After poor business decision-making in the financial sector was a primary cause of the Great Recession, and after years of board and management mistakes leading to the bankruptcies of industrial icons GM and Chrysler, the business community today faces a crisis of confidence in its own ranks and in broader society. Regard for corporations is at a historic lows
Many are asking: how can corporations govern themselves more effectively---and truly be held accountable?
I found this Times story of special moment because the Committee for Economic Development just a few days ago published a Policy Brief in which I tried to suggest a way forward. It was entitled: "Restoring Trust in Corporate Governance: The Six Essential Tasks of Boards of Directors and Business Leaders."
Necessary public policy debates are taking place all across the globe on new regulations to ensure the safety and soundness of the financial sector and to improve the governance of all publicly-held corporations (with focus on an enhanced shareholder role and mandated disclosure about compensation and risk processes).
But, regardless of regulatory outcomes, the destiny of public corporations will still turn on the complex decisions made by business leaders and boards of directors.
In my view, to meet the legitimate criticisms of business decision-making, corporations must first redefine their mission---and the role of the board and CEO.
To summarize a much longer discussion, they must clearly and explicitly redefine the purpose of the corporation as creation of long term economic value through sustained economic performance, sound risk management and high integrity.
In particular, business leaders must forge a sound balance between necessary risk-taking (creativity and innovation) and required risk-management (financial and operational discipline). They must fuse this high performance with high integrity. High integrity means a commitment to law, ethics and values in order to attain affirmative benefits in the company, the marketplace and global society but also to reduce legal, ethical, reputational, public policy and country risk.
The past emphasis on short-term maximization of shareholder value must be significantly reduced.
The Policy Brief then argues for five other essential tasks built on the imperatives of sustained performance, sound risk management and high integrity: revamped leadership training; a refocused CEO selection process; a restatement of operational goals across performance, risk and integrity dimensions; a revision of compensation that holds back or pays out a significant portion of pay as objectives are met, exceeded or missed; and a re-alignment of board oversight to focus on critical operational and compensation goals.
In my view, only if these six, closely connected tasks are carried out with focused intensity is it possible for trust to be restored. But there are many obstacles to prevent this from happening such as the short-termism of many institutional investors; a "money happy" labor market for business talent which will frustrate compensation regimes paying out over time and for performance, and problems in meaningful board oversight of management.
There is, thus, certainly reason for substantial doubts whether the "practical ideal" I suggest can be realized. For example, with the separation of ownership (shareholders) and control (managers), the theory was that the boards would represent the shareholders and control the management. Unfortunately, too often the practice has been that management controls the board (and, today, there is no one "shareholder" as various types of "shareholders" have myriad conflicting objectives and strategies).
Nonetheless, although other accountability mechanisms such as regulation may, limit private discretion in order to accomplish public goals, private decision-making by boards and business leaders still must drive corporations. This is where ultimate accountability will always lie, however uncertain and problematic.
And, for those skeptical about corporate governance, there is the answer of self-interest. With business facing a crisis in confidence about governance and accountability, it is, I believe, in the demonstrable interest of corporate leaders (and capitalism itself) truly to address legitimate criticisms, to provide a clear, credible and powerful private sector response and, as one alternative, to consider using the "actionable framework" of the six essential tasks.
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For those interested in reading more, go to the website of the Harvard Law School Forum on Corporate Governance and Financial Regulation to find both a longer summary of the argument and the Policy Brief itself.
Ben Heineman Jr. is is a senior fellow at the Belfer Center for Science and International Affairs, in Harvard's Kennedy School of Government, and at the Harvard Law School's Program on Corporate Governance. He is the author of High Performance With High Integrity.
It isn’t the only democratic institution that finds itself in danger.
Four years ago, as a speechwriter for President Obama, I commissioned a binder full of women.
A little context. It was the morning of the Al Smith Dinner, the election-year tradition in which both parties’ nominees don white-tie attire and deliver comedy monologues to New York City’s elite. Our opponent, Governor Mitt Romney had recently used the words “binders full of women” while discussing gender parity in government. Eager to mock the clumsy phrase, I asked a staffer on the advance team to put together a prop.
