Month: March 2019

The Government ‘Match’ to High-Powered Corporate Governance

Editor’s Note: This post is part of an ongoing multi-part series covering the Millstein Center’s March 1, 2019 conference, “Corporate Governance ‘Counter-narratives’: On Corporate Purpose and Shareholder Value(s).”

By Brea Hinricks

Professor Jeff Gordon presents his argument for addressing the economic insecurity faced by today’s employees—a robust government investment program in human capital to subsidize employee retraining and reeducation.

Capitalism and corporate purpose have evolved over the last half century to become increasingly and more narrowly focused on profits and shareholder value. The Friedman Doctrine has firmly taken hold. At the same time, the rise of global product and capital markets have subjected firms to increased competitive pressures, and domestic disrupters in the U.S. such as Walmart, Amazon, Netflix, and the large tech companies have transformed entire industries and resulted in a more dynamic and less predictable domestic economy. The rise of asset managers and index funds have allowed shareholders to hold globally diversified equity portfolios at a low cost. A “high-powered” corporate governance regime has emerged in which managerial performance is closely monitored through shareholder value metrics, and activists tolerate only minuscule amounts of slack. Firms are encouraged to engage in more risk-taking and less diversification of cashflows at the firm level (which is inefficient given shareholders’ diversified portfolios across firms), resulting in shorter company lifespans.

Continue reading The Government ‘Match’ to High-Powered Corporate Governance

Corporate Purpose, The New Paradigm, and Unintended Consequences

A panel discussion with Colin Mayer, Mats Isaksson, Martin Lipton, and Ron Gilson at the Millstein Center’s Counter-Narratives Conference.

Editor’s Note: This post is part of an ongoing multi-part series covering the Millstein Center’s March 1, 2019 conference, “Corporate Governance ‘Counter-narratives’: On Corporate Purpose and Shareholder Value(s).”

By Brea Hinricks

In his recent book, Prosperity: Better Business Makes the Greater Good, Oxford Professor Colin Mayer lays out a framework for radically reconceptualizing business for the 21st century. At the core of his argument is the idea that the purpose of business is not solely to make profits, but to “produce profitable solutions to the problems of people and planet, and in the process it produces profits.”

Mayer’s proposed law and policy reforms, which he detailed in his remarks at the Millstein Center’s March 1, 2019 conference, Corporate Governance “Counter-narratives”: On Corporate Purpose and Shareholder Value(s), would aim to incentivize companies to create and deliver on a corporate purpose that transcends profit alone. (We discuss Colin’s presentation in greater detail here.)

Mayer debated these ideas during a panel discussion with Mats Isaksson, Head of the Corporate Affairs Division at the OECD, Martin Lipton, a founding partner of Wachtell, Lipton, Rosen & Katz LLP, and Ron Gilson, Professor of Law at Columbia Law School and Stanford Law School. (A full recording of Mayer’s remarks and this panel discussion is available here.)

Continue reading Corporate Purpose, The New Paradigm, and Unintended Consequences

Colin Mayer’s ‘Prosperity’ and the Future of the Corporation

Editor’s Note: This post is part of an ongoing multi-part series covering the Millstein Center’s March 1, 2019 conference, “Corporate Governance ‘Counter-narratives’: On Corporate Purpose and Shareholder Value(s).”

By Brea Hinricks


In the more than fifty years since the enshrinement of the Friedman doctrine as fundamental business canon, the conventional view has been that the singular purpose of a corporation is to increase profits (and therefore, shareholder value) to the maximum extent possible within the rules of the game. Oxford Professor Colin Mayer (and more than 30 other academics who collaborated with him on the British Academy’s Future of the Corporation project) would like that to change.

Under the Friedman doctrine, corporations have been a source of great economic prosperity and growth, but also great inequality and environmental degradation. As companies have become increasingly focused on profits and detached from a broader public purpose, Mayer says, they have engendered in society a “profound, pervasive, and persistent” distrust of business leaders and corporations.

In his work on the Future of the Corporation and in his recent book, Prosperity: Better Business Makes the Greater Good, Mayer seeks to determine how business needs to change over the coming decades in order to address this distrust, ameliorate inequality and environmental impacts, and grapple with the many other social, political, and economic challenges we face today. Mayer presented his views at the Millstein Center’s March 1, 2019 conference, Corporate Governance “Counter-narratives”: On Corporate Purpose and Shareholder Value(s). (A full recording is available here.)

Mayer proposes an alternative, alliterative, and, to some, radical theory of the purpose of business: rather than producing profits for their own sake, “[t]he purpose of business is to produce profitable solutions to the problems of people and planet, and in the process it produces profits.” While this “counter-narrative” is certainly a significant departure from the Friedman doctrine, Mayer argues that it is hardly a novel concept. He points out that corporations were originally established under Roman law to undertake public functions such as collecting taxes, minting coins, and building infrastructure. It is only over the last 60 years that the Friedman doctrine and shareholder primacy have taken hold, and public purposes have become detached from the corporation.

The purpose of business is to produce profitable solutions to the problems of people and planet, and in the process it produces profits.

Continue reading Colin Mayer’s ‘Prosperity’ and the Future of the Corporation

Corporate Governance “Counter-Narratives”: Remarks by Ira M. Millstein

Opening remarks from Ira M. Millstein presented at the Millstein Center’s March 1, 2019 conference, Corporate Governance “Counter-narratives”: On Corporate Purpose and Shareholder Value(s). 

While I wish I could personally be with all of you today, I am pleased that so many of you are here to discuss this very important topic.

Today we live, and work, in a very complex and constantly evolving capital market system filled with uncertainty―political uncertainty and economic uncertainty. This means that corporations need to be able to evolve with the changing times.

The corporation has three legs―management, the board of directors and shareholders. Management’s role has been vital from the beginning as the engine of corporate performance, at one time in control. Boards, once passive, are now embracing a more active role in oversight and planning. Over the past decade, a coalescence of economic power has reinvigorated shareholders to become actively involved. Once faceless, groupings of shareholders of different varieties now have more significant concentrated power, particularly the ability and inclination to wield considerable influence over the corporation through its directors.

Today’s reality is that shareholders play a critical role in the longevity of a company. They are the capital on which the corporation thrives. Corporations cannot turn a blind eye to shareholders or their demands for faster and visible so-called shareholder value. Continue reading Corporate Governance “Counter-Narratives”: Remarks by Ira M. Millstein

How My Board Made Me a Better CEO

Editor’s Note: This piece was written in July 2018. 

By William E. McCracken with Jonathan B. Kim

When Bill McCracken joined CA, Inc. (NASDAQ: CA) crisis management was at the forefront. The company was recovering from a serious case of fraud—one that called into question the organization’s future. During his initial tenure as Chairman, Bill’s primary concern was rebuilding the company’s board. Later, as CEO, the course CA charted would shape his view on activist board governance.

Sometimes an experienced coach needs all the backing he can get to turn the fortunes of a struggling team. In 2005, I joined the Board of Directors of CA after 36 years at IBM. Shortly thereafter I was elevated to Non-Executive Chairman. At the time the company was operating under the burden of a deferred prosecution agreement with the U.S. Department of Justice, including an outside monitor to oversee its compliance.

I quickly realized we were at a critical stage in the never-ending lifecycle of the board. As a result of mandatory retirements and term limits, nearly half of our directors had departed or were reaching the end of their tenures.

Continue reading How My Board Made Me a Better CEO