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Statement on the Purpose of a Corporation

businessroundtable.org

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Re: Statement on the Purpose of a Corporation

#71

Post by ohthehugemanate »

RockIslandLine wrote: post #33
wiremine wrote: post #23

You can be cynical about this, and a healthy amount of skepticism is warranted given the authorship. That said, it would be interesting (healthy?) to discuss/debate the merits of the actual statements: * Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations. * Investing in our employees. This starts with compensating them f…

"This starts with compensating them fairly and providing important benefits." So 51% of corporate profits are reserved for the employee bonus pool? And all employees are eligible for said bonuses? It's not hard to come up with examples of where this fails. Don't give me aspirational pie in the sky. Give me operational policy.

> Don't give me aspirational pie in the sky. Give me operational policy.

See, there are three layers of decision making: vision, strategy, and tactics. You set large aspirational goals first (eg Microsoft "empower every person and organization on the planet to achieve more"), then smaller component strategies ("build the a cloud provider that integrates business intelligence into everything you do"), then the concrete actions to make those srrategies happen ("integrate Active Directory authentication into kubernetes RBAC"). One "vision" level statement spawns many, many "tactics".

When you're dealing on the level of "181 CEOs" from huge companies as diverse as JP Morgan Chase, Johnson & Johnson, and Ford, it is impossible to talk about tactics and strategy. What Ford can do to better serve long term interests of all stakeholders is too different from what Vanguard should do. You are only able to agree on the big vision, and let the units (or whatever smaller more homogeneous group makes sense) work out the strategy level and below.

This is leadership 101 stuff. There are several models of decision-making, but they are all hierarchical in this way. You won't find many media outlets pushing a collective of 181 companies to issue a single press release about the exact on the ground tactics they will all implement, because in this field that's a nonsensical request on par with "but how many packets can apache serve?"

Re: Statement on the Purpose of a Corporation

#72

Post by phamilton »

analogwzrd wrote: post #38
wiremine wrote: post #23

You can be cynical about this, and a healthy amount of skepticism is warranted given the authorship. That said, it would be interesting (healthy?) to discuss/debate the merits of the actual statements: * Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations. * Investing in our employees. This starts with compensating them f…

If they're serious about decreasing the importance of shareholder value, then they'll re-design executive and management compensation to be tied less to the company stock price.

I wonder if there's a way to tie the other pieces into shareholder value. ESPP is an easy way to let employees see upside when the stock does well. How could we tie serving customers to stock value? Being good partners?

It may be that we can't, and therefore stock price is a bad metric focus on.

Re: Statement on the Purpose of a Corporation

#73

Post by leot »

analogwzrd wrote: post #38
wiremine wrote: post #23

You can be cynical about this, and a healthy amount of skepticism is warranted given the authorship. That said, it would be interesting (healthy?) to discuss/debate the merits of the actual statements: * Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations. * Investing in our employees. This starts with compensating them f…

If they're serious about decreasing the importance of shareholder value, then they'll re-design executive and management compensation to be tied less to the company stock price.

"Shareholder value" misses at least two critical bits of context:

1. over what timescale? 2. at what level of risk?

As soon as they are incorporated, it's obvious that firms have both more leeway and more responsibility to take care of a wider range of stakeholders.

Re: Statement on the Purpose of a Corporation

#74

Post by wanche112 »

This is terrific move by the CEOs. Why most of Hacker News readers are so synical about the statement. It is true that at the end, CEO's fundamental purpose is still on generating values to shareholders. But this statement signals a change in its way to achieve it: focus on customer, and employees with long term perspective, instead of short term stock market gain. The statement says CEO can do actions that can be harmful to stock, but still do it for the benefit of customers and employees, because they believe in it is good for the long term and us economic as whole. I see this is very positive statement.

Re: Statement on the Purpose of a Corporation

#75

Post by bdamm »

skybrian wrote: post #54
n-exploit wrote: post #6

If corporations want to make a real change and provide value to all stakeholders, they will need to develop a practice to systematically eliminate all negative externalities (risk) being transferred to society. Unfortunately, the current regulatory environment still makes this illegal/impossible, given that executives are still legally bound to create value for shareholders. The thoughts and feelings of these CEOs me…

This supposed legal requirement is a myth. Managers have a lot of leeway in how to justify their decisions as somehow related to corporate interests. The company lawyers are not going around warning managers that if they don't pursue shareholder value, they are putting the company at legal risk. It's not something regulators care about. Company training courses warn employees not to do various illegal things that cou…

The statement is great, and meaningful. Hopefully it's a shot of ethics into a somewhat moribund patient. However there are competitive forces also at play. A company that doesn't boost it's stock price as much as its competitor is at a competitive disadvantage because now it has access to less capital.

