion that the board must somehow balance the interests of stockholders against the interests of other stakeholders fundamentally misconstrues the role of directors. It is, moreover, an unworkable notion because it would leave the board with no criterion for resolving conflicts between interests of stockholders and of other stakeholders or among different groups of stakeholders.”

Coming back around to 1981, the Statement on Corporate Responsibility avowed that “Balancing the shareholder’s expectations of maximum return against other priorities is one of the fundamental problems confronting corporate management. …giving enlightened consideration to balancing the legitimate claims of all its constituents, a corporation will best serve the interest of the shareholders.”

If the CEOs were right in 1981, why did they go wrong in 1997? And if they reversed that wrong in 2012, why do they have to repeat that reversal now? The abuses of Shareholder Value did not exactly diminish in the last seven years, so why should we take the latest proclamation any more seriously?

Most telling is the claim in 1997 about having no criterion for resolving conflicts among different stakeholders. How about judgment? Did the CEOs of America lose their judgment in 1997? Jack Welch apparently did. I have been told that this renowned CEO of GE—no longer quite so renowned with his company’s subsequent performance—championed that 1997 statement. Then in 2009, he came around, declaring Shareholder Value to be the “the dumbest idea in the world.” Whoops, looks like he made a little mistake in 1997. Sorry about that!

Will the CEOs of America regain that judgment now, so that their stakeholders will get a fair shake this time around? We had the words in 2012; will we get the actions now?

Here’s an idea for action: Reserve half the seats on the board of American corporations for elected representatives of the workers. No, I have not lost my mind. I am simply stating what Germany did in 1976:  By law, employee representatives have been filing 10 of the 20 board memberships in companies of more than 2000 people. The German economy has hardly been suffering ever since.

If the CEOs of corporate America don’t like this idea, here’s another: Get rid of executive compensation schemes and quarterly reports that drive their attention toward short-run gains in the stock price, so often at the expense of worker security. And another:  Stop lobbying for tax changes that favor corporate shareholders over other people in society. And, while you are at it, support a living minimum wage for workers. How about ending the lobbying that has being doing so much damage to American democracy? The possibilities are endless…for leaders who deserve that label.

These days, words go round and round while behaviors carry on. Being bombarded with proclamations and so much else, we lose memory, alongside judgment. The CEOs of corporate America now have the opportunity to come around finally: put their actions where their mouthpiece is.

© Henry Mintzberg 2019. For my own record on this, please see "Who should control the corporation?” (1984: 517-645; book out of print but available as a pdf free download)

Quoted in “Why Corporate Social Responsibility isn’t a piece of cake”, but removed from the Business Roundtable site.

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Not noble: the fake fact of economics

22 October 2019

Six Nobel Prizes for 2019 have just been widely reported, five of them real.

In his will of 1896, Alfred Nobel created prizes in physics, chemistry, medicine, literature, and peace. Why, then, does nobelprize.org list a sixth one, in “economic sciences”, and then bury deep in its site the heading “Not a Nobel Prize”? And why do so many of its recipients, presumably selected for the integrity of their scholarship, claim to have won a Nobel Prize? Is this just another fake fact, too good to pass up? No, this one has serious consequences, that’s why I harp on it.

Six Nobel Prizes for 2019 have just been widely reported, five of them real.

In his will of 1896, Alfred Nobel created prizes in physics, chemistry, medicine, literature, and peace. Why, then, does nobelprize.org list a sixth one, in “economic sciences”, and then bury deep in its site the heading “Not a Nobel Prize”? And why do so many of its recipients, presumably selected for the integrity of their scholarship, claim to have won a Nobel Prize? Is this just another fake fact, too good to pass up? No, this one has serious consequences, that’s why I harp on it.

In 1968, the Bank of Sweden created a prize in its own name for the “economic sciences“ and added “in memory of Alfred Nobel.” With these superfluous words, the prize that economists created for themselves has come to be called “Nobel”, or sometimes “The Nobel Memorial Prize” (see even Wikipedia), as if the extra word is any less of a violation of Alfred Nobel’s will. Imagine if political scientists or anthropologists tried to get away with this.

