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.
For centuries, philosophers and theologians have almost unanimously held that civilization as we know it depends on a widespread belief in free will—and that losing this belief could be calamitous. Our codes of ethics, for example, assume that we can freely choose between right and wrong. In the Christian tradition, this is known as “moral liberty”—the capacity to discern and pursue the good, instead of merely being compelled by appetites and desires. The great Enlightenment philosopher Immanuel Kant reaffirmed this link between freedom and goodness. If we are not free to choose, he argued, then it would make no sense to say we ought to choose the path of righteousness.
Today, the assumption of free will runs through every aspect of American politics, from welfare provision to criminal law. It permeates the popular culture and underpins the American dream—the belief that anyone can make something of themselves no matter what their start in life. As Barack Obama wrote in The Audacity of Hope, American “values are rooted in a basic optimism about life and a faith in free will.”
George Will is denouncing a GOP that has been ailing for years, but quitting won’t help—an American political party can only be reformed from within.
This past weekend, George Will revealed that he had formally disaffiliated himself from the Republican Party, switching his Maryland voter registration to independent. On Fox News Sunday, the conservative pundit explained his decision: "After Trump went after the 'Mexican' judge from northern Indiana then [House Speaker] Paul Ryan endorsed him, I decided that in fact this was not my party anymore.” For 40 years, George Will defined and personified what it meant to be a thoughtful conservative. His intellect and authority inspired a generation of readers and viewers, myself very much among them.
His departure represents a powerful image of divorce between intellectual conservatism and the new Trump-led GOP. Above all, it raises a haunting question for the many other Republicans and conservatives repelled by the looming nomination of Donald Trump as the Republican candidate for president of the United States: What will you do?
Hillary Clinton wrote something for The Toast today. Are you sobbing yet?
Either you’ll immediately get why this is crazy, or you won’t: Hillary Clinton wrote a thing for The Toast today.
Are you weeping? Did your heart skip a beat? Maybe your reaction was, “What. Whaaaat. WHAT,” or “Aaaaaaahhhhhhh!!!” or “OH MY GOD,” or simply “this is too much goodbye I'm dead now.”
Perhaps your feelings can only be captured in GIF form, as was the case for someone commenting on Clinton’s post under the name Old_Girl:
Reader comments like the ones above are arguably the best part of Clinton’s post, because they highlight just how meaningful hearing directly from Clinton is to The Toast’s community of readers. The Toast is a small but beloved feminist website known for its quirky literary humor. It announced last month it couldn’t afford to continue operating. Friday is its last day of publication.
“This western-front business couldn’t be done again.”
On this first day of July, exactly 100 years ago, the peoples of the British Empire suffered the greatest military disaster in their history. A century later, “the Somme” remains the most harrowing place-name in the annals not only of Great Britain, but of the many former dependencies that shed their blood on that scenic river. The single regiment contributed to the First World War by the island of Newfoundland, not yet joined to Canada, suffered nearly 100 percent casualties that day: Of 801 engaged, only 68 came out alive and unwounded. Altogether, the British forces suffered more than 19,000 killed and more than 38,000 wounded: almost as many casualties in one day as Britain suffered in the entire disastrous battle for France in May and June 1940, including prisoners. The French army on the British right flank absorbed some 1,600 casualties more.
It happened gradually—and until the U.S. figures out how to treat the problem, it will only get worse.
It’s 2020, four years from now. The campaign is under way to succeed the president, who is retiring after a single wretched term. Voters are angrier than ever—at politicians, at compromisers, at the establishment. Congress and the White House seem incapable of working together on anything, even when their interests align. With lawmaking at a standstill, the president’s use of executive orders and regulatory discretion has reached a level that Congress views as dictatorial—not that Congress can do anything about it, except file lawsuits that the divided Supreme Court, its three vacancies unfilled, has been unable to resolve.
On Capitol Hill, Speaker Paul Ryan resigned after proving unable to pass a budget, or much else. The House burned through two more speakers and one “acting” speaker, a job invented following four speakerless months. The Senate, meanwhile, is tied in knots by wannabe presidents and aspiring talk-show hosts, who use the chamber as a social-media platform to build their brands by obstructing—well, everything. The Defense Department is among hundreds of agencies that have not been reauthorized, the government has shut down three times, and, yes, it finally happened: The United States briefly defaulted on the national debt, precipitating a market collapse and an economic downturn. No one wanted that outcome, but no one was able to prevent it.
