“Pay no attention to that man behind the curtain!”

A spate of blogs and press releases tout upgraded or “new and improved” capitalism, corporate governance, and executive-pay models. Before common sense can prevail, we have to use it.

More power to people who want to make things run better. But, how much of what is proposed is really an upgrade, or new and improved?

In many cases, sellers of “change” seem to be repackaging common sense and smart business as something ground-breaking. To do this, they may distort old-fashioned way of doing things, ignore fundamental principles, or posit what remains for them to prove.

What do I mean?

“Upgraded capitalism” is just smart business

One CEO increased wages to provide employees with financial stability. By this he meant an ability to save 20% of earnings. He claimed to be “upgrading capitalism” since “just counting on market forces to create a just and equitable society isn’t working.”

Who argues that you can just count on market forces? Of course, the world has a whole lot of painful proof that you cannot create a just and equitable society without these forces. But paying workers so that they enjoy financial stability just represents good business. It aligns them with the company, promoting loyalty and cohesion. The unspoken flip side is that as more is given, more is expected. Far from being an “upgrade,” isn’t this just the market at work — and smart business? In 1914, Henry Ford doubled his workers’ wages. Giving workers an across-the-board raise 106 years later doesn’t look like an upgrade. It looks like catch up.

You don’t serve stakeholders by conning them

On the governance front, much has been made of a Business Roundtable Statement supposedly changing the purpose of a corporation to serve all stakeholders. The scope of this statement, however, has been overblown and doubt cast upon its sincerity.

What’s modern about a perennial challenge?

Finally, is there anything really “modern” about recently released “Modern Principles for Sensible and Effective Executive Pay“? They serve the worthy-but-perennial goal of getting Board of Directors to do their jobs right. The Principles proclaim that “the job of a CEO has changed….The CEO is not just leading a business; he/she is leading a more integrated community of employees, suppliers and producers working to respond effectively to customers, investors and, increasingly, to those acting on behalf of significant and growing environmental and local needs.”

Please. Who among the “suppliers and producers” chose the CEO to lead them? What and who authorizes a CEO to act “on behalf” of the environment and localities?

There’s nothing new under the sun, including sales puffery

Bright, shiny things catch our eye. But, in the above areas, we need to think from first principles and to look closely and critically on the history of business challenges. Otherwise, we will end up assuming what has to be proved, slapping duct tape on what needs to be fixed, and paying “new-and-improved” prices for old-and-tired platitudes.

#therightwaytowin

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