Each of the social sciences has its central concept, for example power in political science, culture in anthropology, and markets in economics. Considered together, in balance, they provide a range of perspectives on human behavior. Considered alone, each narrows our perspective, at the limit into a dogma. Should we see our behavior primarily through the lens of power, or of culture?

Well, mainstream economics has convinced too many of us to see our behavior primarily through the lens of markets, in the form of a dogma that greed is good, markets are sufficient, and governments are suspect. As one view of the human condition, this makes some sense. As the view, it is nonsense. Yet this nonsense, in an unholy alliance with the private forces of greed, has been throwing much of the world dangerously out of balance. (When John Maynard Keynes declared famously that “In the long run we are all dead”, he meant each of us, not all of us. There is no collective “we” in economics, no sense of community. Thanks to the state of the world today, we could all be dead in the short run.)

A healthy society sustains balance across its three sectors: respected governments in the public sector, responsible businesses in the private sector, and robust communities in what should be called the plural sector. Thanks to this alliance, many ostensibly democratic societies have become unhealthy, not least the U.S. and U.K. Their private sectors dominate, coopting their governments, diminishing their communities, and undermining their democracy. On the international stage, economic globalization has become the new hegemony. Facing no countervailing power, it plays governments off against each other, driving down taxes at the expense of public services. 

The consequences of this imbalance are all too evident, for example in the income disparities that are driving many frustrated people to vote for the likes of Trump and Brexit; in levels of production and consumption that exacerbate climate change; even in our everyday vocabulary that regards human beings as “human resources“ and citizens as “customers“ of governments. These days, every organization is supposed to act like a business, with every chief a CEO.

Where to begin the restoration of balance? We can hardly expect corporations to cede the power that they have amassed. And fixing capitalism, however necessary, will not fix democracies that are broken, any more than fixing communism would have fixed the broken societies of Eastern Europe (which were out of balance on the side of their public sectors). And how can we expect balance to be restored by governments that have been coopted by private interests.

This leaves the plural sector, were culture matters more than markets. If we are to stop our descent into self-destruction, a form of reformation will have to begin here. Some of us may work in the private sector and many of us may vote in the public sector but all of us live our social lives in the plural sector—for example, when volunteering for a cause, donating to an NGO, joining a protest, or just plain working out at the Y.

Our economically developed world is in dire need of social redevelopment. The restoration of balance will take a lot more than putting this economics prize in its place, namely as The Bank of Sweden Prize in Economic Sciences. But doing so could be a good place to start—even better if it’s name was changed to the Bank of Sweden Prize in the Social Sciences—by sending a message that private sector interests have to refocus their attention back in their place, namely the marketplace, so that our public sector governments and plural sector communities can get on with serving our collective and social needs.

© Henry Mintzberg 2019. See Rebalancing Society…radical renewal beyond left, right, and center

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Donald Trump is not the problem - Part V

4 October 2019

I. THE DEMISE OF DEMOCRACY IN AMERICA

II. REFLECTING ON AND IN AMERICA

III. GLOBALIZATION IN THE NAME OF “LIBERAL DEMOCRACY”

IV. REGAINING BALANCE

V. YOU CHOOSE: GLOBAL DEVASTATION OR GROUNDED REFORMATION

Someone once remarked that “It is difficult to make predictions, especially about the future.”1 What most of us do instead is extrapolate: the optimists the trends they like, the pessimists the ones they don’t. To complete this five-part essay, I will do both. I have made my choice; what’s yours?

