Expert Perspective from Grahall’s Editorial Board
A couple of points in Gary Hamel’s sales pitch (for Umair Haque’s new book, “The New Capitalist Manifesto: Building a Disruptively Better Business”) disguised as a treatise on the threats to capitalism (Capitalism is Dead. Long Live Capitalism, September 21, 2010 Wall Street Journal) caught the attention of our Editorial Board.
Hamel says: “…the real threat to capitalism isn’t unfettered financial cunning. It is, instead, the unwillingness of executives to confront the changing expectations of their stakeholders. In recent years, consumers and citizens have become increasingly disgruntled with the implicit contract that governs the rights and obligations of society’s most powerful economic actors—large corporations. To many, the bargain seems one-sided—it’s worked well for CEOs and shareholders, but not so well for everyone else.”
In his book, Effective Executive Compensation, Michael Graham discusses the power coalition of key stakeholders. These individuals are not, as Hamel subtly suggests, entirely defenseless against the interest of the company. Owners, investors, Board members, employees, customers, suppliers (all stakeholders) both individually and together can wield power by asking tough questions, working effectively (or not), providing (or withholding) recommendations, and by “voting with their feet” . Stakeholders have an interest in the success of the company since their own success is linked to it.
Perhaps for the past two years and possibly for the foreseeable future, “average Americans” might feel the “bargain is one sided” as they face home foreclosure, job loss, and an uncertain financial future. But back in the early 2000’s (and before) when the market was booming, 401(k) account balances along with housing values (and prices) growing exponentially, the one-sidedness of the arrangement was not an “issue.” Many consumers (i.e., stakeholders) in the single-minded pursuit of consumerism didn’t give a hoot about environmental impacts. Many shareholders in their single-minded pursuit of growth and dividends didn’t give a hoot about CEO pay. Many employees in the single-minded pursuit of, well, a pay check or a raise didn’t give a hoot if their employer was “doing the right thing.” We can go on and on. In fact, today “average Americans” might rather be employed by a business in the business of making money, than to be unemployed by a company focused on “enhance[ing]human well-being in economically efficient ways.”
Hamel’s article puts the onus on business, particularly big business, to make changes before government regulation replaces the “… invisible hand of the market with the iron hand of the state.” But really it would be better if we were all in this together. Politicians, business executives, boards, shareholders, consumers, employees, suppliers, and even the media, all have a hand in shaping our future and the future of capitalism.
But even if regulations are put in place that ultimately stifle capitalism in its current form, business will still be in business to make money, using “advantage, focus, differentiation, superiority and excellence.”
And “love, joy, honor, beauty and justice” will roll on, when we can afford them, like a sidecar to capitalism, the real driver in our society.
Contact Grahall’s OmniMedia Editorial Board at firstname.lastname@example.org