If we're really lucky, someone has found a way to objectively value the goodwill generated by taking good care of their customers, employees, and partners. Or perhaps that already existed, and the metric has moved into favoring good behavior for some reason, so these CEOs are agreeing to move together into this new operating theater so they can take maximum advantage of their existing customer base and spend less on churning customers.

Re: Statement on the Purpose of a Corporation

#76

Post by my_username_is_ »

vasilipupkin wrote: post #56
wiremine wrote: post #23

You can be cynical about this, and a healthy amount of skepticism is warranted given the authorship. That said, it would be interesting (healthy?) to discuss/debate the merits of the actual statements: * Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations. * Investing in our employees. This starts with compensating them f…

Soviet Union had show trials and U.S. has show letters. The legal purpose of a corporation is to generate returns for shareholders. If training employees and helping customers advances that goal, then corporations should do it. Otherwise - no. Goes without saying that corporations should maximize shareholder value using legal means only.

>The legal purpose of a corporation is to generate returns for shareholders. >Goes without saying that corporations should maximize shareholder value using legal means only.

But why? This line of thinking typically assumes that people start companies strictly to make money--an assumption that I see as patently false. There are plenty of for-profit social enterprises (which is to say nothing of non-profits).

For example, Patagonia recently changed their mission statement "We’re in business to save our home planet" [1]. To think that they continue to exist just because Yvon Chouinard doesn't have enough cash in the bank is laughable.

[1] https://www.patagonia.com/company-info.html

Re: Statement on the Purpose of a Corporation

#77

Post by kingsolmn »

pessimizer wrote: post #32
wiremine wrote: post #23

You can be cynical about this, and a healthy amount of skepticism is warranted given the authorship. That said, it would be interesting (healthy?) to discuss/debate the merits of the actual statements: * Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations. * Investing in our employees. This starts with compensating them f…

They're incomplete in that all of the statements lack any falsifiable content. They're vapid, nonspecific, and obvious. This is clearly a PR exercise, possibly with the hope of publicly allying with one of the Democratic primary contenders, or a strong potential Trump challenger. Statements about planned obsolescence, disposable plastic packaging, repairability or specific forms of rent seeking are examples of the ki…

> This is clearly a PR exercise

I hope this isn't the case, but that's what kept repeating in my head while I was reading it. If this is an honest sentiment and the start of a change in the way business runs then we'll see that in short order. But, in the end, it all comes down to making money and not "the greater good".

Re: Statement on the Purpose of a Corporation

#78

Post by whatshisface »

ohthehugemanate wrote: post #71
RockIslandLine wrote: post #33

Earlier quoted context omitted.

"This starts with compensating them fairly and providing important benefits." So 51% of corporate profits are reserved for the employee bonus pool? And all employees are eligible for said bonuses? It's not hard to come up with examples of where this fails. Don't give me aspirational pie in the sky. Give me operational policy.

> Don't give me aspirational pie in the sky. Give me operational policy. See, there are three layers of decision making: vision, strategy, and tactics. You set large aspirational goals first (eg Microsoft "empower every person and organization on the planet to achieve more"), then smaller component strategies ("build the a cloud provider that integrates business intelligence into everything you do"), then the concret…

Why would all of these CEOs from random companies even be in the same room? In a free market leadership doesn't exist that high, companies aren't supposed to coordinate at that level.

Re: Statement on the Purpose of a Corporation

#79

Post by TheOtherHobbes »

wormseed wrote: post #67
RockIslandLine wrote: post #33

Earlier quoted context omitted.

"This starts with compensating them fairly and providing important benefits." So 51% of corporate profits are reserved for the employee bonus pool? And all employees are eligible for said bonuses? It's not hard to come up with examples of where this fails. Don't give me aspirational pie in the sky. Give me operational policy.

Should 51% of losses come out of employees pockets?

Employees fired during a townturn will certainly have emptier pockets than they used to.

Re: Statement on the Purpose of a Corporation

#80

Post by jackcosgrove »

I don't see anything changing as long as short-term decision-making is incentivized. Executive shares should vest according to some multiple of the average tenure of a company in the S&P 500. If the multiple is 1, that means you need to beat the average to own a share of a company you manage. Tying it to the market average calibrates this schedule to the pace of company turnover due to external factors, such as population growth, technological change, etc. I'm not proposing a legal framework beyond requiring that these norms be promulgated and individual companies required to report the terms of share grants to management. Let investors make decisions armed with this information and enforce the norms that way. Maybe some form of this is already normal; I'd be curious to know.
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