I. THE DEMISE OF DEMOCRACY IN AMERICA

II. REFLECTING ON AND IN AMERICA

III. GLOBALIZATION IN THE NAME OF “LIBERAL DEMOCRACY”

IV. REGAINING BALANCE

V. YOU CHOOSE: GLOBAL DEVASTATION OR GROUNDED REFORMATION

Someone once remarked that “It is difficult to make predictions, especially about the future.”1 What most of us do instead is extrapolate: the optimists the trends they like, the pessimists the ones they don’t. To complete this five-part essay, I will do both. I have made my choice; what’s yours?

We can maintain the course we are on—do nothing much different, continue to ride the current, with a few adjustments—which may lead to devastation, and possibly annihilation, whether from a climate that has had enough of us or a world war that will be the last. Or else we can wake up and address a situation that is no longer tenable. There are signs of that too.

In one significant sense, the prevailing trend today resembles that of Germany in 1933, when a third of the electorate, angered by the treaty that ended World War I, sought their revenge by voting for the Nazi party. Fascism, and World War II followed. Many people today, angered by the imbalance that marginalizes them, have also been seeking their revenge by voting for tyrants.

Five centuries earlier, also in what is now Germany, many people were angry too, with the established ecclesiastic, political, and economic powers, but they did something quite different: engaged in a ground-up reformation that rearranged power in their world. Today, many people have similar feelings about the greediness and lack of compassion of the established powers, and have been expressing a readiness to act for constructive change. Give them a compelling way forward and watch them go.

The States of the World Today   Democracy is now deteriorating at an alarming rate, resulting in a growing number of illiberal democracies (such as in Hungary and the Philippines), that are sliding in the direction of the many established autocratic regimes. This leaves a few countries clinging to a flawed model of liberal democracy (notably the UK and US) and some that do maintain a semblance of balanced democracy (such as Germany, Canada, the Nordic states, and several other small countries). Meanwhile, the same old superpowers continue with their antics, one undemocratic (China), another illiberal (Russia), the third headed that way under the leadership of a loose cannon (US).

The real danger is the slide toward autocracy, because, at the rate it is going, this planet could soon end up with global fascism. The recent experience of Venezuela, in the lead, so to speak, shows how easily tyranny can sweep aside constitutional protections—as if we needed more evidence of this. And it makes no difference if the autocracy is called communism, capitalism, or populism (whether Muslim, anti-Muslim, Jewish, anti-Semitic, Christian, Hindu, Buddhist, or secular). Dogma is dogma, and demagogues are demagogues. Absolute power corrupts absolutely.

Fearing decency, the autocrats of the world unite. Angela Merkel was denounced for caring about refugees, while Saudi Arabia punished Canada for a single tweet about its arrest of two journalists. They united in the 1930s too, although eventually America came to the rescue. Imagine World War II without this and you may be seeing World War III.

Reformation from the Ground Up   What if we come to our collective senses? Early in the Sixteenth Century, with so many people angered at the corruption of their church, the Reformation followed after a monk named Martin Luther nailed a list of 95 theses to the door of a church in a town called Wittenberg. This sparked a movement from the ground up, eventually engaging certain established officials, that spread fast, far, and wide—thanks to a new communications technology of the time, the printing press. Does this sound familiar? With our new social media, and so many people now prepared to act, another reformation—meaning massive but largely nonviolent change in social behavior—could well be coming.

Does this sound utopian? Maybe, but the current reality is hardy utopian.  A reformation on such a scale may be unprecedented, but the problems we face are unprecedented.

Let me offer another example, indicative of how quickly a people can reframe and shift behavior from the ground up. I refer to what is known here in Quebec as The Quiet Revolution, although it was really a quiet reformation. By 1960, many of the women of Quebec had had it with a dominating church in cahoots with autocratic politics. The death of a long-entrenched Premier was the spark that set off the change. Just about every Quebecoise I know from that time has many siblings; their mothers driven by the clergy to procreate non-stop. Just about none has more than a child or two. One wrote to me recently about this “effervescent period”: “The Church that consumed my youth fell apart like a house of cards.” Other places in the world have experienced similar shifts, but perhaps none so profoundly as Quebec. At that point, there were no marches, no protests, no election of other autocrats, just a sweeping shift in mindset that profoundly changed the society. Quebec became, and with lapses remains, probably the most progressive place in North America.