But our binder never saw the light of day. Obama nixed the idea. I remember being disappointed by the president’s decision, and wondering if POTUS was phoning it in. Of the jokes that did make it into the final draft, one in particular stood out for its authenticity.
“Light” events are some of the heaviest lifting in political life. Comedy is hard to begin with, and for the kinds of people involved in politics, jokes are vastly more difficult to write or deliver than “substantive” remarks. And for presidents or presidential aspirants, we’re talking about a special kind of joke. These eminent figures need to come across as “modest” and self-deprecatory, but only up to a humble-brag point. (That is, just enough so the audience and reviewers will say, “Oh, isn’t it charming that he’s willing to laugh at himself!”) Real comedy often includes a “what the hell!” willingness to say something that will genuinely shock or offend, which national politicians can’t afford to do. The White House Correspondents Dinner, the Gridiron, the Al Smith Dinner—any event like this is hard (as David Litt, a former member of the Obama speechwriting team, explains in a very nice item just now).
First there was McCain’s caving to Bush’s signing statement on his own torture bill, then his selection of an extremely unqualified and unvetted running mate, then he backed Trump until nearly the bitter end—even after Trump insulted his POW experience and his fellow vets with PTSD. And now, a shameless betrayal of constitutional principle that would have gotten far more attention this week if Trump hadn’t one-upped McCain with all his incendiary “rigged” rhetoric. Reader Don explains:
I don’t know if your readers have seen this yet, but it seems that McCain has announced that his fellow GOP Senators will not confirm any Supreme Court nomination by Clinton. Trump is an ignorant, narcissistic, nasty piece of work. But McCain used to be a guy who remembered and honored (at least sometimes) the old bipartisan traditions of the Senate. His statement is just outrageous and inexcusable. What he’s basically saying is that only Republican presidents get to appoint Supreme Court Justices.
I understand that their thinking is that they don’t want the bias of the Court to shift from conservative to liberal. But the Court has shifted back and forth over the years, and we have managed to survive those changes. Apparently, today’s Republican Party feels that the country somehow won’t survive a Democratic administration or a liberal Supreme Court.
We have what might be described as an asymmetric politics. One party disagrees with the other party’s policy domestic policy positions, but recognizes the legitimacy of an opposition party and accepts that the other party is patriotic and loyal to the country. The other party rejects the legitimacy and loyalty of the other party. The efforts to de-legitimize former President Clinton, President Obama, and likely future President Hillary Clinton are part of this effort. The refusal of the GOP Congress to allow Obama any legislative accomplishments was another part of it. I expect that a GOP House will adopt the same obstructionist tactics starting in 2017.
People predict that the U.S. population will continue to get younger, better educated, and less white. I hope our political experiment lasts long enough to see that day.
The candidates are back on the campaign trail, following the third, and final, debate on Wednesday night.
It’s Friday, October 21—the election is now less than three weeks away. Donald Trump and Hillary Clinton are back on the campaign trail to deliver their final pitch to voters, ahead of Election Day. We’ll bring you the latest updates from the trail, as events unfold. Also see our continuing coverage:
What began as a two-hour morning outage spanned well into the afternoon as Twitter, Reddit, Spotify, Github, and many other popular websites and services became effectively inaccessible for many American web users, especially those on the East Coast.
The websites were not targeted individually. Instead, an unknown attacker deployed a massive botnet to wage a distributed denial-of-service attack on Dyn (pronounced like dine), the domain name service (DNS) provider that they all share.
A distributed denial of service attack, or DDoS, is not an uncommon attack on the web, and web hosts have been fending them off for years. But according to reports, Friday’s attack was distinguished by its distinctive approach. The perpetrator used a botnet composed of so-called “internet-of-things” devices—namely, webcams and DVRs—to spam Dyn with more requests than it could handle.