What percentage graduated from high school and enrolled within a year at a four year institution where they live on campus?
Who are today’s college students?
The answer surprises most people who attended four year universities, according to Jamie Merisotis, President and CEO of Lumina Foundation. Addressing audiences, like the one he spoke to Friday at The Aspen Ideas Festival, co-hosted by the Aspen Institute and The Atlantic, he frequently poses this question: “What percentage of students in American higher education today graduated from high school and enrolled in college within a year to attend a four year institution and live on campus?”
Most people guess “between forty and sixty percent,” he said, whereas “the correct answer is five percent.” There is, he argued, “a real disconnect in our understanding of who today’s students are. The influencers––the policy makers, the business leaders, the media––have a very skewed view of who today’s students are.”
The trend helps explain Trump and Brexit. What’s next?
On Wednesday, Facebook made an announcement that you’d think would only matter to Facebook users and publishers: It will modify its News Feed algorithm to favor content posted by a user’s friends and family over content posted by media outlets. The company said the move was not about privileging certain sources over others, but about better “connecting people and ideas.”
But Richard Edelman, the head of the communications marketing firm Edelman, sees something more significant in the change: proof of a new “world of self-reference” that, once you notice it, helps explain everything from Donald Trump’s appeal to Britain’s vote to exit the European Union. Elites used to possess outsized influence and authority, Edelman notes, but now they only have a monopoly on authority. Influence largely rests with the broader population. People trust their peers much more than they trust their political leaders or news organizations.
There needs to be more nuanced language to describe the expanding demographic of unmarried Americans.
In 1957, a team of psychology professors at the University of Michigan released the results of a survey they had conducted—an attempt to reflect Americans’ attitudes about unmarried people. When it came to the group of adults who remained single by choice, 80 percent of the survey’s respondents—reflecting the language used by the survey’s authors—said they believed that the singletons remained so because they must be “immoral,” “sick,” or “neurotic.”
It’s amazing, and reassuring, how much has changed in such a relatively narrow slice of time. Today, certainly, marriage remains a default economic and social arrangement, particularly after having been won as a right for same-sex couples; today, certainly, those who do not marry still face some latent social stigmas (or, at the very least, requests to explain themselves). But the regressive language of failed morality and psychological pathology when it comes to singledom? That has, fortunately, been replaced by more permissive attitudes.
The relationship therapist Esther Perel thinks so—and argues that it’s time to rethink matrimony and, with it, infidelity.
Think of the last wedding you attended. Did the couple’s vows to each other involve promises to be, for the rest of their lives, friends and family and companions and lovers and allies? Did the two people vow to keep exciting each other and soothing each other and listening to each other and challenging each other, to be co-adventurers and co-Netflixers and co-owners of things and possibly co-parents of things and, all in all, pretty much all things to each other?
If so, the couple is very modern. Marriage has spent most of its existence, in the West and elsewhere, as primarily an economic arrangement; as a result, it has also spent most of its existence much less laden with the emotional expectation that we tend to heap upon it today. The current romantic conception of marriage—evident in the culture not just in the guise of hopeful wedding vows, but also in the wedding industrial complex and in pretty much every Hollywood rom-com that defines its “happy ending” according to the satisfactions of long-term commitment—is the result of historical coincidence. It arose, the Belgian relationship therapist Esther Perel argues, from a collision of several forces that collided in the 19th and 20thcenturies: among them capitalism, latent Romanticism, and the political and cultural notion of the primacy of the individual.
How much do you really need to say to put a sentence together?
Just as fish presumably don’t know they’re wet, many English speakers don’t know that the way their language works is just one of endless ways it could have come out. It’s easy to think that what one’s native language puts words to, and how, reflects the fundamentals of reality.
But languages are strikingly different in the level of detail they require a speaker to provide in order to put a sentence together. In English, for example, here’s a simple sentence that comes to my mind for rather specific reasons related to having small children: “The father said ‘Come here!’” This statement specifies that there is a father, that he conducted the action of speaking in the past, and that he indicated the child should approach him at the location “here.” What else would a language need to do?