Answering the Irene Question   Irene is a finance manager in Canada, who has worked in the private and plural sectors. She read a draft of my book Rebalancing Society and responded with: “I’d like to do something. I just don’t know where to start.” You cannot imagine how often I have been asked the Irene question ever since!

Add up all the Irenes and Ivans of the world, and we have the makings of a massive global movement for constructive reformation. We just need to coalesce our energies around some shared sense of direction—some compelling narrative that suggests a way forward. The idea of a reformation to rebalance society could be that: to attain a dynamic equilibrium across the public, private, and plural sectors of society.

What can we do in our own lives? What can we do in our communities and associations? What can our enterprises do, small and large, entrepreneurial and corporate, national and international? What can our governments do, at the municipal, national, and global levels? And what can all of us and all of this do together? In other words, the levels of change can be Personal, Plural, Private, Public, and Planet, shown in the table below in terms of Reframing our Beliefs, Reforming our Wrongs, and Renewing our Rights (in both senses of the term).

Find your place in the table: the possibilities are endless. I have my own collection, all over the table. For example, at the top left, I have “ditch the economic dogma”2 (personal level reframing); in the middle, “fix or abandon the stock market” (private level reforming) and “grow the social economy” (plural level renewing); and on the bottom right, “create a Peace Council to replace the (in)Security Council of the United Nations” (planet level renewing).

A Pathway to Reformation    In an earlier blog, I wrote about the puzzling puzzle of rebalancing society. Unlike a pat puzzle (such as a jigsaw one):

  1. The pieces have to be discovered, or created.
  2. Each appears obscure, like a fragment.
  3. They need to connect, although never neatly.
  4. With no box in sight, the picture has to be constructed from these fragments and connections.

The table above can help to identify many of these fragments. But how to fit them together to create the compelling image? Perhaps an answer can lie in what I am currently working on, labelled a Pathway to Reformation, in four phases.

A. Reformation begins in a long-simmering place, about to combust spontaneously. The women of Quebec, like the Eastern Europeans under communism, were all ready to go. Now, perhaps as never before, a great many people are ready to go, all around the globe. 

B.  A spark ignites, in the form of an event (the death of a politician), or the action of a group (opening up the Berlin Wall), a community or even a major part of a society (the women of Quebec).

C. This spreads, in the form of a massive but non-violent shift in social behavior, as a groundswell of social initiatives to reframe and renew. These days, with the help of the social media, it can spread from community to community to go global, becoming a worldwide social movement.

D. Reforms mostly follow, in institutions—governments in the public sector, businesses in the private sector, associations in the plural sector. Most institutions need to be overwhelmed by social forces before they will accept major reforms.

Is such a reformation possible? With the decline of democracy, the proliferation of nuclear weapons, and the warming of the planet, it had better be possible. This world will simply not fix itself. People who care about it will have to do that. There is wealth in the world as never before, enough for decent living far and wide—so long as we can relinquish our superfluous entitlements. Some of us might just discover what decent living is all about.

For the sake of survival, we need to shift the initiative from our private interests to our common interest. Like the women of Quebec, we shall have to get our collective act together—to reframe our thinking so that we can reform our wrongs and renew our rights. Hence, ask not what your leadership has been doing to you. Ask what you can be doing for our communityship—not as conservatives or liberals, from the left or the right, but as decent folk who care about our planet and our progeny.

What’s your choice??

© Henry Mintzberg 2019. No rights reserved: this blog may be reproduced without alterations, for non-commercial purposes, so long as the original © and posting are acknowledged. See  Rebalancing society…radical renewal beyond left, right, and center  for the forerunner to this series.

Apparently first said in the Danish parliament in the 1930s.

that greed is good, markets are sufficient, and governments are suspect.