Science says lasting relationships come down to—you guessed it—kindness and generosity.
Every day in June, the most popular wedding month of the year, about 13,000 American couples will say “I do,” committing to a lifelong relationship that will be full of friendship, joy, and love that will carry them forward to their final days on this earth.
Except, of course, it doesn’t work out that way for most people. The majority of marriages fail, either ending in divorce and separation or devolving into bitterness and dysfunction. Of all the people who get married, only three in ten remain in healthy, happy marriages, as psychologist Ty Tashiro points out in his book The Science of Happily Ever After, which was published earlier this year.
Social scientists first started studying marriages by observing them in action in the 1970s in response to a crisis: Married couples were divorcing at unprecedented rates. Worried about the impact these divorces would have on the children of the broken marriages, psychologists decided to cast their scientific net on couples, bringing them into the lab to observe them and determine what the ingredients of a healthy, lasting relationship were. Was each unhappy family unhappy in its own way, as Tolstoy claimed, or did the miserable marriages all share something toxic in common?
The easiest way to take down the web is to attack people’s access to it.
For more than two hours on Friday morning, much of the web seemed to grind to a halt—or at least slow to dial-up speed—for many users in the United States.
More than a dozen major websites experienced outages and other technical problems, according to user reports and the web-tracking site downdetector.com. They included The New York Times, Twitter, Pinterest, Reddit, GitHub, Etsy, Tumblr, Spotify, PayPal, Verizon, Comcast, EA, the Playstation network, and others.
How was it possible to take down all those sites at once?
Someone attacked the architecture that held them together—the domain-name system, or DNS, the technical network that redirects users from easy-to-remember addresses like theatlantic.com to a company’s actual web servers. The assault took the form of a distributed denial-of-service attack (DDoS) on one of the major companies that provides other companies access to DNS. A DDoS attack is one in which an attacker floods sites “with so much junk traffic that it can no longer serve legitimate visitors,” as the security researcher Brian Krebs put it in a blog post Friday morning.
Diwali lights in England, a pair of scary clown masks in Nicaragua, a rat stuck in a New York garbage can, a bioluminescent jellyfish in the Marianas Trench, a little Hitler, and much more.
Diwali lights in England, families fleeing the violence in Mosul, a pair of scary clown masks in Nicaragua, a rat stuck in a New York garbage can, a bioluminescent jellyfish in the Marianas Trench, cliff diving in Japan, a little Hitler, and much more.
How the national mythos and U.S. labor laws influence geographic mobility.
Kevin Bacon moves from a big city to a small town in Middle America where dancing is outlawed. Ralph Macchio moves from New Jersey to California, where he learns the art of life and combat. Dianne Wiest moves with her two sons to a California town stocked with vampires.
The trope of American families settling in faraway places isn’t just a plotline for terrible 1980s movies, but a national phenomenon. Decades of data, including a more recent Gallup study, characterizes the United States as one of the most geographically mobile countries in the world. “About one in four U.S. adults (24 percent) reported moving within the country in the past five years,” the report noted. With the comparable exceptions of Finland (23 percent) and Norway (22 percent), Americans also move considerably more than their European peers.
Tristan Harris believes Silicon Valley is addicting us to our phones. He’s determined to make it stop.
On a recent evening in San Francisco, Tristan Harris, a former product philosopher at Google, took a name tag from a man in pajamas called “Honey Bear” and wrote down his pseudonym for the night: “Presence.”
Harris had just arrived at Unplug SF, a “digital detox experiment” held in honor of the National Day of Unplugging, and the organizers had banned real names. Also outlawed: clocks, “w-talk” (work talk), and “WMDs” (the planners’ loaded shorthand for wireless mobile devices). Harris, a slight 32-year-old with copper hair and a tidy beard, surrendered his iPhone, a device he considers so addictive that he’s called it “a slot machine in my pocket.” He keeps the background set to an image of Scrabble tiles spelling out the words face down, a reminder of the device’s optimal position.